The purchase comes at a time that the REIT has downgradedestimates of earnings for 2009, with officers citing the strugglingeconomy, higher construction costs and the drop in group bookingsnationwide. Strategic, in its second quarter earnings conferencecall on Aug. 7, said its lowering its guidance for FFO per sharefor the rest of the year by 10% to the mid-point of $1.46 to$1.56.

Strategic officials did not return calls for comment. During theAug. 7 call, president and CEO Laurence Geller said market forceshave forced the company to back off on new properties. "The lengthof time to develop a project in the high-end market is increased byover 20%. Financing is scarce and certainly relatively moreexpensive than in the recent past," he says. "As we look atpotential competitive supply in those markets in which we operate,our conclusion is simple. If a property is not being built today,then we are unlikely to see any more supply coming in before theend of 2011, at the very earliest."

Higher costs have forced Strategic to even hold back on the $130million development of the hotel in the 87-story Aqua buildinggoing up in Chicago. "Although this acquisition is under contract,given the current market conditions, we are evaluating our optionsto defer or modulate this project to better time its recovery intoa recovering market," said Jim Mead, EVP and CFO, during the Aug. 7call. The hotel will still likely open by late 2010, companyofficials said.