SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
January 4, 1998
MEDITRUST CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware 95-3520818
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
197 First Avenue, Suite 300, Needham, MA 02194
(Address of principal executive offices and zip code)
(781) 433-6000
(Registrant's telephone number, including area code)
MEDITRUST OPERATING COMPANY
(Exact Name of Registrant as specified in its charter)
Delaware 96-3419438
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
197 First Avenue, Suite 100, Needham, MA 02194
(Address of principal executive offices and zip code)
(781) 453-8062
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
- ------- ------------
On January 4, 1998, Meditrust Corporation and Meditrust Operating Company
issued the press release attached as Exhibit 99.1 to this Current Report on Form
8-K.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
- ------- -----------------------------------------------------------------
(c) Exhibits
Exhibit No. Description
- ----------- -----------
99.1 Press release announcing the execution of a definitive agreement
pursuant to which La Quinta Inns, Inc. will, subject to certain
conditions, merge into Meditrust Corporation.
99.2 The Meditrust Companies Investor Presentation slides dated January 1998
relating to The Meditrust Companies and the acquisition of La Quinta
Inns, Inc.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 5, 1998 MEDITRUST CORPORATION
/s/ David F. Benson
-------------------------------
By: David F. Benson
Its: President
MEDITRUST OPERATING COMPANY
/s/ Abraham D. Gosman
-------------------------------
By: Abraham D. Gosman
Its: Chief Executive Officer
3
<PAGE>
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
99.1 Press release announcing the execution of a definitive agreement
pursuant to which La Quinta Inns, Inc. will, subject to certain
conditions, merge into Meditrust Corporation.
99.2 The Meditrust Companies Investor Presentation slides dated
January 1998 relating to The Meditrust Companies and the
acquisition of La Quinta Inns, Inc.
EXHIBIT 99.1
THE BOARDS OF DIRECTORS OF THE MEDITRUST COMPANIES
UNANIMOUSLY AGREE TO ACQUIRE LA QUINTA INNS FOR $3.0 BILLION
Transaction Expected To Be 15% Accretive to Meditrust FFO
---------------------
Needham, MA and San Antonio, TX (January 4, 1998) - The Meditrust Companies
("Meditrust") (NYSE: MT) and La Quinta Inns, Inc. ("La Quinta") (NYSE: LQI)
announced today that they have signed a definitive agreement providing for
Meditrust Corporation to acquire La Quinta by means of a merger of the two
companies. The total consideration for the transaction will be $26.00 per share,
in a combination of newly issued shares in Meditrust and cash, subject to
certain adjustments. Meditrust will also assume approximately $900 million in
outstanding La Quinta debt. The total transaction is valued at approximately
$3.0 billion. Upon completion of the transaction, The Meditrust Companies will
have a total market capitalization of approximately $7.5 billion.
The transaction is expected to be approximately 15% accretive to
Meditrust's funds from operations ("FFO") per share for the first twelve months
of combined operations and is expected to contribute significantly to the growth
of the combined entity in future years. Meditrust intends to maintain its
historical record of quarterly increases in shareholder dividends. The
transaction will be accounted for as a purchase, and is expected to close in the
second quarter of 1998.
La Quinta is a fully integrated lodging company that focuses on the
ownership, operation and development of its two hotel products: (i) La Quinta
Inns, a chain positioned in the midprice segment without food and beverage
facilities, and (ii) La Quinta Inn & Suites, a new concept positioned at the
upper end of the midprice segment without food and beverage facilities. La
Quinta currently owns and operates 234 Inns and 36 Inn & Suites with a total of
approximately 35,000 rooms. La Quinta's hotels are located in 28 states with
strong market positions in numerous southern and western states.
- more -
<PAGE>
-2-
Abraham D. Gosman, chairman of the board of directors of The Meditrust
Companies, said, "Meditrust is off and running. The acquisition of La Quinta is
consistent with our stated strategy to make accretive acquisitions of growth
companies, in growth industries, with strong management teams, that can become
consolidators in their industries. We intend to capitalize on these
opportunities as they arise. This acquisition represents a platform for a
lodging and leisure sector within Meditrust."
