Aug. 9, 2006 - RALEIGH -- Winston Hotels is venturing into the Big Apple.

The Raleigh real estate investment trust said Tuesday that it expects to spend $110 million on two hotels that are being built in Manhattan. They would be the company's first in New York City.

The acquisitions would add urban diversity to Winston's portfolio of 41 hotels, which are primarily in suburban markets.

The new hotels, one in the Tribeca section of the city and the other in the Chelsea area, will sell for about $337,400 per room.

That's the most Winston has ever paid, but it's in line with similar Manhattan deals, according to data from Real Capital Analytics, a New York company that tracks property investment deals.

It's a solid opportunity for the company to enter "the nation's most visible market," said Joseph V. Green, Winston's president and chief financial officer.

"We're very, very bullish on New York," he told analysts and investors during a conference call.

And with good reason, said William Crow, a hotel industry analyst for Raymond James & Associates in St. Petersburg, Fla.

"The New York market is one of the best, if not the best, markets longer term for the hotel industry," he said. "On the face of it, it looks like a very interesting and positive development for the company."

Occupancy in New York City hotels rose for the fourth consecutive year to 85.5 percent in 2005, according to data from tourism marketing group NYC & Co. It was the first time occupancy eclipsed the 84.6 percent registered in 2000, the year before the Sept. 11, 2001, terrorist attacks sapped travel and hotel reservations.

Winston is working to brand the hotels as Hilton Garden Inns. The sale is expected to close after the hotels are complete early next year.

The company made the announcement as it released second-quarter financial results, showing increases in occupancy and rates.

Occupancy in the company's portfolio was 75.8 percent during the three months that ended June 30. That's up from 73.7 percent during the same period last year.

That helped boost rates. Revenues from hotel rooms grew to $38.4 million during the second quarter, up 10.4 percent from the same quarter in 2005.

Winston reported funds from operations, a measure of profitability for REITs, of 36 cents per share before nonrecurring charges and expenses. That beat the median estimate of analysts surveyed by Thomson Financial by 2 cents.

Meanwhile, the company lowered guidance for full-year funds from operations to $1.07 to $1.12 per share, before one-time costs.

Winston previously forecast a range of $1.09 to $1.15 per share, but revised the range to factor in earnings dilution from hotel sales and expenses related to the opening of a New Jersey hotel.

Winston shares fell 38 cents Tuesday, closing at $11.97. The stock is up 20.9 percent this year, while the Bloomberg hotel REIT index has gained 12.9 percent.

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