Lone Star buys US hotel group

Lone Star Funds is making an investment in the US hotel sector via its Lone Star Real Estate Fund.

The Dallas-based firm is acquiring Atlanta, Georgia-based Lodigan, which owns and operates 34 hotels, in an all-cash transaction.

Though the parties did not reveal which fund Lone Star is investing, PERE understands that Lone Star’s 2007 dedicated property vehicle that corralled $2.5 billion of equity is behind it.

The firm is currently out raising additional capital for Lone Star Real Estate Fund II along with a private equity vehicle.

Lodigan said in a statement that the investment in the deal was $270 million although the price tag also included assumed debt.

Under the terms of the deal, Lone Star will acquire all of the outstanding common stock of Lodgian for $2.50 per share. The price represents a premium of approximately 67.2 percent over Lodgian's average closing share price of one month prior to January 15, 2010 and 64.3 percent over Lodgian's average closing share price over six monhs.

Sixteen of the assets are InterContinental Hotels Group brands, Crowne Plaza, Holiday Inn, and Holiday Inn Express, twelve are Marriott brands  – Marriott, Courtyard by Marriott, SpringHill Suites by Marriott, Residence Inn by Marriott and Fairfield Inn by Marriott – and two are Hilton brands, while the remaining 4 are affiliated with other franchisors including Starwood, Wyndham and Carlson.