NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

Effective April 14, 2014 (the “IPO Effective Date”), La Quinta Holdings Inc. (“Holdings”) completed its initial public offering (“IPO”) in which Holdings issued and sold 44.0 million shares of common stock. Holdings was incorporated in the state of Delaware on December 9, 2013. Holdings may also be referred to herein as “La Quinta”, “we”, “us”, “our”, or the “Company”, as the context requires, when we refer to our historical operations and financial performance.

Lodge Holdco I L.L.C. (“Holdco I”) and Lodge Holdco II L.L.C. (“Holdco II”), each a Delaware limited liability company, were formed on January 4, 2006. Lodge Holdco III L.L.C. (“Holdco III”), a Delaware limited liability company, was formed March 17, 2006. We refer collectively to Holdco I, Holdco II, and Holdco III as the “La Quinta Predecessor Entities”. Since those dates and prior to the completion of our IPO, the La Quinta Predecessor Entities were owned and controlled by Blackstone Real Estate Partners IV L.P. and affiliates (“BREP IV”) and Blackstone Real Estate Partners V L.P. and affiliates (“BREP V”). BREP IV and BREP V are affiliates of The Blackstone Group L.P. (collectivity, the “Funds” or “Blackstone”).

In November 2014 and April 2015, Blackstone completed two secondary offerings in which it registered and sold 23.0 and 23.9 million shares of Holdings common stock, respectively. As of December 31, 2017 Blackstone owned 30.0% of Holdings’ outstanding common stock.

We own and operate hotels, some of which are subject to a ground lease, located in the United States under the La Quinta brand. We also franchise hotels under the La Quinta brand, with franchised hotels currently operating in the United States (“U.S.”), Canada, Mexico, Honduras and Colombia. All new franchised hotels are La Quinta Inn & Suites in the U.S. and Canada and LQ Hotel in Mexico and in Central and South America. As of December 31, 2017, 2016 and 2015, total owned and franchised hotels, and the approximate number of associated rooms were as follows:

	2017				2016				2015
	# of hotels		# of rooms		# of hotels		# of rooms		# of hotels		# of rooms
Owned ⁽¹⁾		316		40,400		321		41,000		340		43,400
Joint Venture		1		200		1		200		1		200
Franchised		585		47,800		566		46,000		545		43,900
Totals		902		88,400		888		87,200		886		87,500

(1)	As of December 31, 2017, 2016 and 2015, owned hotels includes three, five and 13 hotels, respectively, designated as assets held for sale, which are subject to a definitive purchase agreement.

Spin of CorePoint Lodging and Merger Agreement with Wyndham Worldwide

On January 18, 2017, we announced we were pursuing the possibility of separating our real estate business from our franchise and management business.

On January 17, 2018, and La Quinta Holdings Inc. and Wyndham Worldwide entered into a definitive agreement (the “Merger Agreement”) under which Wyndham Worldwide will acquire our hotel franchise and hotel management business for $1.95 billion in cash (the “Merger”). The acquisition is expected to close in the second quarter of 2018. In connection with the Merger Agreement, on January 17, 2018, we entered into a Separation and Distribution Agreement (the “Separation Agreement”), pursuant to which, on the terms and subject to the conditions set forth in the Separation Agreement, immediately prior to the Merger with Wyndham Worldwide, we will, among other things, (i) effect a reclassification and combination of our common stock whereby each share of our common stock will be reclassified and combined into one half of a share of our common stock (par value $0.02) (the “Reverse Stock Split”), (ii) convey our owned real estate assets and certain related assets and liabilities to CorePoint Lodging Inc. (“CorePoint Lodging”) and, (iii) thereafter, distribute (the “Spin”) to our common stockholders all of the issued and outstanding shares of common stock of CorePoint Lodging, which will become a separate publicly traded company. Under the terms of the Merger Agreement, our stockholders will receive $16.80 per share in cash (after giving effect to the Reverse Stock Split), and Wyndham Worldwide will repay approximately $715 million of our debt net of cash and set aside a reserve of $240 million for estimated taxes expected to be incurred in connection with the Spin. Immediately following the Spin, in accordance with and subject to the terms of the Merger Agreement, a wholly-owned subsidiary of Wyndham Worldwide will merge with and into Holdings, with Holdings continuing as the surviving company and as a wholly-owned indirect subsidiary of Wyndham Worldwide, and our common stock will be delisted from the New York Stock Exchange.

The boards of directors of each of Wyndham Worldwide and La Quinta have approved the Merger Agreement. The Merger is subject to the approval of our stockholders, the completion of the Reverse Stock Split and the Spin and certain customary conditions.

Financing in connection with the Spin and Merger

In connection with the transactions contemplated by the Merger Agreement and the Separation Agreement, including the Merger and Spin, CorePoint Lodging will make a cash payment to La Quinta of $983,950,000, subject to certain adjustments based on the actual amount of net indebtedness of La Quinta (as of immediately prior to the effective time of the Spin) and certain accrued but unpaid expenses incurred in connection with the Spin and the Merger, immediately prior to and as a condition of the Spin. The consummation of the Merger is subject to the consummation of the Spin.

On January 17, 2018, CorePoint Lodging received a binding commitment letter (the “Commitment Letter”) from JPMorgan Chase Bank, N.A. (“JPMorgan Chase Bank”) pursuant to which, and subject to the conditions set forth therein, JPMorgan Chase Bank committed to provide a secured mortgage and, in certain circumstances mezzanine credit facility, in an aggregate principal amount of $1,035,000,000, and a $50,000,000 secured revolving credit facility. The ultimate funding by JPMorgan Chase Bank under the Commitment Letter is subject to certain customary conditions, including, but not limited to, receipt of financial information, delivery of customary documentation relating to CorePoint Lodging and its subsidiaries and consummation of the Spin and the Merger.

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates.