Host Marriott Corp. (HMT) said on Monday it had agreed to pay about $4.04 billion to acquire a portfolio of 38 luxury and upscale hotels from Starwood Hotels and Resorts Worldwide Inc. (HOT)

The sale of hotels in cities from Los Angeles to Madrid is the latest move by Starwood to shed its real estate assets and concentrate on operating, rather than owning hotels. The company had said it was in talks to sell $2 billion to $4 billion of real estate assets.

For Host Marriott, the deal is an opportunity to further expand its portfolio from its original stable of Marriott-branded properties and represents a first bridgehead into the European market, where it is acquiring hotels in Italy, Great Britain, Poland and Spain.

Starwood said that under the terms of the deal, it will continue to manage the properties — including Sheraton, W, Westin, St. Regis and Luxury Collection hotels — for up to 40 years.

The hotels being acquired by Host Marriott, the largest U.S. lodging real estate investment trust, include 28 properties in North America, six in Europe and two each in Asia and Latin America, Starwood said.

Host Marriott expects to take on about $700 million in debt to fund the deal and issue about $2.3 billion in equity to Starwood shareholders. The remainder of the purchase price will be paid in cash, the Bethesda, Maryland-based company said.

Host Marriott shares were down 55 cents, or 3.23 percent, at $16.86. Starwood shares were 35 cents, or 0.6 percent lower, at $58.90.

The sale leaves Starwood with 93 properties with 28,432 rooms that produce more than $500 million a year in annualized earnings before interest, taxes, depreciation and amortization.

Host said it expects the portfolio to generate $355 million to $365 million of EBITDA in calendar year 2006 on a stand-alone basis. It will also add about 3 cents to 5 cents per share to the company's diluted funds from operations.

Goldman Sachs & Co. (GS) advised Host Marriott on the deal, while Starwood was advised by Bear, Stearns & Co. Inc. (BSC) and Deutsche Bank AG.