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.Allied Capital and The LCP Group Become Shareholders in Crescent Hotels
& Resorts, Will Create Fund to Acquire up to $1 Billion in Hotels
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Acquires Detroit Marriott Livonia in First Transaction
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WASHINGTON, D.C., 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.”

About Allied Capital

Allied Capital Corporation, a leading business development company with total assets of more than $4 billion, has paid regular, quarterly cash dividends to shareholders since 1963. Allied Capital invests in the American entrepreneurial economy by providing capital to companies seeking a long-term financial partner and access to managerial resources often unavailable to smaller companies. The company’s private finance portfolio includes investments in over 100 companies that generate aggregate revenues of more than $12 billion and employ more than 85,000 people.

Allied Capital provides flexible, competitive debt and equity capital for management and sponsor-led buyouts, recapitalizations, acquisitions and growth of middle market companies. Allied Capital’s seamless, one-stop financing capabilities include first and second lien senior loans, unitranche debt, junior or mezzanine debt and equity.

Headquartered in Washington, D.C., Allied Capital offers shareholders the opportunity to participate in the private equity industry through an investment in the company’s New York Stock Exchange-listed stock, which is traded under the symbol ALD.  For more information, please visit www.alliedcapital.com.

About The LCP Group

The LCP Group, a privately held company, was founded and is chaired by Crescent Chairman Robert Roskind.  Through its controlled partnerships, the LCP Group has owned such hotels as the Arizona Biltmore in Phoenix, the King Edward in Toronto, Canada, and Hyatt Regency hotels in Savannah, Ga., Phoenix, Ariz., and Washington, D.C.   Roskind is a founder and former chairman of CapStar Hotels and Resorts, a predecessor company to MeriStar Hospitality Corporation.

About Crescent Hotels & Resorts

Headquartered in Fairfax, Va., outside of Washington, D.C., Crescent Hotels & Resorts owns and co-invests in hotel real estate, and is an independent, third-party operator of hotels and resorts.  The company currently owns or operates approximately 35 upscale and mid-market hotels and resorts with approximately 5,400 rooms in 18 states.  The company’s portfolio encompasses properties in the resort, full-service, convention and premium limited-service segments under nearly 15 hotel flags, including the leading brands of Marriott, Hilton, Sheraton, InterContinental, Choice and Wyndham Hotel Group, as well as independent hotels and resorts. 

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Contact:

Bill Driscoll
www.crescenthosp.com

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Also See: Piedmont Holdings Contracts with Crescent Hospitality to Re-flag and Manage Two Downtown Atlanta Properties / August 2006
E. Robert Roskind Joins Crescent Hospitality Corporation as Chairman; Will Lead the Hotel Management Company into Hotel Ownership / December 2005
Crescent Hospitality Names William F. Driscoll Vice President of Business Development / April 2006


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