Mr. Gosman continued, "La Quinta's growth plan is to have over 100 Inn &
Suites hotels with approximately 13,500 additional rooms to be opened by the end
of 1999. This program will increase the availability of total rooms by
approximately 45% and will result in Inn & Suites representing over 30% of total
La Quinta brand rooms by the end of 1999. With the successful completion of La
Quinta's comprehensive chain-wide re-imaging program and execution of its Gold
Medal(R) Rooms Program - the complete renovation of over 30,000 La Quinta Inn
rooms - La Quinta has achieved its goal of creating the most consistent,
high-quality lodging chain in the midprice segment of the industry. Over the
last three years, La Quinta management and employees have transformed the
company into one of the premier brands in its segment. La Quinta's employees and
management will play a critical role in the future of our combined company."
Gary L. Mead, president and chief executive officer of La Quinta Inns,
Inc., said, "This transaction allows La Quinta shareholders to convert their
shares into Meditrust shares on favorable terms and to participate in the upside
potential of the combined company. We feel that the strengths of the La Quinta
organization will add significantly to Meditrust's long-term growth strategy.
Additionally, the combined company will have greater financial flexibility than
La Quinta would have on a stand-alone basis. We are proud that we are able to
provide our shareholders with such a strong partner. Meditrust has had strong
financial performance - an average annual total return of 22% from inception
through 1996 - and 47 consecutive quarterly dividend increases."
Ezzat S. Coutry, chief operating officer of La Quinta, said, "La Quinta is
the largest owner and operator of midprice hotels without food and beverage
facilities - a segment that is less sensitive to economic cycles than others
within the lodging industry. We have a proven portfolio of properties, a
well-recognized brand and the management expertise to create value for all
shareholders. La Quinta today has one of the highest customer satisfaction
ratings in the lodging industry. We also have a highly rated frequent travelers
program, The Returns(R) Club, with over 300,000 members, approximately 10% of
whom spend more than 30 nights a year at a La Quinta property. Combining
Meditrust's financial strength and ability to access the capital markets coupled
with La Quinta's operating and development experience will enhance La Quinta's
ability to create lasting brand value for the future."
- more -
<PAGE>
- 3 -
Abraham Gosman will continue to serve as chairman of the boards of
directors of The Meditrust Companies. Upon completion of the merger agreement,
Gary Mead, currently president and chief executive officer of La Quinta will
step aside to allow Ezzat Coutry, currently chief operating officer of La
Quinta, to become president and chief executive officer of La Quinta. Prior to
joining La Quinta in 1996, Mr. Coutry spent 20 years at Marriott International,
Inc. where he held various senior operations management positions overseeing
Marriott Hotels & Resorts, Courtyard, Residence Inn and Fairfield Inn brands.
The rest of the La Quinta senior officers also plan to stay with the new
organization.
Under the terms of the Merger Agreement, La Quinta will merge with and into
Meditrust Corporation. La Quinta shareholders will have the option to elect to
receive, subject to the amount of aggregate cash payable being limited to
approximately 25% of the total transaction consideration, either: (i) a
combination of Meditrust stock and the special dividend distribution of earnings
and profit referred to below, or (ii) cash. The stock consideration will be
payable in Meditrust paired shares under an exchange ratio determined based on
the average closing price of Meditrust's paired shares for 20 randomly
determined trading days in a 30-day period ending the seventh day prior to La
Quinta's shareholder meeting called to consider the merger, defined as the
"Meeting Date Price." The Merger Agreement provides that La Quinta shareholders
electing to receive cash will receive, subject to the maximum cash limitations,
$26.00 per exchanged La Quinta share.
