HPT now owns 76 Candlewood hotels which are operated by InterContinental Hotels Group under the Candlewood Suites brand. In addition, HPT's "owner's priority" return on its Candlewood Suites is partially guaranteed by InterContinental Hotels Group.
Prior to this closing, HPT owned 64 Candlewood Suites hotels which were leased to Candlewood Hotel Group. In early 2003 Candlewood told HPT that it was considering strategic alternatives. Since that time, HPT says it has been working with Candlewood and its advisors regarding various long term alternatives for the HPT-owned Candlewood Suites hotels.
Simultaneously with HPT's $90-million purchase, the lease for 64 hotels between HPT and Candlewood was terminated and HPT entered a new 25-year management contract with Intercontinental Hotels Group for all 76 of these hotels. Also, simultaneously with these transactions, Intercontinental Hotels Group purchased the rights to the "Candlewood Suites" brand from Candlewood. Including the 76 Candlewood hotels owned by HPT, there are approximately 112 Candlewood Suites hotels currently in operation or in development.
The 76 Candlewood hotels now owned by Hospitality Properties Trust contain 9,220 suites and are located in 28 states throughout the US. The new owner's priority return, which HPT will receive from the 76 hotels managed by Intercontinental Hotels Group, is $60 million a year. Intercontinental is providing a limited guaranty of the owner's priority payments to HPT up to $50 million a year.
In connection with Candlewood'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 Intercontinental Hotels Group systems, HPT will invest $15 million in the hotels over the next two years.
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