Company Press Release: Crestline Capital Corporation
June 5, 2000
BETHESDA, MD -- Crestline Capital Corporation (NYSE: CLJ), a major investor, lessee and manager of hotel real estate,
Friday announced that it has entered into a letter of intent to form a joint venture with Bedrock Partners II,
LP to acquire million of hotels over the next two to three years. The joint venture plans to acquire approximately
15 to 20 primarily mid-priced full-service properties with significant turnaround potential, perform extensive
renovations and reposition and re-brand the properties in the upscale hotel segment. Bedrock Partners and Crestline
Capital will be co-general partners for the joint venture, and Crestline Capital's management division, Crestline
Hotels & Resorts, Inc., is expected to manage most or all of the hotels. Bedrock Partners is led by industry
veterans, Paul Novak and Rick Besse.
Crestline Capital will provide approximately 10 percent of the equity for the joint venture. Citadel Group Realty
Group, LLC, through its principals Joel Ross and Dan Abrams, acted as an advisor to Bedrock Partners II in connection
with the formation of the joint venture. The Citadel Group will also act as investment banker for raising an additional
million of third party equity for the fund. When complete, the combined debt and equity is expected to total approximately
million.
``This joint venture further leverages our recently announced strategy to co-invest in hotels to obtain management
contracts with favorable terms,'' said Bruce D. Wardinski, Crestline Capital Chairman of the Board, President and
Chief Executive Officer. ``The venture will add approximately million to our previously announced million of internal
funds. Crestline will benefit from the management fee income for the acquired hotels, while both Bedrock and Crestline
will benefit from what we anticipate to be strong real estate returns.''
``There are a number of mid-market properties in great locations that will not be able to survive in their current
physical condition,'' said Paul Novak, Bedrock II Principal. ``Our access to capital gives us a significant competitive
advantage enabling us to acquire these properties at attractive prices and reposition them in the upscale sector
through major capital expenditures. The upscale sector continues to experience strong revenue growth due to high
barriers to entry controlling the levels of new supply.''
``Our organizations' strengths complement one another,'' Mr. Novak pointed out. ``Bedrock will source a majority
of the acquisitions and oversee the due diligence as well as the renovations, Crestline will oversee the financing
and feasibility, as well as manage the hotels.''
Bedrock Partners II will have a multi-brand strategy, according to James L. Francis, Crestline Capital Executive
Vice President and Chief Financial Officer. ``Since we will have no specific brand affiliation, we will have the
greatest flexibility to acquire hotels and select the brand that will optimize property value,'' he said. ``Both
Bedrock Partners and Crestline Capital have strong relationships with all of the major franchisors and Crestline
has a proven operating track record.''
The joint venture will seek hotels with 150-300 rooms, in urban, suburban and airport locations. Typical properties
will require significant capital improvements with half or more of the all-in-costs allocated for renovations to
extensively upgrade the hotels to the upscale segment.
``Renovation and repositioning requires special expertise,'' noted Mr. Wardinski. ``Bedrock, which focused on these
types of properties in its first fund, produced outstanding returns for its investors. Combined with Crestline
Hotels & Resorts' significant operating experience in hotel turnarounds, we have a great marriage of expertise.''
Mr. Novak and Rick Besse, both Bedrock II Principals, will focus on acquisitions. Mr. Novak has had a long relationship
with Crestline's senior management team. ``We all have worked closely together at various stages of our careers
and have a high regard for one another,'' said Mr. Novak. ``Don Trice and Dave Durbin, who head up Crestline Hotels
& Resorts, are great operators and are backed by a solid team of professionals.''
Bedrock Partners was originally founded in 1994 and acquired a total of 18 hotels over a three year period. The
organization became known for its unique strategy to totally renovate and reposition hotels which offered long
term potential, but which had lost their competitive position due to their physical condition. Typical renovation
exceeded ,000 per room. The original Bedrock portfolio was recently sold for approximately million. Mr. Novak and
Mr. Besse, will continue to work from their offices in Dallas (Bedford), Texas, but will maintain offices at Crestline
Capital's Bethesda, Maryland headquarters.
Crestline Capital is one of the nation's 20 largest hotel management companies through its wholly-owned subsidiary,
Crestline Hotels & Resorts. Crestline Capital is also the nation's largest independent hotel leasing company,
majority owner of an upscale extended-stay hotel portfolio, and owner of one of the nation's premier senior living
community portfolios. Additional information about Crestline Capital is available at the company's web site: www.crestlinecapital.com
Crestline Hotels & Resorts manages and leases 27 hotels, resorts and conference and convention centers with
nearly 5,500 rooms in nine states and the District of Columbia. Crestline Hotels & Resorts manages properties
independently and under such well regarded brands as Marriott, Hilton, Renaissance, Crowne Plaza, Holiday Inn,
Courtyard by Marriott and Residence Inn. Additional information about the hotel management company is available
at the company's web site: www.crestlinehotels.com
Note: Certain matters discussed herein are forward-looking statements within the meaning of the Private Litigation
Reform Act of 1995. Certain, but not necessarily all, of such statements can be identified by the use of forward-looking
terminology, such as ``believes,'' ``expects,'' ``may,'' ``will,'' ``should,'' ``estimates'' or ``anticipates''
or the negative thereof or comparable terminology. All forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual transactions, results, performance or achievements
of the Company to be materially different from any future transactions, results, performance or achievements expressed
or implied by such forward-looking statements. These may include: (i) national and local economic and business
conditions or governmental regulations that will affect demand, prices, wages or other costs for hotels and senior
living communities; (ii) the level of rates and occupancy that can be achieved by such properties; (iii) the Company's
ability to compete effectively in areas such as access, location, quality of properties and rate structures; (iv)
the ability to maintain the properties in a first-class manner (including meeting capital expenditure requirements);
(v) the availability and terms of financing; (vi) governmental actions and initiatives including the REIT Modernization
Act; and (vii) changes to the public pay systems for medical care and the need for compliance with environmental
licensure and safety requirements. Although the Company believes the expectations reflected in such forward-looking
statements are based upon reasonable assumptions and business opportunities, it can give no assurance that its
expectations will be attained or that any deviations will not be material. The Company undertakes no obligation
to publicly release the result of any revisions to these forward-looking statements that may be made to reflect
any future events or circumstances.
SOURCE: Crestline Capital Corporation