The Merger Agreement also provides that La Quinta shareholders electing to
receive stock consideration will receive $26.00 in value so long as the Meeting
Date Price is between $34.20 and $41.80. The $26.00 in value will be comprised
of: (i) paired shares and (ii) a special dividend distribution of La Quinta's
earnings and profit. The special dividend distribution is expected to be
declared immediately prior to the merger, payable to all Meditrust shareholders
of record on a date to be determined by Meditrust between the 15th and the 45th
day following the merger and payable within 15 days of such record date. Above
and below the $34.20 and $41.80 Meditrust share values, the value received by La
Quinta shareholders electing to receive stock consideration is subject to
adjustment based on certain cap and collar mechanisms as described in the Merger
Agreement. If the Meeting Date Price is below $30.40, La Quinta will have the
right to terminate the Merger Agreement under certain circumstances, subject to
a top-up right exercisable by Meditrust. If the Meeting Date Price is below
$28.50, La Quinta will have the unilateral right to terminate the Merger
Agreement. On January 2, 1998, the closing price of Meditrust's paired shares
was $36.375.
All La Quinta shareholders will have the right to elect cash consideration
for each of their shares. In the event that cash to be paid both pursuant to
cash elections in the merger and in the post-closing dividend distribution
exceeds approximately 25% of the total transaction consideration, the cash
merger consideration will be distributed pro rata among those shares submitted
for cash and all other La Quinta shares will receive paired shares and the
post-closing dividend distribution.
- more -
<PAGE>
- 4 -
The transaction is anticipated to be tax-free to La Quinta shareholders who
receive only Meditrust paired shares, except to the extent of: (i) the value of
the paired operating company of the paired shares, which is estimated at
approximately 5% of the total value of the paired shares, and (ii) the special
dividend distribution referred to above. Further, La Quinta shareholders who
receive cash in the transaction (including the associated earnings and profit
distribution) will be taxable to the extent of such cash, with the cash received
as merger consideration generally treated as capital gains and the earnings and
profit distribution treated as ordinary income.
The transaction is conditioned, among other things, upon approval of a
majority of Meditrust Corporation's and Meditrust Operating Company's
outstanding shares, two-thirds of La Quinta's outstanding shares, and regulatory
agencies. In the event that the merger agreement is terminated, under certain
circumstances, including in order to allow La Quinta to pursue a superior
proposal (as defined in the Merger Agreement), La Quinta will be required to pay
Meditrust a break-up fee of $75 million.
In a separate agreement, Gary Mead, Thomas M. Taylor & Co. and entities and
individuals associated with certain members of the Bass family who own in the
aggregate approximately 28% of La Quinta's shares have agreed, among other
things, to vote their La Quinta shares in favor of the proposed transaction with
Meditrust.
The Merger Agreement has been unanimously approved by the boards of
directors of Meditrust Corporation, Meditrust Operating Company and La Quinta.
Salomon Smith Barney acted as financial advisor and provided a fairness opinion
to The Meditrust Companies. Merrill Lynch & Co. Incorporated acted as financial
advisor and provided a fairness opinion to La Quinta.
La Quinta Inns, Inc. is the largest owner/operator of midpriced hotels in
the United States, with 234 La Quinta Inns and 36 La Quinta Inn & Suites with a
total of approximately 35,000 rooms. La Quinta Inns operate primarily in the
midprice segment without food and beverage facilities and La Quinta Inns &
Suites in a new concept positioned at the upper end of that segment. The Company
has inns located in 28 states, concentrated in the southern and western states.
The Meditrust Companies, a paired share real estate investment trust and
the nation's largest health care real estate investment trust, with headquarters
in Needham, Massachusetts, consists of Meditrust Corporation and Meditrust
Operating Company. Meditrust has investments in over 500 health care facilities
in 41 states with 38 different operators and has a total market capitalization
in excess of $4.5 billion.
###
Certain matters discussed within this press release may constitute
forward-looking statements within the meaning of the federal securities laws.
Although Meditrust and La Quinta believe the statements are based on reasonable
assumptions, the companies can give no assurance that their expectations will be
attained. Actual results and the timing of certain events could differ
materially from those projected in or contemplated by the forward-looking
statements due to a number of factors, including, without limitation, general
economic and real estate conditions, the availability of equity and debt
financing for acquisitions and renovations, interest rates, competition for
hotel services in a given market and other risks detailed from time to time in
the filings of Meditrust Corporation, Meditrust Operating Company, and La Quinta
with the Securities and Exchange Commission, including quarterly reports on Form
10-Q, reports on Form 8-K and annual reports on Form 10-K.
