$90 Million and a New Management Agreement with
InterContinental Hotels Group
|NEWTON, Mass. - Dec. 31, 2003 -- Hospitality Properties Trust (NYSE:
HPT) today completed several agreements which were previously announced
including the acquisition of 12 Candlewood hotels for $90 million and a
new management agreement with InterContinental Hotels Group (LSE/NYSE:
IHG) for operation of all Candlewood hotels owned by HPT. Upon closing
these agreements today, HPT now owns 76 Candlewood hotels which are now
operated by IHG as Candlewood Suites hotels. Also, HPT's Owner's Priority
return on its 76 Candlewood Suites hotels is partially guaranteed by IHG.
Prior to the closing today HPT owned 64 Candlewood Suites hotels which were leased to Candlewood Hotel Group (OTC: CNDL). In early 2003 CNDL advised HPT that CNDL was considering strategic alternatives. Since that time, HPT has been working with CNDL and its advisors regarding various long term alternatives for the HPT owned Candlewood Suites hotels. The agreements completed today are the result of these efforts.
Pursuant to these agreements HPT purchased 12 Candlewood Suites hotels for $90 million. Simultaneously with this purchase, the lease for 64 hotels between HPT and CNDL was terminated, and HPT entered a new 25 year management contract with IHG for all 76 of these hotels. Also, simultaneously with these transactions, IHG purchased the rights to the "Candlewood Suites" brand from CNDL. Including the 76 Candlewood hotels which are owned by HPT, there are approximately 112 Candlewood Suites hotels currently in operation or in development.
The 76 Candlewood hotels now owned by HPT contain 9,220 suites, are located throughout the USA in 28 states, and the average age of the 76 hotels is only five years. The new Owner's Priority return which HPT will receive from the 76 hotels managed by IHG is $60 million/year. IHG is providing a limited guaranty of the Owner's Priority payments to HPT up to $50 million/year. In connection with CNDL's release from its lease obligations, HPT retained a security deposit and a capital improvements escrow totaling about $45 million. In order to pay for capital costs at the 76 hotels and to convert various operating systems to IHG systems, HPT will invest $15 million in the 76 managed hotels during the two years following closing of these transactions.
A summary of certain terms of the previous lease between HPT and CNDL
and the new management contract between HPT and IHG is as follows:
THIS PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND THE FEDERAL SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON HPT'S CURRENT BELIEFS AND EXPECTATIONS, BUT THEY ARE NOT GUARANTEED TO OCCUR. THESE FORWARD LOOKING STATEMENTS MAY NOT OCCUR BECAUSE OF KNOWN CONTINGENCIES OR BECAUSE OF CHANGED CIRCUMSTANCES. FOR EXAMPLE:
AS A RESULT OF THE TERRORIST ATTACK ON SEPTEMBER 11, 2001, AND BECAUSE OF THE GENERAL DECLINE IN BUSINESS TRAVEL DURING THE PAST THREE YEARS, CERTAIN HOTELS OWNED BY HPT, INCLUDING SOME OF THE 76 CANDLEWOOD HOTELS NOW OWNED BY HPT, HAVE NOT GENERATED SUFFICIENT CASH FLOW TO PAY RENT. IF ANOTHER TERRORIST ATTACK OCCURS WITHIN THE USA OR IF ECONOMIC ACTIVITY AND BUSINESS TRAVEL DO NOT INCREASE, IT MAY BE THAT IHG WILL BE UNABLE TO PAY THE OWNER'S PRIORITY DUE HPT. SUCH FACTORS ARE GENERALLY BEYOND HPT'S AND IHG'S CONTROL.
Hospitality Properties Trust
John G. Murray, President
Mark L. Kleifges, CFO
|Also See:||InterContinental Hotels Group to Acquire the Candlewood Suites Brand for $15 million in Cash / October 2003|
|Candlewood Hotel Company, Inc. Proceeding Towards Complete Liquidation and Dissolution; Best Alternative for the Stockholders / October 2003|