As part of the overall transaction, Interstate will also acquire 100% of the third hotel, the Sheraton Columbia, for $46.5 million.  The company plans to invest $12 million in a comprehensive renovation of the property, including upgrades to all guest rooms and public spaces, which is expected to be completed by the end of 2008.  Interstate will fund the acquisition with available cash and capacity under its senior revolving credit facility.  The transaction is expected to close in the fourth quarter. 

�This falls directly within our strategy of owning real estate, both for our own account and in joint venture partnerships,� said Thomas F. Hewitt, Interstate�s chief executive officer.  �This transaction is an illustration of our successful execution of our growth strategy.  We remain opportunistic in our acquisition strategy and maintain flexibility to structure transactions within dynamic markets.�   

�These three, geographically diverse properties are located in key urban, airport and major suburban markets,� said Leslie Ng, chief investment officer.  �All of the properties are strong performers with steadily improving RevPAR and income and have significant further upside potential.  This is our first venture with Investcorp, one of the world�s largest and most diverse alternative investment managers, and we look forward to exploring additional opportunities with them.�  

�The acquisition of these hotels is consistent with our multi-disciplinary focus of aggressively pursuing opportunities across product platforms and geographies to deliver strong cash flows and above average returns to our global clients,� said John Fraser, Co-Head, Investcorp Real Estate Group.  �Interstate has been successfully managing these properties and is thoroughly familiar with the individual markets.  Given Interstate�s solid track-history, expertise and proprietary management systems, we are very confident in its ability to drive these properties to their fullest potential.�

Sheraton Columbia, Maryland
The 288-room Sheraton Columbia Hotel is located in Columbia, Md., a 14,000-acre planned community approximately 40 miles north of Washington, D.C., and 15 miles from Baltimore.  Situated in Howard County, one of the wealthiest counties in the state of Maryland, this award-winning community features more than 2,500 businesses, over 60,000 jobs, 21 million square feet of commercial and residential space and a wide array of social, cultural, educational, entertainment and recreational programs and facilities.  

Hilton Seelbach Louisville, Kentucky
Since its grand opening in 1905, the legendary Seelbach Hilton Louisville has been the premier, luxury hotel in Louisville.  The 321-room, four-diamond property offers the atmosphere of a bygone era coupled with modern amenities and state-of-the-art technology, including high-speed internet access in all guest rooms and meeting rooms.  It also is home to Kentucky�s first and only five-diamond restaurant, the Oak Room.  The landmark hotel enjoys an excellent downtown location, in close proximity to Louisville�s unique attractions, such as Bluegrass-style entertainment, the Kentucky Derby, bourbon-distillery tours and scenic riverboat rides. 

Crowne Plaza Madison, Wisconsin
Located off I-90/94, three miles from the Madison airport, the 226-room Crowne Plaza is situated near Madison�s largest shopping mall, theater and restaurants, and proximate to the city�s convention center, the University of Wisconsin and the state capitol.  Renovated in 2005, the hotel features an indoor pool, restaurant and lounge, a business center and more than 6,800 square feet of meeting space. Madison is the second largest city in Wisconsin, after Milwaukee, and is located in the state�s fastest growing county.  In addition to state government, Madison is home to a number of major corporations, including Alliant Energy and American Family Insurance.
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Sheraton Columbia  10207 Wincopin Circle Columbia, Maryland

Seelbach Hilton Louisville 500 Fourth Street Louisville, Kentucky

Crowne Plaza Hotel Madison 4402 E. Washington Ave. Madison, Wisconsin

The Investcorp Real Estate Group is a well-capitalized, return-oriented real estate investor with an investment portfolio totaling in excess of $4 billion and a long and distinguished track record of success.  Investcorp�s real estate team, is experienced in the acquisition, development, financing, leasing, management, and disposition of a wide variety of property types including office, retail, hotel, residential, mixed-use, luxury resort and others.  The group takes a flexible approach to investing and works closely with local operating partners on both a co-investment and direct investment basis, targeting investment profiles ranging from core-plus to opportunistic in markets throughout the U.S.    

The Investcorp Real Estate Group is part of Investcorp, a leading provider and manager of alternative investment products.  Investcorp has offices in New York, London and Bahrain and is publicly traded on the London Stock Exchange (IVC) and Bahrain Stock Exchange (INVCORP).  The firm has five lines of business: private equity, real estate, hedge funds, venture capital and Gulf growth capital.  Founded in 1982, Investcorp has grown to become one of the largest and most diverse alternative investment managers in terms of both product offerings and geography, and currently has approximately $13 billion in invested assets under management. Additional information on Investcorp can be found at www.investcorp.com. 

About Interstate

As of August 31, 2007, Interstate Hotels & Resorts operated 189 hospitality properties with more than 43,000 rooms in 36 states, the District of Columbia, Belgium, Canada, Ireland, Mexico and Russia, including six wholly-owned properties and 20 properties with a minority ownership interest through 13 separate joint ventures.  In addition, Interstate Hotels & Resorts has contracts to manage 16 hospitality properties with nearly 4,600 rooms currently under development.  For more information about Interstate Hotels & Resorts, visit the company�s Web site: www.ihrco.com.  

This press release contains �forward-looking statements,� within the meaning of the Private Securities Litigation Reform Act of 1995, about Interstate Hotels & Resorts, including those statements regarding future operating results and the timing and composition of revenues, among others, and statements containing words such as �expects,� �believes� or �will,� which indicate that those statements are forward-looking.  
 

Carrie McIntyre
SVP, Treasurer
(703) 387-3320