Sue Broderick, manager of corporate administration for HEIHospitality, reports the company has its first property acquisitionto be financed by the new fund under contract. She would notdivulge the property to be acquired, but says the deal could closelater this week.

The original target for the discretionary fund was $250 million.Morgan Stanley was the placement agent for the fund. Participantsin the fund include institutional investors, individuals and a"significant investment" from the principals and employees of HEIHospitality. Merritt Hospitality, a wholly owned subsidiary of HEI,will be the preferred operator of the hotels acquired by the fund.Company officials add, however, that the fund may acquire hotelsthat are managed by other operating companies.

Commenting on the closing of the equity fund, HEI chairman andchief executive officer Gary Mendell says, "We believe the 10%over-subscription is a good barometer of the interest thatinvestors have at this stage of the economic cycle in acquiringquality hotels that are operated by experienced professionals. Thisequity, prudently leveraged, will give us the financial strengthand flexibility to acquire up to approximately $800 million inhotels over the next 24 to 36 months." He adds that HEI seeks toacquire 200- to 500-room hotels in the top markets.