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									The Extended Stay Hotels Deal
A Case Study in Transaction Management

On April 17, 2007 the Lightstone Group announced that one of its affiliates had reached
agreement with an affiliate of the Blackstone Group to purchase the Extended Stay Hotel chain
for a record $8 billion, making it one of the largest non-casino hotel deals in U.S. history. The
chain operates under the Extended Stay Deluxe, Extended Stay America, Homestead Studio
Suites, StudioPlus and Crossland brands and includes 684 hotels (76,000 units) in 44 states and
Canada. Subject to the standard conditions of sale, the parties wanted to close the deal in two

Madison Mahwah, one of Madison Title’s affiliates, took the lead in coordinating the title work
for this transaction, which due to its scope, involved all of the nation’s major title underwriters.
Needless to say, this was an exciting opportunity for Madison and one that we hope will open up
a whole new level of service for us and our clients.

This case study outlines the methods we used to manage the transaction.

The Challenge
Madison faced several significant challenges in this transaction:

   The sheer volume of properties—all 684 sites had to be tracked individually. That meant
    ordering municipal and tax searches, compiling search reports, resolving title issues (if any),
    tracking commitments, policies and all underlying documents for each individual property.

   The geographic scope—laws and conventions for transferring property title vary not only by
    state, but often by county as well. Some states, for example, set premium rates. Others allow
    the carriers to set their own rates. Within any given state, each county may have different
    fees and requirements for recording mortgages, transfer taxes, etc. Multiply these variations
    by 44 states and two countries and you’ve got a lot of facts to manage.

   The coordination with the underwriters— given the size and geographic scope of this
    transaction, no single underwriter would undertake the entire risk. Although Stewart Title
    and Guaranty Company led the way, almost every major title underwriter was involved.

   The Timeframe—two months is plenty of time for most closings, but for a transaction of this
    magnitude it is an extremely tight deadline.

   Maintenance of other business—we were committed to other clients and other transactions at
    the same time. We had to be certain that these transactions got the attention and service they

The Team
Madison put together a team of ten of our most experienced title officers, led by Sam Shiel Esq.,
whose national expertise was invaluable on this project. This team dedicated itself exclusively to
the ESH transaction. We created an ESH command center in our corporate headquarters so the
team could share information immediately, work together more easily and have exclusive access
to the office equipment they needed. We also assigned 45 paralegals from our Citybook affiliate
to support the team by producing the actual commitments and policies.

The Customize d Website
Within a day and half of having been awarded this assignment, Madison built a customized
website that was the key to managing the transaction. All interested parties—buyer, seller,
lenders and their representatives—had access to the data and relevant documents. Not only could
they see how things were progressing, but they could use our site to manage or facilitate their
own related activities.

These are just a few of the key features built into the site:

   The Status Report
    o Lists the individual sites by state and by site number (using a numbering system the seller
       had in place)
    o Indicates the dates the searches were ordered and completed for each site and the
       corresponding dates for the commitments.
    o Shows totals under each category so you can see at a glance how many sites had
       completed searches and commitments.

    Plus, with a simple click on the site number users can bring up the relevant documents—
    survey, commitment, attachments, any liens, back title and policies.

   Master Issues
    Basically this feature serves as a spreadsheet that lists all the sites that have any title issues
    and tracks the resolution of those issues. The seller used this feature to track releases by site.

   Search Function
    This document search feature proved of particular value to the lenders, but also helped our
    own team and the seller. By listing a document type (e.g., survey) you pull up all the
    documents of that type on file and sort by date. So, the parties could get daily updates on the
    documents of interest to them.

In the post closing phase, we use the site to keep track of mortgages as they are recorded. And, as
they become available, we will add the records for transfer tax payments and zoning letters.

The Closing
Using several experienced closers Madison orchestrated the closing for this transaction, which
took place over a four-day period. There were literally thousands of documents to review. Our
team spent the first two days reviewing the seller’s documents and the next day and a half
reviewing the buyer’s documents. The funding took place, of course, on the fourth and final
day—Monday, June 11, 2007.

Simpson Thacher & Bartlett LLP represented Blackstone and Extended Stay Hotels. Herrick
Feinstein LLP represented Lightstone and Cadwalader, Wickersham & Taft, LLP represented the
lenders. The closing went smoothly, and the transaction was completed nearly a week before the
two- month deadline set by the principals.
What We Learned Along the Way
According to Miriam Stern, one of the senior title officers on the team, “It’s more a question of
reinforcing the importance of some of the basic things that we all know but sometimes take for
granted, like really putting yourself in the client’s shoes. Just as an example, a simple thing like
using the client’s numbering system to identify the sites instead of our own made a huge

Madison’s CEO, Joseph I. Rosenbaum, said, “Our philosophy has always been that you should
keep a strong infrastructure in place regardless of fluctuations in the market. That way you are
prepared to act when opportunities arise. And that’s been born out in this situation. We had the
resources to jump on this transaction—despite its scope and tight turnaround time. I am
extremely pleased with the outcome and proud of our team.”

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In the meantime . . .
While the ESH transaction was in progress so were many others. During this same period we
handled several hundred residential closings plus a number of commercial deals including:
 $131 million purchase in PA
 13-property purchase in NJ
 $13 million construction purchase in Lakewood, NJ
 $22 million purchase in PA

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