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McLEAN, VA-Affiliates of JER Partners Acquisitions IV LLC have agreed to buy locally based Highland Hospitality Corp. for $2 billion in cash. Highland Hospitality Corp. is a lodging REIT based here that focuses on the premium and upscale full-service and limited-service markets.

The two firms entered into an agreement in which JER would assume Highland’s approximately $260-million existing debt and acquire all of its outstanding common stock and operating partnership units for $19.50 per share. As part of the acquisition agreement, no future dividends will be paid on the common stock.

The purchase price is a 15% premium over Highland’s three-month average closing share price, according to the companies. Should the merger close, JER will add 27 hotel properties with an aggregate of 8,379 rooms in 14 states and DC to its portfolio. The firm now holds an interest in more than 17,000 rooms in 170 properties.

Bear, Stearns & Co. Inc. and Merrill Lynch & Co. acted as financial advisors to Highland. Hogan & Hartson LLP was its legal advisor. Wachovia Securities and Citi were JER’s financial advisors. Acquisition financing is being provided by Wachovia Bank. O’Melveny & Myers LLP, Allen & Overy LLP and Venable LLP acted as JER’s counsel.

According to Cia Buckley, president of JER’s US Fund Business, JER intends to undertake a focused capital investment program to position the portfolio for further growth. “We view this as a key strategic investment for our organization,” she says in a statement.

JER is also in the midst of another merger transaction. JER in conjunction with Formation Capital LLC has a $1.7 billion offer on the table to acquire Genesis HealthCare Corp. Currently, Genesis operates 221 skilled nursing and assisted living properties.

Additionally, JER routinely acquires one-off hotels in key markets that can range from limited service to luxury class. The firm purchased the 394-key Fairview Park Marriott in March for $108.5 million, as well as the 393-key Renaissance Stanford Court Hotel in San Francisco for $157 million.

The last hotel portfolio the company acquired, a spokesman tells, was its purchase of Jameson Inns Inc., for $371 million in May 2006.

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