MEMPHIS, TN & WASHINGTON Hotel REIT RFS Hotel Investors has advised Hilton Hotels Corp. of its intent to terminate all operating leases and management contracts with respect to hotels owned by RFS. Pursuant to a previously announced agreement with Hilton, RFS intends to exercise its option to terminate the agreements in exchange for a payment of approximately $60 million. Closing is expected to occur in January 2001. In addition, RFS announced the formation of a strategic alliance with MeriStar Hotels & Resorts, the nations largest hotel management company. Upon termination of the contracts with Hilton, RFS intends to enter into management agreements with Flagstone Hospitality Management (Flagstone), a newly formed company owned jointly by MeriStar and RFS executive vice president of asset management, Angie Mock. Mock will resign her position with RFS, concurrent with the transactions closing. Flagstone intends to employ substantially all of the existing employees of the current lessee/manager and expects no changes in either the management or franchise affiliation of any of RFS hotels. Following this transaction, 50 hotels owned by RFS will be managed by Flagstone, 10 hotels will be operated by other third-party management companies and, of those 10, five will be encumbered by long-term operating leases. (11/29/00)
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