1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 000-21583
Candlewood Hotel Company, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 48-1188025
------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
Lakepoint Office Park
9342 E. Central
Wichita, Kansas 67206
----------------------------------------
(Address of principal executive offices)
(316) 631-1300
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ ] No [X] *
- -------------------
* The Company has been subject to the filing requirements since
November 4, 1996.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 16, 1996
- ---------------------------------- --------------------------------
Common Stock, $.01 par value 9,025,000 shares
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CANDLEWOOD HOTEL COMPANY, INC.
FORM 10-Q
FOR THE QUARTER ENDED
SEPTEMBER 30, 1996
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1996
and December 31, 1995 3
Consolidated Statements of Operations for the three
and nine months ended September 30, 1996 4
Consolidated Statement of Cash Flows for the nine
months ended September 30, 1996 5
Notes to Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1996 1995
------------- ------------
ASSETS
Cash and cash equivalents $ 1,206,732 $ 123,384
Accounts receivable 145,788 2,975
Pre-opening costs, net of accumulated amortization
of $55,477 61,800 --
Prepaid expenses 62,154 945
----------- ----------
Total current assets 1,476,474 127,304
----------- ----------
Construction in progress - hotel properties 4,388,618 842,656
Property and equipment, net of accumulated
depreciation of $90,976 and $301, respectively 3,934,327 37,639
Intangible assets, net of accumulated
amortization of $18,351 and $4,324, respectively 227,682 239,345
Pre-acquisition costs 661,302 6,397
Other assets, net 464,210 30,000
----------- ----------
$11,152,613 $1,283,341
=========== ==========
LIABILITIES AND MEMBERS' EQUITY
Accounts payable $ 407,586 $ 64,695
Accrued expenses 145,234 27,532
Deferred franchise fee revenue 151,200 --
----------- ----------
Total current liabilities 704,020 92,227
----------- ----------
Minority interests 81,754 8,427
Members' equity 10,366,839 1,182,687
----------- ----------
$11,152,613 $1,283,341
=========== ==========
See accompanying notes to consolidated financial statements.
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CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
1996 1996
------------- -------------
REVENUES:
Room revenue $ 253,025 $ 369,138
Other revenue 9,530 13,455
--------- -----------
Total revenues 262,555 382,593
--------- ----------
OPERATING COSTS AND EXPENSES:
Hotel operating expenses 126,205 212,400
Corporate operating expenses 295,946 1,044,294
Depreciation and amortization 89,420 160,179
--------- -----------
Total operating costs and expenses 511,571 1,416,873
--------- -----------
Loss from operations (249,016) (1,034,280)
Interest income 17,553 29,049
--------- -----------
Net loss $(231,463) $(1,005,231)
========= ===========
Pro forma net loss per share $ (0.04) $ (0.19)
========= ===========
See accompanying notes to consolidated financial statements.
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CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months
Ended
September 30,
1996
-------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,005,231)
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation and amortization 160,179
Change in:
Accounts receivable (142,813)
Pre-opening costs (117,277)
Prepaid expenses (61,209)
Other assets (2,000)
Accounts payable 342,891
Accrued expenses 117,702
Deferred franchise fee revenue 151,200
------------
Net cash used in operating activities (556,558)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (7,533,325)
Pre-acquisition costs (654,905)
Certificates of deposit (103,585)
Intangible assets (2,364)
------------
Net cash used in investing activities (8,294,179)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Members' capital contributions 10,189,383
Capitalized financing fees (124,638)
Deferred costs of public offering (203,987)
Capital contributions to subsidiaries by minority interest partners 73,327
------------
Net cash provided by financing activities 9,934,085
------------
Net increase in cash and cash equivalents 1,083,348
Cash and cash equivalents at beginning of period 123,384
------------
Cash and cash equivalents at end of period $ 1,206,732
============
See accompanying notes to consolidated financial statements.
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CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Reorganization
Candlewood Hotel Company, Inc. (together with its predecessor, the
"Company") was incorporated in August 1996 to succeed to the business of
Candlewood Hotel Company, L.L.C., a Delaware limited liability company
("Candlewood LLC"), in anticipation of the initial public offering of 3,850,000
shares of the Company's common stock, $.01 par value per share. Candlewood LLC
was formed in November 1995 to develop, own, operate and franchise Candlewood
extended-stay hotels designed particularly for the business traveler.