Exhibit 99.2
[START: DESCRIPTION OF SLIDES]
The Meditrust Companies
Investor Presentation
January 1998
<PAGE>
Table of Contents
1 Transaction Overview and Rationale
2 Overview of Meditrust
3 Overview of La Quinta
Appendix
A Additional Meditrust Information
B Additional La Quinta Information
2
The Meditrust Companies
<PAGE>
These slides may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, and such statements are
subject to risks and uncertainties. Any such forward-looking statements are not
guarantees of future performance. Actual results may differ materially from
those in the forward-looking statements as a result of various factors,
including general economic and real estate conditions, as well as additional
risk factors contained in the companies' filings with the Federal Securities and
Exchange Commission.
3
The Meditrust Companies
<PAGE>
Transaction Overview
The Meditrust Companies
<PAGE>
Transaction Overview
Summary: Merger of La Quinta into Meditrust
Transaction Size: Equity value: $2,139 million
Debt: $ 900 million
--------------
Transaction value: $3,039 million
Consideration: Total consideration valued at $26.00 per La Quinta share
Share for share transaction with a cash election of up to
$520 million - $6.75 per share if all shareholders elect
cash
Exchange ratio for stock component to be based on collar
mechanism and average Meditrust stock price during agreed
upon pricing period prior to closing
Special post-merger dividend to distribute La Quinta's
accumulated earnings and profits to be included in the
purchase price
5
The Meditrust Companies
<PAGE>
Transaction Overview (Cont'd)
Shareholder Agreements: Principal shareholders representing 28% of La Quinta's
share have agreed to vote in favor of the transaction
Break Up Fee: $75 million, payable if La Quinta pursues an
alternative transaction
Management: Ezzat Coutry, with more than 20 years experience with
Marriott prior to joining La Quinta in 1996 as COO,
will become CEO of the La Quinta division with the La
Quinta management team reporting to him
6
The Meditrust Companies
<PAGE>
Transaction Rationale
La Quinta offers a strong operating platform to Meditrust:
Wholly owned hotels, all recently developed or renovated
High operating margins
Market leadership in its sector
Growth opportunities through geographic expansion
Well established and recognized brand name
La Quinta offers the following financial benefits to Meditrust:
Significantly accretive in the first 12 months of combined operations
La Quinta has proven to be less earnings sensitive in an economic downturn
La Quinta's recent $270 million renovation program limits near term capital
expenditure requirements
Strong and growing cash flows
7
The Meditrust Companies
<PAGE>
Transaction Rationale (Cont'd)
Combined company will be one of the largest publicly traded REITs with pro
forma equity market and total market capitalization in excess of $5.2 and
$7.5 billion, respectively
Paired-share structure allows Meditrust to capture 100% of hotel economics as
owner/operator of hotel properties and owner of La Quinta brand name
Strong combined management team with extensive industry and capital raising
experience
8
The Meditrust Companies
<PAGE>
Meditrust Selected Financial Data(1)
[START: BAR CHARTS]
(Figures in millions)
Total Revenues Funds from Operations
1993 1994 1995 1996 1997E 1993 1994 1995 1996 1997E
$150 $173 $209 $254 $299 $78 $96 $137 $179 $192
4 Yr CAGR: 18.7% 4 Yr CAGR: 25.4%
[END: BAR CHARTS]
(1) 1997 based on analyst estimates
9
The Meditrust Companies
<PAGE>
La Quinta Selected Financial Data(1)
[START: BAR CHARTS]
(Figures in millions)
Revenues EBITDA
1993 1994 1995 1996 1997E 1993 1994 1995 1996 1997E
$272 $362 $414 $443 $503 $104 $149 $186 $206 $240
4 Yr CAGR: 16.6% 4 Yr CAGR: 23.3%
[END: BAR CHARTS]
(1) 1997 based on analyst estimates
10
The Meditrust Companies
<PAGE>
Selected Income and Capitalization Information
(Figures in millions)
<TABLE>
<CAPTION>
1997E(1) 1997E(2)
Meditrust La Quinta Meditrust La Quinta(3)
<S> <C> <C> <C> <C> <C>
Total Revenues $299 $503 Debt $1,399 $900
EBITDA 282 240 Equity Market Value $3,230 $2,139
FFO/Net Income to Common 192 81 Total Market Cap. $4,629 $3,039
FFO/Earnings Per Share $2.52 $1.01 Total Debt/Total 30% 30%
Market Cap.
