NEWTON, Mass.--(BUSINESS WIRE)--
Hospitality Properties Trust (NYSE: HPT) today announced that it has
entered a letter of intent and an exclusive negotiating period for hotel
investments with NH Hoteles, SA (BME: NHH) (NYSE: NHHEY (ADRs)) in Latin
America, Europe and the USA totaling approximately US $375 million.
The outline of terms which have been negotiated between HPT and NHH is
as follows:
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HPT will purchase five hotels (804 keys) in Latin America from NHH for
approximately US $70 million. These hotels will be managed by NHH
under long term contracts for 20 years plus renewal options. NHH will
provide a limited guarantee of a priority return to HPT on HPT's
invested capital at the rate of 10% p.a. and HPT may receive
additional returns after base and incentive management fees are paid
to NHH. This investment and HPT's returns will be paid in US Dollars.
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HPT will provide a loan to NHH for €170 million which will be secured
by first mortgages on four hotels (1,203 keys) in Europe. The loan
will be a recourse obligation of NH Hoteles, have a seven year term
and require interest at a floating rate not less than 10% p.a. In
certain circumstances, HPT will have the option to take ownership of
these hotels by cancelling the loan and paying the difference between
the loan amount and the agreed values of these hotels. The loan will
be funded and interest and principal paid in Euros. HPT expects to
hedge its foreign currency risk by borrowing in Euros an amount
approximately equal to the loan.
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NHH and an European partner currently own a 242 key hotel in New York
City. HPT and NHH will form a joint venture to acquire this hotel. HPT
expects to provide up to US $80 million to retire the ownership of
NHH's current partner and fund a major refurbishment of this hotel.
After this hotel is refurbished, NHH and Sonesta International Hotels,
Inc. ("Sonesta") will jointly brand and manage this hotel. HPT will
receive a priority return on its investment in this hotel equal to 8%
p.a. Also, after Sonesta and NHH receive management and branding fees
and after NHH receives a return on its residual investment in this
hotel, HPT and NHH will divide the cash flow based upon their agreed
ownership interests.
John G. Murray, President of HPT, made the following statement at the
time this letter of intent was announced:
NH Hoteles is one of the leading hotel management companies in the
world. NH Hoteles operates approximately 400 hotels in Europe and Latin
America, and it is simultaneously today announcing a strategic
investment by HNA Group of China into NH Hoteles. HPT began its
discussions with NH Hoteles almost one year ago and HPT hopes that, when
the transaction outlined in the letter of intent announced today is
implemented, it will be the beginning of a long term strategic
relationship between our companies, especially in North and South
America and possibly elsewhere.
The hotels in which HPT will be invested are all well located, market
leading hotels. All of the five hotels in Latin America were recently
built or renovated and four of these five hotels are located in the
capital cities of Mexico, Chile, Colombia and Uruguay1. The
four hotels which will be the collateral for HPT's mortgage loans are
each full service hotels, well located in the city centers of Madrid,
Barcelona, Amsterdam and Brussels. The NYC hotel is located in Mid-Town
Manhattan; when it is fully renovated it will be operated to top tier
brand standards of both NH Hoteles and Sonesta, and HPT expects that the
joint marketing programs to be developed by NH Hoteles and Sonesta will
promote the hotel's financial success as a "flagship" type asset for
both managers.
The letter of intent announced today is detailed, but it is only an
expression of current intents and not a binding agreement. HPT's and
NHH's obligations to undertake this transaction are conditioned upon
their agreement to and entry of final transaction documents and other
matters. Also, because the transaction described in the letter of intent
involves multiple hotels in multiple legal jurisdictions, it is expected
that it may be implemented in a series of closings. At this time, HPT
expects this transaction may be fully completed during the summer of
2013.
HPT was represented in the negotiation of the transaction announced
today by Morgan Stanley.
Hospitality Properties Trust is a real estate investment trust, or REIT,
which as of December 31, 2012, owned or leased 289 hotels and 185 travel
centers located in 44 states, Puerto Rico and Canada. HPT is
headquartered in Newton, Massachusetts, USA.
