Allied and LCP Become Shareholders in Crescent

Will Create Fund to Acquire up to $1 Billion in Hotels

. October 14, 2008

WASHINGTON, DC, September 18, 2006. Crescent Hospitality today announced that it has formed an acquisition fund to acquire up to $1 billion in hotel assets over the next 12 to 18 months. Allied Capital (NYSE: ALD) and The LCP Group, a real estate investment firm, have become shareholders in Crescent Hospitality, which has changed its name to Crescent Hotels & Resorts (Crescent). With the addition of these new partners, Crescent will focus on three business strategies: ownership, sliver investments and third-party management.

The acquisition fund expects to acquire up to $1 billion in hotel assets through direct investment or joint-venture arrangements with affiliated and unaffiliated partners. "Our target is upper, upscale hotels and portfolios located in primary and secondary U.S. markets, as well as resorts," said Michael George, Crescent president and CEO. "The fund will seek to acquire full-service hotels typically in the 200- to 500-room range that can benefit from an infusion of strategic capital and management, especially those properties that have repositioning and rebranding potential. We will focus on hotels of the upper, upscale brands of Marriott, Hilton, Starwood and InterContinental," he added. Crescent Hotels & Resorts will operate the hotels acquired by the fund.

In its first transaction, the fund acquired the Detroit Marriott Livonia hotel. Connected to the Laurel Park Place mall, the property is located at 17100 Laurel Park Drive North and is proximate to downtown Detroit, Ann Arbor, and the Detroit Metro Airport. Molinaro Koger brokered the sale.

The hotel, which has 224 rooms and three suites, will undergo a $3.5 million upgrade. The refurbishment will include a renovation of all guest rooms and bathrooms, as well as a new exterior "skin." The renovation will be completed in phases to be the least disruptive to guests and is expected to be completed in the first quarter of 2007.

"Allied Capital has had a relationship with Crescent for several years and knows firsthand its ability to improve returns on hotels," said John Scheurer, managing director of Allied Capital. "They are a hands-on operator with strategic vision and have the size to provide economies of scale in marketing and purchasing to the hotels they have under management. Their significant depth of management will allow us to build an attractive portfolio of assets."

Crescent Hotels & Resorts' second business strategy is to partner with institutional investors and provide sliver equity of 10 to 20 percent to acquire and manage upper select-service hotels. "We have a growing number of strategic partners who have an appetite for hotels in this segment, and we believe we can acquire up to 10 to 15 hotels annually under this business model," said Crescent's Chairman E. Robert Roskind. "We will look at the leading existing brands in this segment, as well as consider development of several new brands in this sector."

Crescent's third business strategy will focus on third-party management of hotels, the previous company's initial business model. Crescent recently was ranked as one of the top third-party, independent management companies in the U.S. Created in 2001, the company has doubled in size every year since its inception. It is one of a small group of independent management companies to be approved to operate hotels under the Marriott, Hilton, Starwood and InterContinental flags. "While we have no quota, we would like to add 10 to 15 new third-party management contracts annually," George added. "We have the infrastructure in place with significant bench strength to expand. We will be disciplined in our growth so that we will continue to provide senior-management attention to every hotel we manage."

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