</TABLE>
(1) Based on analyst estimates
(2) Based on company estimates
(3) Calculated at $26 purchase price
11
The Meditrust Companies
<PAGE>
Meditrust FFO Payout History
Over the past five years Meditrust's FFO Payout has increased by 3.0% CAGR,
while its dividend payout ratio has decreased from approximately 95% to 90%
With the Santa Anita acquisition, Meditrust's projected FFO payout ratio for
1998 would have increased to approximately 100%
With the La Quinta transaction, the pro forma 1998 payout ratio is estimated
to be less than 90%
[START: BAR CHART]
<TABLE>
<CAPTION>
FFO Payout FFO Payout Ratio
1992 1993 1994 1995 1996 1997 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2.05 $2.11 $2.18 $2.25 $2.31 $2.38 95.44% 93.75% 92.05% 90.72% 89.81% 94.00%
</TABLE>
12
The Meditrust Companies
<PAGE>
Meditrust Overview
The Meditrust Companies
<PAGE>
Meditrust Overview
One of four publicly traded paired share REITS
Largest Healthcare REIT
Increasing dividends for 47 consecutive quarters
Total investment of $2.6 billion in 491 health care facilities in 41 states
with 38 different operators as of September 30, 1997
$3.2 billion equity market capitalization as of December 31, 1997 with Santa
Anita
Estimated 1997 FFO per share of $2.52
25.4% FFO CAGR over past 4 years
Reaffirmed investment grade credit rating from Moody's and Standard & Poors
14
The Meditrust Companies
<PAGE>
Organization Chart
Paired Certificate
Meditrust Meditrust
REIT Operating Company
Board of Directors Board of Directors
Abraham D. Gosman, Chairman Abraham D. Gosman, Chairman
President Chief Executive Officer
David F. Benson Abraham D. Gosman
Chief Sr. Vice Chief CEO CEO
Operating President Financial Santa Anita La Quinta EVP
Officer Corporate Officer Companies Acquisitions
Michael F. Counsel Laurie T. William C. Ezzat S. (Open)
Bushee Michael S. Gerber Baker Coutry
Benjamin
15
The Meditrust Companies
<PAGE>
Meditrust Strategies
Thoroughbred Inpatient
Horse Racing Healthcare
REIT Ancillary
Consolidation Healthcare
Meditrust
Hospitality Golf
Real Estate Retirement
Development Communities
16
The Meditrust Companies
<PAGE>
La Quinta Overview
The Meditrust Companies
<PAGE>
Company History
1968 Founded in San Antonio, Texas
1972 Initial public offering
1992 Assembled new management team led by Gary L. Mead, President and CEO,
that restructured the business and consolidated the ownership of all
the hotels
1994 First major renovation program (Image Enhancement Program) completed
1996 Commenced development and opening of first Inn and Suites Hotels
1997 Second major renovation program (Gold Medal Rooms Program) completed
Inn and Suites product reaches 36 hotels with 26 additional properties
under construction
18
The Meditrust Companies
<PAGE>
Company Profile
Fully integrated lodging company focused on the midprice sector without food
and beverage facilities
La Quinta Inns
La Quinta Inn & Suites
270 properties in 28 states with approximately 35,000 rooms by December 31,
1997
Estimated 1997 revenues over $500 million and EBITDA of $240 million
EBITDA projected to increase in 1998 by approximately 20%
First full marketing year for renovated Inns
36 Inn and Suites on line for whole year, with 29 to 34 new properties
scheduled to open in 1998
New management systems recently put in place
19
The Meditrust Companies
<PAGE>
Competitive Strengths
Ranked as one of the largest and most profitable lodging companies
Market leadership
Well recognized, established brand name