WARNING REGARDING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE INCLUDES FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND
OTHER SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON
HPT'S PRESENT BELIEFS AND EXPECTATIONS, BUT THEY ARE NOT GUARANTEED TO
OCCUR AND MAY NOT OCCUR FOR VARIOUS REASONS, SOME OF WHICH ARE BEYOND
HPT'S CONTROL. FOR EXAMPLE:
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THIS PRESS RELEASE STATES THAT HPT'S INVESTMENTS WITH NHH WILL TOTAL
APPROXIMATELY US $375 MILLION. THE INVESTMENTS HPT INTENDS TO MAKE
INCLUDE CAPITAL INVESTMENTS FOR IMPROVEMENTS TO THE HOTELS IN LATIN
AMERICA AND NEW YORK CITY. THE FINAL COSTS OF THESE CAPITAL
INVESTMENTS HAS NOT YET BEEN DETERMINED. ACCORDINGLY, THE TOTAL AMOUNT
OF HPT'S INVESTMENT WITH NHH MAY BE MORE OR LESS THAN US $375 MILLION.
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THIS PRESS RELEASE STATES THAT HPT WILL RECEIVE A PRIORITY RETURN ON
HPT'S INVESTED CAPITAL IN THE LATIN AMERICA HOTELS AT THE RATE OF 10%
P.A., THAT HPT'S PRIORITY RETURN WILL BE SECURED BY A LIMITED
GUARANTEE FROM NHH AND THAT HPT MAY RECEIVE AN ADDITIONAL RETURN ON
THIS INVESTMENT AFTER BASE AND INCENTIVE MANAGEMENT FEES ARE PAID TO
NHH. AN IMPLICATION OF THESE STATEMENTS MAY BE THAT HPT WILL RECEIVE
AT LEAST A 10% P.A. RETURN ON ITS INVESTMENT IN THE LATIN AMERICA
HOTELS. HOWEVER, THE AMOUNT OF NHH'S GUARANTEE WILL BE LIMITED AND THE
FINANCIAL RESULTS REALIZED AT THESE HOTELS MAY NOT PRODUCE SUFFICIENT
CASH FLOW TO PAY HPT'S PRIORITY RETURN OR ANY RETURN ON HPT'S
INVESTMENT.
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THIS PRESS RELEASE STATES THAT THE PRIORITY RETURN HPT WILL RECEIVE
FROM ITS INVESTMENTS IN LATIN AMERICA WILL BE AT 10% P.A. AND THE
INTEREST RATE ON HPT'S MORTGAGE LOAN TO NHH WILL BE NO LESS THAN 10%
P.A. EARNINGS OR INTEREST HPT RECEIVES FROM ITS INVESTMENTS OR
MORTGAGE LOANS IN FOREIGN COUNTRIES WILL BE TAXED IN THOSE COUNTRIES
AT CUSTOMARY RATES OR AT RATES SET BY THE TREATIES BETWEEN THE USA AND
THE COUNTRIES WHERE THE HOTELS ARE LOCATED. ACCORDINGLY, THE AFTER TAX
EARNINGS THAT HPT WILL REALIZE FROM INVESTMENTS AND LOANS OUTSIDE THE
USA MAY BE LESS THAN INVESTMENTS AND LOANS MADE IN THE USA AND HPT MAY
HAVE LESS NET EARNINGS FROM SUCH INVESTMENTS TO PAY DIVIDENDS TO
SHAREHOLDERS OR OTHER OBLIGATIONS.
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THIS PRESS RELEASE STATES THAT THE €170 MILLION LOAN HPT INTENDS TO
MAKE TO NHH WILL BE A RECOURSE OBLIGATION OF NHH. AN IMPLICATION OF
THIS STATEMENT MAY BE THAT NHH WILL PAY THE INTEREST AND REPAY THE
PRINCIPAL OF THIS LOAN TO HPT. HPT EXPECTS NHH WILL HONOR ITS
OBLIGATIONS; HOWEVER, HPT CANNOT PROVIDE ANY ASSURANCE THAT NHH WILL
BE WILLING OR ABLE TO PAY INTEREST AND REPAY THE PRINCIPAL DUE HPT.