Candlewood LLC began construction of its first Candlewood hotel in Wichita,
Kansas in the fourth quarter of 1995, and construction was completed and the
hotel opened in May 1996. In May and June 1996, respectively, Candlewood LLC
began construction of its second and third hotels in the Omaha, Nebraska and
Denver, Colorado areas. In September 1996, Candlewood LLC began construction of
its fourth and fifth hotels in the Cincinnati, Ohio and Louisville, Kentucky
areas. The properties in the Wichita, Omaha, Denver, Cincinnati and Louisville
areas are owned by separate limited liability companies which are organized as
subsidiaries of Candlewood LLC (the "Subsidiary LLCs").
On November 8, 1996, the Company completed an initial public offering
of 3,850,000 shares of common stock at an initial public offering price of
$10.00 per share (the "Offering"). The net proceeds to the Company from the
Offering, after deducting the underwriting discounts and commissions and
estimated expenses of the Offering, were approximately $35.2 million.
The Company intends to use approximately $33.2 million of the net
proceeds from the Offering to fund the national expansion of the Company
through the development of Company-owned Candlewood hotels and approximately
$2.0 million for working capital and general corporate purposes. Pending the
use of proceeds described above, the net proceeds of the Offering have been
invested in interest-bearing, short-term, investment grade securities.
Prior to the Offering, the membership interests in Candlewood LLC were
owned 50% by Doubletree Corporation ("Doubletree"), 42.5% by JPD Corporation, a
Kansas corporation owned by Mr. Jack P. DeBoer, the Company's President, and
certain trusts (the "DeBoer Trusts"), the beneficiaries of which are certain
members of his family, and 7.5% by the Warren D. Fix Family Partnership. L.P.
(the "Fix Partnership"), a Kansas limited partnership, the general partner and
majority owner of which is Mr. Warren Fix, the Executive Vice President and
Chief Financial Officer of the Company.
Immediately prior to the Offering, Doubletree and the Fix Partnership
contributed to the Company all of their outstanding membership interests in
Candlewood LLC and certain minority interests which they held in the Subsidiary
LLCs. At the same time, Mr. DeBoer and the DeBoer Trusts contributed to the
Company 100% of the stock of JPD Corporation, the assets of which were
substantially comprised of its membership interest in Candlewood LLC and the
Subsidiary LLCs. In consideration of such transfer, each of Doubletree and the
Fix Partnership were issued shares of the Company's common stock in proportion
to their ownership interests in Candlewood LLC immediately prior to such
transfer, and Mr. DeBoer and the DeBoer Trusts, collectively, were issued
shares of the Company's common stock in proportion to JPD Corporation's
ownership interest in Candlewood LLC immediately prior to such transfer. As a
result, the ownership of the common stock of the Company by Doubletree, the Fix
Partnership and the shareholders of JPD Corporation immediately prior to the
Offering was in the same proportion as their ownership of membership interests
in Candlewood LLC immediately prior to the reorganization of the Company.
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In addition, prior to the Offering, approximately $12.5 million
previously contributed to Candlewood LLC by Doubletree, including a preferred
return amounting to approximately $392,000 on its capital contributions, was
distributed by Candlewood LLC to Doubletree. Doubletree concurrently extended
to the Company a $15.0 million subordinated credit facility, of which the
amount of the distribution to Doubletree was funded in connection with the
reorganization of the Company. The terms of the distribution to Doubletree, as
well as the subsequent loan by Doubletree to the Company, were determined by
the members of Candlewood LLC in the course of arms-length negotiations.
2. Basis of Presentation
The accompanying unaudited consolidated financial statements are the
financial statements of Candlewood LLC, which is the entity through which
business was conducted until completion of the above-discussed reorganization.
The accompanying unaudited financial statements contain all
adjustments (consisting of only normal recurring adjustments and including
eliminations of all significant intercompany transactions and accounts) which
the Company believes are necessary for a fair presentation of financial
position and results of operations. The December 31, 1995 consolidated balance
sheet was derived from the Company's audited financial statements. These
interim financial statements should be read in conjunction with the
consolidated historical financial statements, and notes thereto, presented in
the Company's Registration Statement on Form S-1 (Registration No.
333-1188025), as amended. The results of operations for interim periods are
not necessarily indicative of the results which may be expected for the entire
year. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
the accompanying notes. Actual results could differ from those estimates.
