Newton, MA (April 11, 2002). Hospitality Properties Trust (NYSE: HPT) today acquired 21 Candlewood Suites hotels (2,593 suites) for $145 million. These hotels were simultaneously leased back to a subsidiary of Candlewood Hotel Company, Inc. (NASDQ: CNDL) for rent of $16 million/year, plus percentage rent equal to 10% of increases in gross revenues at the hotels after 2002. The transaction announced today has the security features which are typical of HPT transactions: HPT retained a cash security deposit equal to one year’s minimum rent of $16 million, the lease requires a capital expenditure reserve escrow equal to five percent (5%) of gross hotel revenues and the rent is guaranteed by the brand owner and franchisor, CNDL. Also, the 21 hotels purchased today have been added to a combination or pooled lease for 36 Candlewood hotels which HPT currently owns creating one lease for all 57 hotels (6,887 suites), and the combined lease term has been extended through 2018 plus all or none renewal options thereafter.
The 57 hotels included in the combined lease from HPT to CNDL are geographically diversified in 27 states. The average age of the 21 hotels which HPT purchased today is only three years, and the average age of the combined lease pool of 57 hotels is only 3.6 years.
Commenting upon today’s announcement, John Murray, President of HPT, made the following statement:
“HPT is pleased to expand its relationship with Candlewood. HPT now owns approximately half of the Candlewood Suites hotels in operation or under development. The Candlewood management team has done an outstanding job of responding to the challenges which now face the hospitality industry. Since September 11, our Candlewood hotels have suffered relatively minor declines in REVPAR [revenue per available room] and sometimes they have exceeded their prior year’s performance.”
HPT has funded this acquisition using cash on hand and borrowings under its recently renewed revolving bank credit facility.
Hospitality Properties Trust is a real estate investment trust headquartered in Newton, MA, which owns hotels.
THIS PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES REFORM ACT OF 1995. THESE FORWARD LOOKING STATEMENTS INCLUDE IMPLICATIONS THAT THE CANDLEWOOD GUARANTY WILL ENSURE RENT PAYMENTS, THAT HPT’S CANDLEWOOD HOTELS WILL CONTINUE TO PRODUCE OPERATING PROFITS SUFFICIENT TO PAY RENT, THAT HPT RENTS WILL INCREASE AS A RESULT OF PERCENTAGE RENT PAYMENTS AND OTHERWISE. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON HPT’S PRESENT BELIEFS AND EXPECTATIONS, BUT THEY MAY NOT OCCUR. FOR EXAMPLE, THE CANDLEWOOD GUARANTY MAY BE UNCOLLECTABLE, THE PERFORMANCE OF HPT’S CANDLEWOOD HOTELS MAY DECLINE, PERCENTAGE RENT MAY NOT EXIST AND HPT’S RENTAL INCOME COULD DECLINE. CURRENTLY UNEXPECTED RESULTS COULD OCCUR FOR MANY REASONS, SOME OF WHICH ARE BEYOND HPT’S OR CNDL’S CONTROL, SUCH AS A GENERAL DECLINE IN TRAVEL, A TERRORIST ATTACK, INCREASED COMPETITION OR OTHERWISE. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.