‘Mission Accomplished’ As MeriStar, Interstate Merger Is Completed

WASHINGTON, D.C.— Interstate Hotels and Resorts is taking on a new life, which promises to be a most active life indeed. Now that all the necessary approvals are in place and examinations of the transaction fully satisfied, the mammoth hotel-management entity— brought into being via a merger marrying MeriStar Hotels and Resorts here and Pittsburgh, PA-based Interstate Hotels Corp.— operates more than 400 lodging properties encompassing some 85,000 rooms worldwide. This makes Interstate Hotels and Resorts the largest operator in the industry by a staggering margin. As set up, the new company will consist of four basic divisions: Luxury and Independent Hotels, with about 60 properties in its fold; Upscale Branded Hotels, comprising roughly 120 properties; Crossroads, with some 170 (basically) limited-service facilities; and Bridgestreet Corporate Housing Worldwide, a subsidiary as well as one of the firm’s primary operating divisions. Apart from the aforementioned divisions is Flagstone Hospitality Management, a 55-property subsidiary of MeriStar Hotels and Resorts that is to be operated independently. According to Whetsell, despite the enormity of the company’s current overall portfolio, “selected” growth will still be the order of the day in the months and years to come as the company looks forward to “double-digit” growth for the foreseeable future. “But rather than concentrating on expansion along the lines of perhaps doubling our numbers, our game plan is to grow selectively, particularly in the Central Business Districts [CBDs] of primary and— to a lesser extent— secondary cities. “What we’re aiming for,” Whetsell explained, “is a solid and predictable income stream from quality hotels. Basically, this translates into making sure we have the right properties in the right markets… even if it takes some capital investment on our part,” he said. Continuing on in a financial vein, Whetsell noted the financial positioning of the new, combined organization is extremely solid, with its present debt levels less than four times EBITDA. “What we’re ultimately looking for,” he maintained, “is for something in the range of two to three times EBITDA.” Moreover, Whetsell pointed out that EBITDA going forward on a run-rate basis is expected to amount to something in the neighborhood of $40 million. Additionally, with more liquidity and the improved ability to open up a different market opportunity to investors, it was felt the company’s overall financial footing and capitalization would be more likely to attract institutional money. Certainly, the opportunity offered by this union has attracted considerable interest in the past, particularly from the likes of Lance Shaner and the Shaner Hotel Group in State College, PA. In fact, as Whetsell noted: “Right up until the last minute, Mr. Shaner had continued to express a keen interest [in acquiring Interstate Hotels Corp.]but, in the final analysis, the MeriStar offer was adjudged to be vastly superior. “Of course,” Whetsell added, “Mr. Shaner is still a major shareholder [in this new, combined operation]and, as such, my hope is that he ultimately finds he’s very happy with his investment and making money.” As of today, Aug. 1, 2002, Interstate Hotels and Resorts begins trading on the New York Stock Exchange under the symbol IHR. As of this writing, shares are priced at $3.35.