CapStar Hotel Company Shareholders Approve Merger with American General Hospitality Corp.

WASHINGTON, D.C.--(BUSINESS WIRE)--July 28, 1998--

New REIT and Paper-Clipped Management Company to Trade on NYSE as MHX and MMH

Stockholders of CapStar Hotel Company (NYSE: CHO), a hotel ownership and management firm, voted today to approve the previously announced merger with American General Hospitality Corporation (NYSE: AGT), a hotel real estate investment trust (REIT), and the formation of the first hotel industry "dedicated" paper clip REIT. Approximately 99 percent of the voting CapStar Hotel Company stockholders approved the merger agreement at a special stockholders' meeting held in Washington, D.C.

Pending the outcome of a similar meeting later today for American General Hospitality shareholders, the merger is expected to close on August 3, 1998. The merged companies will create the nation's fifth largest hotel REIT, with an approximate $2.6 billion total market capitalization. The transaction also will result in the creation of the nation's largest independent, non-branded hotel leasing and management company.

Under terms of the merger agreement announced in March, CapStar will spin off its hotel operations and management business to its current stockholders as a new C-Corporation to be called MeriStar Hotels & Resorts, Inc. CapStar subsequently will merge its real estate into American General Hospitality Corporation in a tax-free reorganization, more than doubling the American General REIT holdings. American General, which will be renamed MeriStar Hospitality Corporation, will own 116 hotels (including eight hotels under contract) with 29,118 rooms in 27 states, the District of Columbia and Canada.

MeriStar Hotels & Resorts, Inc. will acquire privately-held American General Hospitality, Inc. and AGH Leasing, L.P., which together currently lease and operate 46 of American General Hospitality Corp.'s 54 owned hotels and lease and/or manage 15 additional properties for third party owners. Upon completion of the CapStar spin-off and acquisitions, MeriStar Hotels & Resorts will lease and/or manage 214 hotels (including eight hotels under contract with the REIT) with 45,087 rooms in 34 states, the District of Columbia and Canada.

According to the merger agreement, CapStar stockholders will receive one share each in MeriStar Hospitality Corporation and MeriStar Hotels & Resorts, Inc. for each CapStar share owned, as well as one non-transferrable right to purchase one additional share of MeriStar Hotels & Resorts for each six shares of MeriStar Hospitality Corporation received. The subscription price for the rights will equal 95 percent of the average of the daily high and low prices on the New York Stock Exchange of MeriStar Hotels & Resorts for the period of five consecutive trading days immediately following the third trading day after the effective date of the merger.

American General Hospitality stockholders will receive 0.8475 shares of MeriStar Hospitality Corporation for each American General Hospitality share owned and a non-transferrable right to purchase a share of MeriStar Hotels & Resorts for each six shares received of MeriStar Hospitality Corporation.

Following the merger, it is estimated that CapStar stockholders will own approximately 56 percent of the stock of MeriStar Hospitality Corporation and American General Hospitality stockholders will own approximately 44 percent of the stock of MeriStar Hospitality Corporation. Following the approval of the merger by American General Hospitality stockholders, shares in CapStar and American General Hospitality will cease trading at close of business on Friday, July 31, 1998. Shares in MeriStar Hospitality Corporation and MeriStar Hotels & Resorts, Inc. will begin trading on the New York Stock Exchange on Monday, August 3, 1998, under the symbols MHX and MMH, respectively.

The matters in this press release include "forward looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are qualified by cautionary statements contained herein and in CapStar's and American General Hospitality's filings with the Securities and Exchange Commission.

    CONTACT:  CapStar Hotel Company
               John Emery, Chief Financial Officer
               [phone]
               or
               Daly Gray Public Relations (Media)
               Jerry Daly or Carol McCune
               [phone]
               American General Hospitality Corporation
               Bruce Wiles, Executive Vice President
               [phone]