Subsequent to the Offering, the Company no longer operates as a
limited liability company, and as a result, the Company has become a taxable
entity. Pro forma net loss per share information is presented as if (i) the
Company had operated as a taxable entity for the periods presented and (ii) the
reorganization described above had been effective as of October 1, 1995 (date
of inception) and the shares of common stock issued in conjunction with the
reorganization (5,175,000 shares) had been issued and outstanding for all
periods presented.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Three Months Ended September 30, 1996
Hotel Operations
----------------
The Company currently owns and operates one Candlewood hotel in
Wichita, Kansas, which opened May 5, 1996. In addition, the Company has four
hotels under construction, one each in the following areas: Omaha, Nebraska,
Denver, Colorado, Cincinnati, Ohio and Louisville, Kentucky. The results of
operations for this period are not necessarily indicative of the future results
of operations of the Wichita hotel or of other Company-owned hotels.
Room revenue for the quarter ended September 30, 1996 was
approximately $253,000. The average occupancy rate, which is determined by
dividing the number of guest rooms occupied on a daily basis by the total
number of guests rooms available at the hotel for the period, was 52.8%.
During the same period, the length of stay averaged approximately 14 days, and
the average daily room rate was $47.58. The Company believes that the average
daily room rate was favorably affected by stays that were shorter than six
days, as these shorter stays commanded a slightly higher rate. Revenue per
available room (RevPAR) was $25.14 for the quarter ended September 30, 1996.
Other revenue for the quarter ended September 30, 1996 was
approximately $10,000 and consisted of guest telephone, vending and pay-
per-view movie revenues.
Hotel operating expenses for the quarter ended September 30, 1996
totaled approximately $126,000, and consisted of all expenses directly
applicable to the operation of the hotel. It did not include any allocation of
corporate operating expenses. The largest portion of hotel operating expenses
consisted of salaries, wages and fringe benefits. The balance of hotel
operating expenses was comprised of normal operating items, such as
electricity, gas and other utilities, property taxes, insurance, cleaning
supplies, promotional materials, maintenance items and similar expenses.
Depreciation and amortization expense applicable to hotel operations
for the quarter ended September 30, 1996 totaled approximately $70,000 and
related to the building, furniture, fixtures, equipment and capitalized
pre-opening expenses of the hotel. Depreciation expense is computed using the
straight-line method over the estimated useful lives of the respective assets,
ranging from three to forty years, except in the case of pre-opening expenses,
which are amortized over no more than the first twelve months of operations.
Depreciation and amortization expense for the quarter ended September 30, 1996
reflects amounts for a pro-rata portion of the full year.
Corporate Operations
--------------------
Corporate operating expenses for the quarter ended September 30, 1996
totaled approximately $296,000 and included all expenses not directly related
to the development or operations of specific hotels. The largest portion of
corporate operating expenses consisted of salaries, wages and fringe benefits.
The balance of other corporate operating expenses was comprised of normal
operating costs, such as office space lease, telephone, utilities, advertising
and professional fees and similar expenses.
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Depreciation and amortization applicable to corporate operations for
the quarter ended September 30, 1996 totaled approximately $20,000 and related
to the furniture, equipment and intangible assets of the corporate office.
Depreciation and amortization was calculated using the straight-line method
over the estimated useful lives of the respective assets, ranging from three to
twenty years. Amortization expense for intangible assets is computed using the
straight-line method over the life of the corresponding asset. Depreciation and
amortization expense for the quarter ended September 30, 1996 reflects amounts
for a pro-rata portion of the full year.
The Company earned approximately $18,000 of interest income during the
third quarter of 1996 which related principally to short-term investment of
excess funds.
Nine Months Ended September 30, 1996
Hotel Operations
----------------
Operations at the first Candlewood hotel commenced in Wichita, Kansas
on May 5, 1996. For the period from May 5, 1996 (commencement of operations)
to September 30, 1996, room revenue totaled approximately $369,000. The
average occupancy rate, which is determined by dividing the number of guests
rooms on a daily basis by the total number of guest rooms available at the
hotel for the period, was 51.3%. During the same period, the length of stay
averaged approximately 12 days, and the average daily room rate was $47.78. The
Company believes that the average daily room rate was favorably affected by
stays that were shorter than six days, as these shorter stays commanded a
slightly higher rate. Revenue per available room (RevPAR) was $24.20 for the
period from May 5, 1996 to September 30, 1996.
Other revenue for the hotel for the period from May 5, 1996
(commencement of operations) to September 30, 1996 was approximately $13,000
and consisted of guest telephone, vending and pay-per-view movie revenues.
Hotel operating expenses for the period from May 5, 1996 (commencement
of operations) to September 30, 1996 totaled approximately $212,000, and
consisted of all expenses directly applicable to the operation of the hotel.
