MeriStar financed the investment in the landmark 705-room hotel with cash on hand. According to a company spokesman, MeriStar was attracted to the property because of the location--at the corner of Lexington Avenue and 48th Street--and occupancy rates in the low 90% range.

"We are pleased to have been able to reallocate capital from our non-core asset sales into a strong hotel in a premier market," says chief financial officer Donald D. Ollinger in a statement. "We completed this transaction without having to access the capital markets while maintaining adequate liquidity."

The 28-story hotel was built in 1929 and features 82 suites, 101 deluxe rooms and 522 standard rooms. An $18-million renovation was completed in 2001 and included upgrades to all public spaces, guest rooms, bathrooms and mechanical systems. In March of this year, 90 rooms were upgraded to business-class rooms, with new carpeting, granite-topped work desks and luxury-quality linens. In addition to the guest rooms, four retailers--Raffles, J. Sung Dynasty, Latin Quarter and Starbucks--lease space at the hotel.