NEWTON,Mass.--Hospitality Properties Trust (NYSE: HPT) today announced that it has purchased two hotels for $63 million.
The two purchased hotels are upscale Crowne Plaza Hotels in Miami and
Philadelphia. These hotels have 749 rooms/suites and over 23,000 sq.ft.
of meeting space. In addition, each of these hotels have exercise
rooms/fitness centers, swimming pools, restaurants and lounges. Property
details are as follows:
Approx. sq. ft. No. of Food
of Meeting and Beverage
Location Hotel No. of Keys Space Outlets
----------------- ---------- ----------- --------------- -------------
Miami, FL Crowne
Plaza 304 5,300 sq.ft. 2
Philadelphia, PA Crowne
Plaza 445 18,000 sq.ft. 2
----------- --------------- -------------
Totals: 749 23,300 sq.ft. 4
meeting space
Both of these hotels were purchased from FelCor Lodging Trust (NYSE:
FCH). Simultaneously with this purchase, HPT added these two hotels to a
long term management contract with a subsidiary of InterContinental
Hotels Group, plc (LSE/NYSE: IHG). This contract includes eight
additional IHG branded hotels and has terms similar to other contracts
entered by HPT, including: an initial term of 25 years, plus two
consecutive 15 year renewal options; escrowed reserves for anticipated
capital expenditures; subordination of management fees to the payment of
defined minimum returns to HPT; and a limited guaranty from IHG for
certain minimum returns to HPT. The eight hotel transaction was closed
earlier this year and the purchase of the two hotels described herein
was delayed until today while HPT completed diligence.
In addition to the purchase price, HPT will invest $7.1 million in
these hotels during the three years following the closing to fund
capital improvements. HPT's annual minimum returns for these two hotels,
which are guaranteed by IHG, will be initially $5.04 million/year in
2006, increase to $5.6 million/year in 2007, $5.8 million/year in 2008
and approximately $6.0 million/year after the full $7.1 million of
planned hotel improvements are funded. HPT may also receive additional
non-guaranteed additional returns, a percentage of gross revenue
increases at these hotels starting in 2008 and the net cash flows after
payment of management fees to IHG.
The hotels have been purchased free and clear of all mortgage debt.
HPT has funded this transaction by drawing under its unsecured revolving
bank credit facility.
HPT also announced today that its previously announced acquisition of
the 524 room Holiday Inn Sunspree Resort in Montego Bay, Jamaica for
$30 million is still expected to close later in 2006. This hotel will be
leased to IHG and the lease will be subject to cross guarantees and
combined renewal options with the 10 hotel management agreement
described above.
Hospitality Properties Trust is a REIT which upon completion of these
transactions will own 310 hotels located in 38 states, Puerto Rico,
Canada and Jamaica. HPT is headquartered in Newton, Massachusetts.
WARNING REGARDING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND THE
FEDERAL SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON
HPT'S CURRENT BELIEFS AND EXPECTATIONS, BUT, FOR VARIOUS REASONS, THEY
MAY NOT OCCUR. FOR EXAMPLE:
- THIS PRESS RELEASE STATES THAT PAYMENT TO HPT OF RENT AND
MINIMUM RETURNS WILL BE GUARANTEED BY IHG. HOWEVER, THE IHG GUARANTY
ALSO APPLIES TO OTHER MANAGEMENT CONTRACTS WITH HPT AFFECTING ADDITIONAL
HOTELS, AND THIS GUARANTY IS LIMITED TO A MAXIMUM LIABILITY BY IHG.
ALTHOUGH THIS GUARANTY INCLUDES A COVENANT BY IHG TO MAINTAIN A CERTAIN
NET WORTH, THERE CAN BE NO ASSURANCE THAT IHG WILL BE ABLE TO MAINTAIN
ITS NET WORTH OR BE ABLE TO MAKE GUARANTY PAYMENTS. ALSO, HPT HAS AGREED
THAT THE IHG GUARANTY MAY BE RELEASED IF CERTAIN FINANCIAL PERFORMANCE
THRESHOLDS ARE ACHIEVED AND SUCH A RELEASE WLLL REMAIN EFFECTIVE EVEN IF
SUBSEQUENT PERFORMANCE DECLINES.
- THIS PRESS RELEASE STATES THAT $7.1 MILLION WILL BE INVESTED BY
HPT FOR CERTAIN CAPITAL IMPROVEMENTS TO THE PURCHASED HOTELS AND THAT
THE MANAGEMENT CONTRACT BETWEEN HPT AND IHG WILL REQUIRE ESCROW OF
RESERVES FOR ANTICIPATED CAPITAL EXPENDITURES THEREAFTER. IT IS
DIFFICULT TO ACCURATELY ANTICIPATE HOTEL CAPITAL REQUIREMENTS. THIS IS
ESPECIALLY SO AT UPSCALE FULL SERVICE HOTELS WHICH HPT HAS PURCHASED. IF
ESCROWED AMOUNTS ARE INSUFFICIENT TO MAINTAIN THESE HOTELS, HPT MAY
HAVE TO INVEST ADDITIONAL AMOUNTS TO ACHIEVE AND MAINTAIN THE FUTURE
FINANCIAL PERFORMANCE REALIZED AT THESE HOTELS. HPT MAY NOT HAVE THE
NECESSARY FUNDS TO INVEST AND ITS ABILITY TO MAINTAIN THE SUCCESSFUL
FINANCIAL PERFORMANCE OF THESE HOTELS IS NOT ASSURED.
- THE AMOUNT OF THE ACCRETION TO HPT'S CASH FLOW WHICH HPT MAY
REALIZE FROM THIS INVESTMENT WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE FUTURE FINANCIAL OPERATING RESULTS REALIZED AT THESE
HOTELS BY IHG'S MANAGEMENT, HPT'S FUTURE CAPITAL COSTS INCURRED TO FUND
THIS TRANSACTION AND OTHERS. SOME OF THESE FACTORS DEPEND UPON
CIRCUMSTANCES BEYOND HPT'S CONTROL OR OVER WHICH HPT HAS ONLY LIMITED
CONTROL OR INFLUENCE. IF THE IMPACTS OF THESE FACTORS ARE OR BECOME
DIFFERENT FROM THOSE HPT NOW ANTICIPATES, SUCH AS CHANGES IN THE
FINANCIAL PERFORMANCE OF THE HOTELS, INCREASED CAPITAL COSTS, OR IF
IHG'S GUARANTY BECOMES EXHAUSTED OR UNCOLLECTABLE, THEN THIS TRANSACTION
MAY NOT BE ACCRETIVE BUT MAY REDUCE THE CASH FLOW AVAILABLE TO HPT TO
FUND DISTRIBUTIONS TO SHAREHOLDERS.
- THIS PRESS RELEASE STATES THAT HPT'S PURCHASE OF THE HOLIDAY INN
SUNSPREE RESORT IN JAMAICA HAS BEEN DELAYED. IN FACT, CIRCUMSTANCES MAY
DELAY THIS PURCHASE FOR AN EXTENDED PERIOD OR PREVENT IT OCCURRING.
- THIS PRESS RELEASE STATES THAT THE LEASE FOR THE HOLIDAY INN
SUNSPREE RESORT AND THE MANAGEMENT CONTRACTS FOR THE TEN (10) OTHER
HOTELS WILL BE SUBJECT TO CROSS GUARANTEES AND COMBINED RENEWAL OPTIONS.
WHENEVER SEPARATE CONTRACTS ARE ENTERED FOR SEPARATE PROPERTIES,
ESPECIALLY PROPERTIES LOCATED IN DIFFERENT LEGAL JURISDICTIONS, THE
MAKING OF SUPPORT PAYMENTS BETWEEN PROPERTY OPERATIONS MAY NOT BE
LEGALLY ENFORCEABLE. FOR THIS REASON, HPT CANNOT ASSURE INVESTORS THAT
ITS COMBINATION REQUIREMENTS WILL BE RESPECTED IN ALL CIRCUMSTANCES.
FOR THESE REASONS AMONG OTHERS, INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.
Hospitality Properties Trust
Timothy A. Bonang
617-964-8389
Manager of Investor Relations
www.hptreit.com