It did not include any allocation of corporate operating expenses. The largest
portion of hotel operating expenses consisted of salaries, wages and fringe
benefits. The balance of hotel operating expenses was comprised of normal
operating items, such as electricity, gas and other utilities, property
taxes, insurance, cleaning supplies, promotional materials, maintenance items
and similar expenses.
Depreciation and amortization expense applicable to hotel operations
for the period from May 5, 1996 (commencement of operations) to September 30,
1996 totaled approximately $119,000 and related to the building, furniture,
fixtures, equipment and capitalized pre-opening expenses of the hotel.
Depreciation expense is computed using the straight-line method over the
estimated useful lives of the respective assets, ranging from three to forty
years, except in the case of pre-opening expenses, which are amortized over no
more than the first twelve months of operations. Depreciation and amortization
expense for the period from May 5, 1996 (commencement of operations) to
September 30, 1996 reflects amounts for a pro-rata portion of the full year.
Corporate Operations
--------------------
Corporate operating expenses for the nine months ended September 30,
1996 totaled approximately $1.0 million and included all expenses not directly
related to the development or operations of specific hotels. The largest
portion of corporate operating expenses consisted of salaries, wages and fringe
benefits. The balance of other corporate operating expenses was comprised of
normal operating costs, such as office space lease, telephone, utilities,
advertising and professional fees and similar expenses.
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Depreciation and amortization applicable to corporate operations for
the nine months ended September 30, 1996 totaled approximately $41,000 and
related to the furniture, equipment and intangible assets of the corporate
office. Depreciation and amortization was calculated using the straight-line
method over the estimated useful lives of the respective assets, ranging from
three to twenty years. Amortization expense for intangible assets is computed
using the straight-line method over the life of the corresponding asset.
Depreciation and amortization expense for the nine months ended September 30,
1996 reflects amounts for a pro-rata portion of the full year.
The Company earned approximately $29,000 of interest income during the
nine months ended September 30, 1996 which related principally to short-term
investment of excess funds.
Liquidity and Capital Resources
- -------------------------------
During the nine months ended September 30, 1996, cash used in
operating activities totaled approximately $557,000. The net loss during the
period of approximately $1.0 million was largely due to the need to employ
corporate staff in anticipation of, and preparation for, the addition of future
hotel facilities. Uses of cash resulted from an increase in accounts
receivable of approximately $143,000, pre-opening costs of approximately
$117,000 and prepaid and other assets of approximately $63,000. These uses
were offset by sources of cash from increases in accounts payable of
approximately $343,000, accrued expenses of approximately $118,000 and deferred
franchise fee revenue of approximately $151,000. Noncash adjustments to
reconcile the net loss to net cash used in operations totaled approximately
$160,000 for depreciation and amortization.
Cash used by investing activities for the nine months ended September
30, 1996 totaled approximately $8.3 million. The Company expended
approximately $7.5 million for property and equipment in connection with the
construction of new hotels and for furniture and equipment for the corporate
office. Pre-acquisition costs and certificates of deposits in connection with
contracts for the purchase of land for future hotels resulted in uses of cash
totaling approximately $758,000.
Cash flows from financing activities for the nine months ended
September 30, 1996 resulted from members' capital contributions to Candlewood
LLC in the amount of approximately $10.2 million reduced by capitalized
financing fees of approximately $125,000 and deferred public offering costs of
approximately $204,000. Capital contributions to subsidiaries by the minority
interest partners provided approximately $73,000 in cash flows.
The Company's material commitments for capital expenditures at
September 30, 1996 were approximately $18.9 million and related to the
construction of the hotels in the Denver, Omaha, Louisville and Cincinnati
areas.
Before closing on the Offering, the Company's operations were financed
primarily through capital provided by Doubletree. In connection with the
Company's Reorganization, Doubletree agreed to extend to the Company a five
year, $15.0 million subordinated credit facility. Prior to the Offering,
Doubletree loaned to the Company $12.5 million, including a preferred return
amounting to approximately $392,000 on its capital contributions, which is
subordinated to debt incurred in the development of hotels and the Company's
line of credit, if any is established in the future. Amounts outstanding
under the credit facility bear interest at annual rates of 7% and 10% for the
first and second 12 month periods following funding, respectively, and 15%
thereafter. The determination of the applicable interest rates for the
initial amounts loaned under the credit facility is based on the date
equivalent amounts were originally contributed to Candlewood LLC. Interest on
borrowings under the facility is payable quarterly.
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The Company has arranged with a third party lender to finance up to 60%
of the cost of individual Company-developed hotels. The Company expects to seek
financing of up to 80% of the cost of certain Company-developed hotels and
expects to utilize a guarantee of certain indebtedness by Doubletree to
facilitate such financing. In return for such guarantee, Doubletree would
receive a 5% interest in the profits and residual value of the respective hotel
and a 0.25% to 0.50% fee on the total loan amount outstanding. In addition, the
Company, through its Subsidiaries, has entered into a $3.0 million term loan
agreement and promissory note, dated as of October 15, 1996, with NationsBank
related to its Wichita hotel. The Company has also obtained separate term loan
commitments from NationsBank in the amounts of $4.0 million and $4.1 million for
each of its hotels under construction in the Denver and Omaha areas,
respectively.
The Company's sources of liquidity on a long-term basis include
anticipated cash flow from completed Candlewood hotels, secured and unsecured
borrowings, sale/leaseback arrangements and the issuance of debt or equity
securities.
The Company believes that a combination of the net proceeds from the
Offering and cash from operations, together with its subordinated credit
facility and construction loan guarantees from Doubletree, construction
financing from NationsBank and the third party lender (if approved on an
individual basis) will be sufficient to provide capital for development and
operations during the next 12 months.
FORWARD-LOOKING STATEMENTS
Certain statements contained in the Form 10-Q, including without
limitation statements containing the words "believes," "anticipates," "expects"
and words of similar import, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. The Company has made forward-looking statements in
this Form 10-Q. These statements are only predictions, however, and actual
events or results may differ materially.
Risks facing the Company include, but are not limited to: the
Company's limited operating history and risks of operations; development risks,
the need for future capital and additional financing; risks of rapid growth and
reliance on Doubletree; dependence on key personnel; competition for and
dependence on franchise agreements; dependence on the Company's development
agreements; risks associated with the lodging industry, including competition;
risks of real estate investment, including illiquidity and the risk of loss;
risk of fluctuation in operating results; government regulation; impact of
government regulation; and other factors. Given these uncertainties,
prospective investors are cautioned not to place undue reliance on
forward-looking statements made by the Company. The Company disclaims any
obligation to update any such factors or to announce publicly the result of any
revisions to any of the forward-looking statements contained in this and other
Securities and Exchange Commission filings of the Company to reflect future
events or developments.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The list of exhibits contained in the accompanying Exhibit Index is
incorporated herein by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
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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 thereunto duly authorized.
CANDLEWOOD HOTEL COMPANY, INC.
Date: December 16, 1996 By: /s/ JACK P. DEBOER
----------------- -----------------------------
Jack P. DeBoer, President
and Chief Executive Officer
Date: December 16, 1996 By: /s/ WARREN D. FIX
----------------- -----------------------------
Warren D. Fix, Executive Vice
President and Chief Financial
Officer
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EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description Page
----------- -------------------------------------------------------------- ------------
10.1 Form of Indemnification Agreement for executive officers
and directors.**
10.2 1996 Equity Participation Plan and form of stock option
agreements.**
10.3 Employment Agreement between the Registrant and Jack P. DeBoer
dated as of September 1, 1996.**
10.4 Development Agreement between the Registrant and Studio West
Hotel Development Company, L.L.C. dated as of June 11, 1996.**
10.5 Franchise Agreement between the Registrant and Studio West Hotel
Development Company, L.L.C. dated July 25, 1996.**
10.6 Incorporation and Registration Rights Agreement dated as of
September 1, 1996 among Doubletree Corporation, JPD Corporation
and the Warren D. Fix Family Partnership, L.P.**
10.7 Term Loan Agreement by and between NationsBank of Texas, N.A. and
Candlewood Wichita Northeast, L.L.C., dated October 15, 1996.**
10.8 Promissory Note from Candlewood Wichita Northeast, L.L.C. to
NationsBank of Texas, N.A., dated October 15, 1996.**
10.9 Security Agreement between Candlewood Wichita Northeast, L.L.C.
and NationsBank of Texas, N.A., dated October 15, 1996.**
10.10 Guaranty Agreement between the Company and NationsBank of
Texas, N.A., dated October 15, 1996.**
27.1 Financial Data Schedule.
- ----------------
** Incorporated by reference pursuant to Rule 12b-32 from the Company's
Registration statement on Form S-1 (Registration No. 333-12021).
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