MeriStar Hospitality Corporation Refinances $300 Million CMBS Portfolio Loan; Reduces Interest Rate by More Than 300 Basis Points

"This transaction is another important step, which, when combinedwith the strength of our properties' performance, will continue ourefforts to provide value to our shareholders by strengthening ourbalance sheet and improving our overall credit statistics," saidDonald D. Olinger, chief financial officer. "Significantly, it reducesour expected annualized interest expense by more than $9 million."

The refinancing included a defeasance of the existing loan andborrowings under two new facilities, using 18 properties that wereincluded in the original collateral package. The new borrowingsconsist of a $312 million, 17-property CMBS loan at a rate of LIBORplus 135 basis points, or 309 basis points below the effective rate ofthe original loan; and a $15 million term loan covering one propertywith a borrowing rate of LIBOR plus 350 basis points. The new CMBSfacility will have an initial maturity of October 9, 2007 plus threeone-year extensions at the company's option. The term loan facilitywill initially mature on April 9, 2006 with an option to extend thematurity for an additional six months.

Olinger said that the transaction also provides the company withsignificantly greater flexibility and control over the 18 hotels inthe loan collateral pool, noting that, "We now have the flexibility tosell assets included in the collateral group that do not fit with ourlong-term strategy, generating proceeds to further reduce our debtwhile at the same time reducing our future capital requirements."

In the third quarter, the company expects to record a $45.9million loss on early extinguishment of debt related to the defeasancecost and an $8.7 million charge related to the termination of theinterest rate swap on the original CMBS loan. In addition, the companyalso expects to record a non-cash impairment charge of approximately$36 million related to four assets in the collateral package that thecompany expects to sell, but which could not be sold under theoriginal CMBS structure. Despite the one-time debt related charges,the company expects the transaction to be net present value (NPV)positive.

The CMBS refinancing is one of a number of financial transactionscompleted by the company in 2005. In addition to the CMBS refinancing,the company expanded its bank facility to $150 million while loweringthe borrowing rate on the facility by 100 basis points. Since the endof the first quarter the company has bought back more than $37 millionof its senior unsecured notes and redeemed the remaining $32.7 millionof 8 3/4 percent senior subordinated notes at par on August 15, 2005.The company also recently announced its intention to expand its assetdisposition activity for the year in response to strong marketconditions for dispositions and expressed interest. "Pending the saleof additional hotels, we plan to call between $175 million and $200million of our 10.5% senior notes when they become callable onDecember 15th of this year, significantly reducing our most costlypiece of debt," Olinger said.

"We are continuing to see the positive financial results of ouroverall corporate strategy. We expect our weighted average interestrate to decrease by nearly 70 basis points to 7.8% and our interestcoverage ratio to improve from 1.4 to between 1.7 and 1.8 by year end2005. Our next material maturity is not until 2008. The performance ofour properties combined with our capital markets activities arestrengthening our balance sheet and improving our overall creditstatistics. Shareholder value has been increased by all of theseachievements."

The new CMBS financing and expanded bank facility were placedthrough Lehman Brothers.

Arlington, Va.-based MeriStar Hospitality Corporation owns 71principally upscale, full-service hotels in major markets and resortlocations with 19,889 rooms in 22 states and the District of Columbia.The company owns hotels under such internationally known brands asHilton, Sheraton, Marriott, Ritz-Carlton, Westin, Doubletree andRadisson. For more information about MeriStar Hospitality, visit thecompany's website: www.meristar.com.

This press release contains forward-looking statements within themeaning of Section 27A of the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934. Forward-looking statements,which are based on various assumptions and describe our future plans,strategies and expectations, are generally identified by our use ofwords such as "intend," "plan," "may," "should," "will," "project,""estimate," "anticipate," "believe," "expect," "continue,""potential," "opportunity," and similar expressions, whether in thenegative or affirmative. We cannot guarantee that we actually willachieve these plans, intentions or expectations. All statementsregarding our expected financial position, business and financingplans are forward-looking statements. Except for historicalinformation, matters discussed in this press release are subject toknown and unknown risks, uncertainties and other factors which maycause our actual results, performance or achievements to be materiallydifferent from future results, performance or achievements expressedor implied by such forward-looking statements. Factors which couldhave a material adverse effect on our operations and future prospectsinclude, but are not limited to: economic conditions generally and thereal estate market specifically; supply and demand for hotel rooms inour current and proposed market areas; other factors that mayinfluence the travel industry, including health, safety and economicfactors; competition; cash flow generally, including the availabilityof capital generally, cash available for capital expenditures, and ourability to refinance debt; the effects of threats of terrorism andincreased security precautions on travel patterns and demand forhotels; the threatened or actual outbreak of hostilities andinternational political instability; governmental actions, includingnew laws and regulations and particularly changes to laws governingthe taxation of real estate investment trusts; weather conditionsgenerally and natural disasters; rising interest rates; and changes inU.S. generally accepted accounting principles, policies and guidelinesapplicable to real estate investment trusts. These risks anduncertainties should be considered in evaluating any forward-lookingstatements contained in this press release or incorporated byreference herein. All forward-looking statements speak only as of thedate of this press release or, in the case of any documentincorporated by reference, the date of that document. All subsequentwritten and oral forward-looking statements attributable to us or anyperson acting on our behalf are qualified by the cautionary statementsin this section. We undertake no obligation to update or publiclyrelease any revisions to forward-looking statements to reflect events,circumstances or changes in expectations after the date of this pressrelease.