High quality, recently developed or renovated hotels
Geographically diverse, with room for expansion
Successful development track record
Strong and growing revenues and cash flows
Strong management team with proven industry experience
Ability to be consolidator in this sector
Investment grade credit rating
20
The Meditrust Companies
<PAGE>
Strong Management Team (1)
Indusry
Name Position Experience
Ezzat S. Coutry President and Chief Executive Officer 21 years
Steven T. Schultz SVP - Development 20 years
Stephen B. Hickey SVP - Marketing 25 years
William S. McCalmont SVP and Chief Financial Officer 13 years
John F. Schmutz VP, General Counsel and Secretary 18 years
Average Industry Experience 19 Years
(1) Post transaction closing
21
The Meditrust Companies
<PAGE>
Appendices
The Meditrust Companies
<PAGE>
Additional Meditrust Information
The Meditrust Companies
<PAGE>
Consistent Growth in Real Estate Investments
[START: BAR CHART]
($ in Millions)
- --------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997E
- --------------------------------------------------------------------------------
$506 $672 $782 $889 $1,081 $1,288 $1,550 $1,855 $2,286 $2,786
- --------------------------------------------------------------------------------
69% 33% 16% 14% 22% 19% 21% 20% 21% 22%
- --------------------------------------------------------------------------------
[END: BAR CHART]
24
The Meditrust Companies
<PAGE>
Growth Strategy
Elderly Care: The Spectrum of Health Care Delivery Options
------------- ----------- -------------
"no-go" "slow-go" "go-go"
------------- ----------- -------------
------------- ----------- -------------
Traditional
Geriatric Assisted Independent
Nursing Living Living
Home Facility
------------- ----------- -------------
Acuity Lower
Higher Acuity
25
The Meditrust Companies
<PAGE>
Investments by Type of Facility
[START: PIE CHART]
As of September 30, 1997
Psychiatric; Alcohol and Substance Abuse (1%)
Acute Care Hospital Campus (3%)
Medical Office Buildings (7%)
Rehab Services (10%)
Retirement and Assisted Living (22%)
Nursing Homes (57%)
[END: PIE CHART]
26
The Meditrust Companies
<PAGE>
Investments by Operator
[START: PIE CHART]
As of September 30, 1997
Other Non Public (19%)
Sun Healthcare* (15%)
Other Public (13%)*:
Alternative Living Services
ARV Assisted Living
Assisted Living Concepts
Columbia
Genesis
HealthSouth Rehabilitation
Karrington Health
Mariner
Multicare
Sterling House Corporation
Youth Services International
Emeritus Corporation* (8%)
Horizon/CMS* (5%)
Springwood Associates (5%)
Harborside* (4%)
Health Asset Realty Trust (4%)
Tenet* (3%)
Integrated Health Services* (2%)
Life Care Centers of America (22%)
*Public Companies approximate 50% of total operator base
[END: PIE CHART]
27
The Meditrust Companies
<PAGE>
Dividend Growth - 47 Consecutive Increases
[START: LINE CHART]
1992 1993 1994 1995 1996 1997
$2.46 $2.54 $2.62 $2.70 $2.78 $2.86*
*Analyst Projections prior to announcement of Santa Anita acquisition
[END: LINE CHART]
28
The Meditrust Companies
<PAGE>
Average Annual Total Return
[START: BAR CHART]
Since Inception*
Meditrust 22%
S&P 16%
NAREIT 10%
*1985-1996
[END: BAR CHART]
29
The Meditrust Companies
<PAGE>
Additional La Quinta Information
The Meditrust Companies
<PAGE>
High Quality, Recently Renovated Hotels
Image Enhancement Program:
Completed in 1994
Cost: $70 Million
Brighter and more fully
landscaped exteriors
Improved signage and logo
Full lobby renovation
5% occupancy increase after first
year of program