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THIS PRESS RELEASE STATES THAT HPT'S €170 MILLION LOAN TO NHH WILL
HAVE A TERM OF SEVEN YEARS. HPT EXPECTS THAT THE LOAN TERMS WILL
PERMIT NHH TO PREPAY THE LOAN IN WHOLE OR IN PART UPON CERTAIN
CONDITIONS. ALSO, HPT EXPECTS THAT ITS OPTION TO ACQUIRES THE
MORTGAGED HOTELS BY CANCELING THE LOAN AND PAYING THE BALANCE TO THE
AGREED VALUES OF THE MORTGAGED HOTELS MAY BE EXERCISED BEFORE THE
SEVEN YEAR MATURITY OF THE LOAN IF THE LOAN IS NOT PREPAID.
ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THIS LOAN WILL BE
OUTSTANDING IN WHOLE OR IN PART FOR SEVEN YEARS.
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THIS PRESS RELEASE STATES THAT HPT EXPECTS TO HEDGE ITS FOREIGN
CURRENCY RISK ARISING FROM A LOAN IN EUROS BY BORROWING AN AMOUNT
APPROXIMATELY EQUAL TO THE LOAN AMOUNT IN EUROS. HPT HAS NOT YET
ARRANGED A EURO CURRENCY BORROWING AND THERE IS NO ASSURANCE IT WILL
BE ABLE TO DO SO. ALSO, A EURO DENOMINATED LOAN WILL NOT MITIGATE
HPT'S FOREIGN CURRENCY RISK RELATED TO THE INTEREST PAYMENTS HPT
RECEIVES IN EUROS: IF THE US DOLLAR DECLINES IN VALUE COMPARED TO THE
EURO, THE INTEREST HPT RECEIVES IN EUROS WILL PRODUCE FEWER US DOLLARS
FOR HPT TO PAY DISTRIBUTIONS TO HPT'S SHAREHOLDERS AND HPT'S OTHER
OBLIGATIONS.
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THIS PRESS RELEASE STATES THAT HPT EXPECTS TO PROVIDE UP TO US $80
MILLION TO RETIRE THE OWNERSHIP OF NHH'S CURRENT PARTNER IN NHH'S NEW
YORK CITY HOTEL AND TO FUND RENOVATIONS TO THAT HOTEL. THE COST OF
HOTEL RENOVATIONS IS DIFFICULT TO PROJECT. AFTER A RENOVATION PROJECT
IS BEGUN IT OFTEN MUST BE COMPLETED DESPITE COST OVERRUNS.
ACCORDINGLY, HPT MAY NEED TO INVEST MORE THAN US $80 MILLION TO
COMPLETE THE RETIREMENT OF NHH'S CURRENT PARTNER AND THE NEW YORK CITY
HOTEL RENOVATION.
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THIS PRESS RELEASE STATES THAT HPT WILL RECEIVE A PRIORITY RETURN ON
ITS INVESTMENT IN THE NEW YORK CITY HOTEL EQUAL TO 8% P.A. THIS
STATEMENT IMPLIES THAT HPT WILL EARN AT LEAST 8% P.A. ON THIS
INVESTMENT. HPT'S PRIORITY RETURN ON THIS INVESTMENT IS NOT
GUARANTEED, AND THAT RETURN WILL BE PAID FROM THE EARNINGS AT THAT
HOTEL. THE EARNINGS AT THAT HOTEL WILL DEPEND UPON THE ABILITY OF
SONESTA AND NHH TO PROFITABLY OPERATE THAT HOTEL, UPON MARKET
CONDITIONS IN THE NEW YORK CITY HOTEL INDUSTRY AND NUMEROUS OTHER
FACTORS, MANY OF WHICH ARE BEYOND HPT'S CONTROL. ACCORDINGLY, THERE
CAN BE NO ASSURANCE THAT HPT WILL EARN 8% P.A. ON ITS INVESTMENT IN
THE NEW YORK CITY HOTEL OR ANY RETURN ON THIS INVESTMENT.
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THIS PRESS RELEASE STATES THAT NHH HAS SIMULTANEOUSLY ANNOUNCED A
STRATEGIC INVESTMENT BY HNA GROUP OF CHINA INTO NHH. HPT CAN NOT
PROVIDE ANY ASSURANCE THAT HNA'S INVESTMENT INTO NHH WILL BE
SUCCESSFULLY CONCLUDED. SIMILARLY, THIS PRESS RELEASE STATES THAT THE
TRANSACTION DESCRIBED IN THIS PRESS RELEASE MAY BE THE BEGINNING OF A
LONG TERM STRATEGIC RELATIONSHIP BETWEEN HPT AND NHH IN NORTH AND
SOUTH AMERICA AND ELSEWHERE; HOWEVER, THERE CAN BE NO ASSURANCE THAT
HPT AND NHH WILL DECIDE TO DO FUTURE BUSINESS WITH EACH OTHER AND
NEITHER HPT NOR NHH HAVE COMMITTED TO DO SO.
