CapStar Hotel Company Signs Agreement to Acquire Holiday Inn Riverfront-St. Louis in Joint Venture.

WASHINGTON, D.C.--(BUSINESS WIRE)--November 26, 1996--CapStar Hotel Company (NYSE: CHO) today announced that it had signed a letter of intent to form a joint venture with Hallmark Investment Corporation, a private investment group, to acquire the rights to a long-term lease for the 456-room Holiday Inn Riverfront in downtown St. Louis, Mo. The venture will invest more than $8 million in a major renovation project. Opened in 1975 as a Holiday Inn, the property currently is owned by Towers Hotel Corporation, a St. Louis-based privately held firm.

The Holiday Inn Riverfront will be CapStar's second full-service property in Missouri, and the company's third announced hotel acquisition since its August 23, 1996 initial public offering (IPO). Under the terms of the agreement, the joint venture will immediately begin a renovation of the 28-story hotel, which is expected to be completed by mid-1997. Plans call for adding two high speed elevators, a complete refurbishment of all guests rooms and public space, upgrading and re-configuring the food and beverage facilities, and adding 6,600 square feet of new meeting space.

CapStar expects to complete the joint-venture agreement within 15 days, subject to customary documentation and conditions. CapStar will manage the hotel and the renovation program.

"The Holiday Inn Riverfront acquisition demonstrates CapStar's desire to expand its presence in the Midwest," said Paul Whetsell, president and CEO of CapStar. "This joint venture also highlights our ability to structure and execute more complex transactions."

Whetsell added that the company has a portfolio of five other pending hotel acquisitions under contract, which were announced at the time of the IPO and are expected to close by year end. "We continue to have an aggressive appetite for acquisitions and have a substantial pipeline of candidates in active negotiations," he said.

The hotel is located on North Fourth Street in the heart of the riverfront area of downtown St. Louis. It is situated in the center of the business and financial district on Interstate 70, approximately 12 miles from Lambert-St. Louis International Airport, and just two-thirds of a mile north of Interstates 64 and 55. The property also includes a 533-space parking garage and an ancillary 50,000-square-foot building, which contains street-level retail space, meeting rooms and commercial offices.

"The Holiday Inn Riverfront has an extraordinary location at the base of the Gateway Arch," said David McCaslin, CapStar's chief operating officer. "The property also is situated close to the city's main convention facility, a high concentration of office space in the immediate downtown area, and the riverboat casinos and two major sports complexes which generate substantial leisure traffic. However, the hotel needs significant upgrading to compete effectively in the coming century. With a reinvigorated property and management, we expect to see substantial improvement in the business performance."

CapStar owns and manages upscale, full service hotels throughout the U.S. under such nationally known brands as Hilton, Sheraton, Marriott and Westin. The company currently owns 13 upscale, full service hotels, with 3,809 rooms. Including the Holiday Inn Riverfront, the company has seven hotels with a total of 1,813 rooms under purchase agreement or letter of intent. CapStar is one of the nation's largest hotel management companies and currently manages 45 hotels with 8,795 rooms.

CONTACT: William M. Karnes

Senior Executive Vice President

and Chief Financial Officer

or John Emery

Treasurer

[phone]

or

Robert Jones/Christine DiSanto/Jim Cappuccio

Stan Froelich - (financial media)

Morgen-Walke Associates

[phone]

or

Jerry Daly or Carol McCune (media)

[phone]