Mar. 20--RALEIGH, N.C.--A unit of Lehman Brothers Holdings has acquired the Sheraton Capital Center, Raleigh's largest downtown hotel, in a deal valued at $21.4 million. 

L.B. Raleigh Hotel, an affiliate of the New York investment bank, obtained the Sheraton from Prism Hotels of Dallas, which had owned the 355-room hotel since 1998. 

The hotel's fortunes have fluctuated since it opened on Fayetteville Street Mall 21 years ago. But the Sheraton is riding a crest as the only inn within walking distance of the Raleigh Convention and Conference Center. Last year the hotel -- Wake County's second-largest behind the 375-room Marriott at Crabtree -- had a 70.4 percent occupancy rate, compared to a countywide average of 61 percent. 

Groups and travelers with business and meetings in downtown regularly stay at the Sheraton, which faces the convention center. The hotel also has the contract to house Southwest Airlines' visiting flight crews. 

"They've benefited being one of the few downtown properties," said Martin Armes, communications director for the Greater Raleigh Convention and Visitors Bureau. 

If city officials get their wish, the Sheraton will soon get some competition for downtown guests. They have selected a site just south of the Sheraton for a new civic center and hope to recruit a four-star hotel with 450 rooms to the tract. 

Suzanne Hinde, the hotel's general manager, said she expects occupancy at the Sheraton to drop right after a new hotel opens but predicted it eventually will climb back. 

"Once we get more bookings for conventions to town it will be a windfall for all," Hinde said. "We need a new convention center and for it to survive, downtown needs more hotel rooms." 

The hotel opened as the Radisson Plaza in 1982, but by the mid-1990s was languishing from neglect. Prism paid $14.2 million for the hotel, made an estimated $7 million in renovations and transferred the franchise to Sheraton. 

Lehman Brothers, which had provided financing for Prism's purchase of the hotel five years ago, expects to spend about $800,000 this year replacing all the beds and pillows, Hinde said. 

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