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SONESTA IS OWNED BY HPT'S MANAGING TRUSTEES. THE SONESTA MANAGEMENT
AGREEMENT FOR THE NEW YORK CITY HOTEL WILL BE ENTERED BY A JOINT
VENTURE INCLUDING BOTH NHH AND HPT AND IT WILL BE SUBJECT TO APPROVAL
BY HPT'S INDEPENDENT TRUSTEES WHO ARE NOT OWNERS OF SONESTA. THIS
PROCESS AND OTHER PROCEDURAL SAFEGUARDS WHICH HPT EXPECTS TO EMPLOY
IMPLY THAT THIS AGREEMENT WILL BE ON TERMS AT LEAST AS FAVORABLE AS
HPT COULD ACHIEVE AS A RESULT OF ARM'S LENGTH NEGOTIATIONS WITH AN
UNRELATED HOTEL MANAGEMENT COMPANY. NONETHELESS, THE SONESTA
MANAGEMENT AGREEMENT FOR THE NEW YORK CITY HOTEL SHOULD BE CONSIDERED
A RELATED PERSON TRANSACTION BY HPT. THE INFORMATION CONTAINED IN
HPT'S FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
("SEC"), INCLUDING UNDER THE CAPTION "RISK FACTORS" IN HPT'S ANNUAL
AND QUARTERLY REPORTS, IDENTIFIES IMPORTANT RISKS THAT COULD ARISE
FROM HPT'S RELATIONSHIPS WITH SONESTA AND OTHER AFFILIATED AND RELATED
PERSONS AND ENTITIES. HPT'S FILINGS WITH THE SEC ARE AVAILABLE ON THE
SEC WEBSITE AT: WWW.SEC.GOV.
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THIS PRESS RELEASE STATES THAT HPT EXPECTS THAT THE TRANSACTION
DESCRIBED WILL BE COMPLETED DURING THE SUMMER OF 2013. HPT AND NHH
HAVE AGREED TO A DETAILED OUTLINE OF TERMS, BUT HAVE NOT AGREED ON
FINAL DOCUMENTATION. THE PROCESS OF DOCUMENTING AND CLOSING COMPLEX
INTERNATIONAL TRANSACTIONS MAY REVEAL MATERIAL ISSUES WHICH HAVE NOT
BEEN CONSIDERED BY THE PARTIES TO A LETTER OF INTENT AND THAT MAY NOT
BE SUCCESSFULLY RESOLVED. ALSO, THIS COMPLEX INTERNATIONAL TRANSACTION
INVOLVES MULTIPLE LEGAL REQUIREMENTS THAT CAN TAKE LONGER THAN
ANTICIPATED TO ADDRESS OR THAT MAY PREVENT THE TRANSACTION FROM
CLOSING. THERE CAN BE NO ASSURANCE THAT THE TRANSACTION DESCRIBED IN
THIS PRESS RELEASE OR ANY PART OF IT WILL CLOSE OR THAT IT WILL BE
COMPLETED BY THE SUMMER OF 2013.
FOR THESE REASONS, AMONG OTHERS, THE FORWARD LOOKING STATEMENTS IN THIS
PRESS RELEASE AND THEIR IMPLICATIONS MAY NOT OCCUR. INVESTORS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON THE FORWARD LOOKING
STATEMENTS IN THIS PRESS RELEASE.
EXCEPT AS MAY BE REQUIRED BY LAW, HPT DOES NOT INTEND TO UPDATE ANY
FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
1 The fifth Latin America hotel is also in Mexico.
A Maryland Real Estate Investment Trust with transferable shares of
beneficial interest listed on the New York Stock Exchange.
No
shareholder, Trustee or officer is personally liable for any act or
obligation of the Trust.
Hospitality Properties Trust
Timothy A. Bonang, 617-796-8232
Vice
President, Investor Relations
or
Carlynn Finn, 617-796-8232
Senior
Manager, Investor Relations.
www.hptreit.com