CapStar is buying Columbia, Cross Keys inns Rouse drops lodging, opens its newest mall

Hospitality industry

March 05, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Rouse Co. effectively checked out of the lodging business yesterday, when it cemented deals to sell its Columbia and Cross Keys inns to a Washington hotelier for $34 million.

The sale of the 435 limited-service hotel rooms to CapStar Hotel Co. comes as the Columbia-based real estate concern is working to further concentrate its holdings in retail malls, office and mixed-use buildings and community development.

To that end, Rouse yesterday opened its first newly developed regional mall in nearly a decade. Oviedo Marketplace, a 820,000-square-foot retail hub outside Orlando, Fla., took four years of planning and involved a $100 million investment by the company.

"We never intended to be in the hotel business," said David L. Tripp, a Rouse vice president and its director of investor relations. "We built the hotels there to prove that the market was viable in the early 1970s, because we felt the two communities needed a quality operation and no one else showed interest in doing it.

"CapStar will provide economies of scale and a national reservation system, and the sale will allow us to concentrate our resources on what we do best."

CapStar, which will complete the acquisitions later this month, intends to invest $6.1 million to upgrade the two hotels and convert them to a Sheraton and a Radisson.

Both hotels have average occupancy rates in the mid-70 percent range, and command average room rates of $100 a night.

The inns mark CapStar's first purchases in the Baltimore metropolitan area. In all, CapStar's hotel portfolio comprises 56 hotels with 14,938 rooms. The company also manages 67 hotels with 10,318 rooms.

"These are excellent acquisitions for CapStar from both a product and brand standpoint," said Rob Koger, president of Molinaro Koger, a Virginia hotel brokerage firm that Rouse retained to market the properties. "They'll bring more of a national identity to the properties, and the hotel industry in general is moving in that direction. There aren't a lot of independent operators left."

At the Columbia Inn, which will be operated as a Sheraton, CapStar will install two concierge floors, upgrade room furniture, build a health club, improve the lobby and install a state-of-the-art sprinkler system.

"The Columbia Inn represents a classic CapStar opportunity -- a well-located, well-built property in a growing market with solid upside potential, priced well below replacement cost," said Paul W. Whetsell, CapStar's president and chief executive. "Columbia leads the state in job growth and we anticipate that the new Sheraton flag will significantly improve mid-week corporate business."

At the Cross Keys Inn, which will be converted to a Radisson, CapStar intends to upgrade guest rooms and furniture, baths and corridors. CapStar's $2.3 million in renovations follows a $2 million refurbishment Rouse completed in 1995.

"Our planned capital enhancements and our aggressive, direct sales techniques and Radisson branding will significantly improve the property's competitive positioning," said David McCaslin, CapStar's chief operating officer.

Pub Date: 3/05/98

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