Gold Medal Rooms Program:
Completed in 1997
Cost: $200 million
Completely redesigned interiors
for maximum functionality and
superior appearance
Enhanced entertainment system
to rival upscale hotels
Interior parallel of Image
Enhancement Program
Favorable impact expected for 1998
31
The Meditrust Companies
<PAGE>
Geographically Diverse Portfolio of Hotels*
[MAP OF USA SHOWING LOCATIONS OF INNS AND INNS & SUITES]
36 Inn & Suites (4,592 rooms)
234 Inns (30,180 rooms)
270 Properties (34,772 rooms)
*As of December 31, 1997
32
The Meditrust Companies
<PAGE>
Lodging Industry Overview
The United States hotel industry has experienced dramatic growth and record
profitability during the past five years
Lodging industry profit has sharply rebounded from 1992 and is forecasted to
remain strong
Room revenues in the "mid price sector without food and beverage facilities"
have recorded 16.3% CAGR over the period 1990 to 1996 - by far the fastest
growing lodging sector
La Quinta is the largest independent operator in the "midprice sector without
food and beverage facilities" and the only operator to own and operate nearly
100% of its branded hotels
[START: BAR CHART]
U.S. Lodging Industry - Estimated Profitability
-----------------------------------------------
1992 1993 1994 1995 1996 1997 1998P
0.0 2.4 5.5 8.5 12.5 14.6 15.5 - 16.5
Source: Smith Travel Research
[END: BAR CHART]
33
The Meditrust Companies
<PAGE>
Lodging Market Overview
Total Industry Supply Data (as of October 1997): 3,532,761 Total Hotel Rooms
[START: PIE CHART]
Budget 16.4%
Upper Upscale 16.6%
Upscale 14.9%
Midprice w/F&B 25.0%
Midprice w/o F&B 9.7%
Economy 17.4%
Source: Data provided by Smith Travel Research
[END: PIE CHART]
34
The Meditrust Companies
<PAGE>
Chain Supply & Profit Shares 1996
[START: BAR CHART]
Upper Midprice Midprice
Upscale Upscale with F&B w/o F&B Economy Budget Independent
Supply 12.7% 7.3% 19.9% 7.9% 12.0% 6.9% 33.3%
Profit 37.0% 15.7% 5.5% 9.0% 12.7% 1.9% 18.2%
[END: BAR CHART]
Statistics on Compound Annual Growth, 1990 - 1996:
Demand 2.3% 5.5% 0.1% 11.3% 4.6% -1.2% -0.7%
Supply 1.0% 3.7% -0.1% 10.8% 4.7% 0.9% -0.9%
Rm Revenues 6.0% 9.3% 2.5% 16.3% 7.2% 1.2% 2.5%
Source: Copyright 1997 Smith Travel Research
1996 Total room supply was 3.43 million rooms and profit $12.5 billion
35
The Meditrust Companies
<PAGE>
La Quinta Hotel Operating Statistics
ADR $44.33 $46.25 $47.65 $51.07 $53.83 $56.86
RevPAR $29.08 $30.20 $33.40 $36.17 $37.06 $39.45
Occupancy 65.6% 65.3% 70.1% 70.8% 68.9% 69.4%
- ------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
Total Hotels
in Operation 169 211 266 235 248 270
Total Rooms 21,700 27,000 29,100 30,000 32,000 34,900
36
The Meditrust Companies
<PAGE>
Profile of Lodging Sector
Total Industry Supply Data
(as of October 1997):
3,532,761 Total Hotel Rooms
2,400,961 Total Chain Controlled Rooms
1,131,800 Total Independent Rooms
Midprice w/o F&B
Avg. ADR: $59
Name # of Rooms
Comfort Inn* 93,954
Hampton Inn* 75,854
Holiday Inn Express* 51,011
La Quinta 33,226
Comfort Suites* 11,895
Country Inn & Suites* 7,549
Drury Inn 7,351
Amerisuites 7,182
Shilo Inn 5,072
Amerihost 3,736
Other Chains 24,000
Independents 21,941
Total Segment 342,771
% of Industry 9.7%
Total Chain Controlled 320,830
% of Industry 9.1%
* Indicates predominantly franchised chains.
Note: Data provided by Smith Travel Research
Midprice breakdown F&B and w/o F&B based on Salomon Smith Barney
Estimates and Independents allocated according to price point
37
The Meditrust Companies
