TravelCenters of America Sold to Hospitality Properties Trust

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TravelCenters of America Sold to Hospitality Properties Trust

WESTLAKE, Ohio -- As reported by CSNews Online yesterday, Hospitality Properties Trust has entered into an agreement with private equity group Oak Hill Capital Partners L.P. to purchase its TravelCenters of America for approximately $1.9 billion. For TravelCenters' 162 locations -- 13 of which are owned and operated by franchisees -- throughout the U.S. and Canada, business will continue as usual throughout the transition.

Hospitality Properties Trust, a real estate investment trust headquartered in Newton, Massachusetts, owns 310 hotels located throughout the United States, Puerto Rico and Ontario, Canada. This purchase is the company's first in the convenience industry. Tim Bonang, the manager of investor relations told CSNews Online "We look at this as within the travel industry but obviously not as owning hotels, TravelCenters has 20 hotels within its portfolio, but that's not the bulk of it."

"The hotel industry is cyclical and these facilities performed extremely well, and in all types of markets -- recessions, up markets -- and we feel it helps mitigate a bit of the cyclicality," he continued.

In May, TravelCenters announced it would seek a new major investor to finance its growth strategies, which include the growth and enhancement of its products and services for professional drivers and other customers. Current strategies include more locations and additional shop bays in existing and new locations.

Tom Liutkus, director of advertising and public relations told CSNews Online that "No other changes [will be made] at all. Hospitality Properties is an investment company so the nature of transaction is that they don't run any business. … This is a way to use capital and they get a return on ours."

Liutkus added that the agreement between the companies benefits both sides. Hospitality Properties looked at TravelCenters' track record of growth and TravelCenters' looked at ways to fuel the company's continued growth.

The choice to sell to Hospitality Properties than a number of other bidders was based on the sale price and the amount of capital that would be available to company, Liutkus said. For Hospitality Properties, TravelCenters has "the things that we like, it fits with our investment criteria that it has a national network … we like a geographic distribution in our investments," Bonang said.

Once the transaction is closed, Hospitality Properties will hold all of the TravelCenters' real estate and transfer its operating business to a subsidiary which will be distributed to Hospitality Properties' shareholders. TravelCenters' operating assets, including the franchise agreements, will be distributed to shareholders to create a separately traded, public company with shares listed on a national stock exchange.

According to Hospitality Properties, the transaction will increase and diversify its investments and revenues while being immediately accreditive to the company's funds from operations. In addition, Hospitality Properties will gain additional growth opportunities and stabilize revenues in the future through TravelCenters.

"TravelCenters provides an important infrastructure type service within the U.S. transportation system, with largely irreplaceable sites along the U.S. Interstate Highway System," said John Murray, president of Hospitality Properties in a release.

He continued, "The Hospitality Properties lease will have the same security features which characterize Hospitality Properties Trust's existing hotel leases and management contracts: one long term lease for all the properties, a strong parent company guaranty, all or none renewal options, etc."

The transaction is expected to close in early 2007. Hospitality Properties has hired Merrill Lynch & Co. to provide temporary financial assistance and will obtain long-term financing for the transaction by issuing debt and equity securities.

TravelCenters' was advised by Lehman Brothers and Credit Suisse during the transaction. In 2000, TravelCenters was acquired by Oak Hill Capital Partners L.P., a private equity investment group; Freightliner and some TravelCenter management. Before that, the company was owned by intuitional investors including The Clipper Group, TravelCenter management and Freightliner.

Hospitality Properties will hold a conference call and Web cast to discuss the acquisition today at 10 a.m. at (800) 289-0572 and

TravelCenters of America's new Goasis concept, designed by Dublin, Ohio-based WD Partners, achieved a first place tie in the Best Original Store Design category in CSNews' first Store Design Contest. Goasis, which debuted in Ashland, Ohio, in September 2005, was designed to be a clean, safe stop for families, business travelers, and locals, with special details to make it attractive to women and moms.