Strategic Hotel Capital, Inc. Acquiring a 45% Interest in the Hotel del Coronado, San Diego

KSL Resorts will Continue to Manage

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. October 14, 2008

CHICAGO, IL, October 31, 2005. Strategic Hotel Capital, Inc. today announced it has signed an agreement to acquire a 45 percent interest in the Hotel del Coronado in San Diego, California through a new joint venture with existing owners Kohlberg Kravis Roberts & Co. ("KKR") and KSL Resorts. The $745 million aggregate purchase price for the joint venture includes the 679-room luxury property, a spa and beach club that are currently under development, an under construction 78-room beachfront, luxury condominium-hotel development, and a zoned parcel for an additional 144-room development. The acquisition, which is expected to close in the first quarter of 2006, remains subject to closing conditions, including the prior buy-out of an existing stakeholder.

The Hotel del Coronado, a National Historic Landmark located on 28 acres of prime beachfront, is considered to be one of the top ten resorts in the world. The property's amenities include eight unique restaurants, retailing outlets, two spacious beachfront pools, and 135,000 square feet of combined indoor and outdoor function space, including two of the most famous ballrooms in the country. A current expansion, due to be completed in 2006, will more than triple the number of treatment rooms and add an infinity pool to the existing spa, as well as add retail space and 78 luxury beach-front condominium-hotel rooms.

Strategic Hotel Capital will be managing partner of the venture. KKR will hold 41 percent, and KSL Resorts the remaining 14 percent. Strategic Hotel Capital will receive asset management fees in addition to other fees for its services. KSL Resorts will continue to manage the property on behalf of the joint venture. Strategic Hotel Capital's total equity investment will be approximately $70 million, plus closing costs.

The company anticipates that the acquisition will be immediately accretive to earnings, and forecasts a combined 2006 property EBITDA will be in the range of $52 million to $54 million, assuming contributions from the renovated spa and rental of condominium-hotel units in the second half of the year, and excluding contributions from sales proceeds of condominium-hotel units and spa and beach club memberships.

Laurence Geller, CEO of Strategic Hotel Capital, commented, "We are both enthusiastic and thrilled to be a part of this joint venture, which speaks to our strategic focus on quality real estate where our creative approach and asset management skills can unlock value. This agreement goes toward fulfilling one of our objectives of utilizing joint venture structures, allowing us to take measured risks in a leveraged transaction with KKR, a recognized leader in private equity transactions, and KSL Resorts, a pre- eminent resort management company. We are excited about the various accretive development opportunities currently underway and in various stages of planning. This world-renowned coastal resort will be additive to our portfolio, which has already benefited from the solid southern California lodging market."