NEWTON, Mass.--Hospitality Properties Trust (NYSE: HPT) today
announced that it has entered an agreement to purchase TravelCenters of
America, Inc. ("TA") from a group of private equity investors led by Oak
Hill Capital Partners, L.P. for total consideration of approximately
$1.9 billion.
When this transaction is closed, HPT will retain substantially all of
TA's real estate and transfer TA's operating business to a subsidiary
which will be distributed to HPT's shareholders. The TA transaction will
significantly increase and diversify HPT's investments and revenues and
this transaction may provide HPT with additional growth opportunities
in the future. Moreover, the travel center subsector of the hospitality
industry in which TA operates has historically been recession resistant
and the TA transaction may provide further stability to HPT's revenues.
Description of TravelCenters of America:
TA owns and operates a cross country network of 162 largely
irreplaceable hospitality and fuel service areas along the U.S.
Interstate Highway System. The TA network includes 161 locations in 40
states and one site in Ontario, Canada. Included in the 162 TA locations
are 13 sites which are owned and operated by TA franchisees. The
typical TA site includes:
- Over 20 acres of land with parking for approximately 170 tractor-trailers and 100 cars;
- An approximately 150 seat, full service restaurant and one to
three quick service restaurants operated under various well recognized
brands;
- A truck repair facility and parts store;
- Multiple diesel and gasoline fueling points;
- A convenience store, game room, lounge and other amenities for truckers and motorists; and
- At twenty sites, a hotel operated under a well recognized brand.
Spin Out Transaction and Lease:
The operating assets of TA, including the franchise agreements, will
be spun out to HPT shareholders in an in kind distribution to create a
separately traded, public company (New TA) with shares listed on a
national stock exchange. TA's substantial real estate will be retained
by HPT and leased to New TA.
HPT currently expects that this transaction will be immediately
accretive to HPT's Funds From Operations, or FFO, by between $0.10 and
$0.15 per share per year and that HPT shareholders may receive
additional significant value from the spin out share distribution of New
TA.
The record date for the spin out distribution, the details of the
lease from HPT to New TA and pro forma financial information for HPT and
New TA are expected to be included in SEC filings to be made in
connection with the spin out. These filings are currently anticipated to
occur within the next 60 days.
Timing and Financing:
HPT currently expects this transaction to close in early 2007. HPT
has arranged interim financing for this transaction from Merrill Lynch
& Co. HPT currently anticipates long term financing this transaction
by the issuance of both debt and equity securities.
Commentary from HPT Management:
John Murray, President of HPT, made the following statement at the time of this announcement:
"TA owns the premier network of full service travel centers in the
U.S. TA provides an important infrastructure type service within the
U.S. transportation system, with largely irreplaceable sites along the
U.S. Interstate Highway System.
"HPT expects this transaction will be immediately accretive to HPT's
FFO. The TA network is the leader in the full service travel center
business, a very fragmented subsector of the hospitality industry. The
spin off of New TA will create a new partner with whom HPT may work for
future growth.
HPT to Acquire TravelCenters of America; Conference Call Scheduled for Tuesday, September 19th at 10:00 a.m.
"The HPT lease will have the same security features which
characterize HPT's existing hotel leases and management contracts: one
long term lease for all the properties, a strong parent company
guaranty, all or none renewal options, etc. Moreover, based upon
historical experience in TA's business, we believe the percentage rents
which HPT receives from the New TA may not be subject to the financial
cyclicality which has historically affected hotels."
Conference Call and Slide Presentation:
On Tuesday, September 19, 2006, at 10:00 a.m. Eastern Time, Barry
Portnoy, Managing Trustee, John Murray, President, and Mark Kleifges,
Chief Financial Officer, will host a conference call to discuss this
transaction. Following the company's remarks, there will be a short
question and answer period.
Before the NYSE opens on Tuesday, September 19, 2006, HPT will make
available a slide presentation describing the TA transaction. This
presentation will be filed with the SEC on Form 8-K and also will be
available at HPT's web site, located at www.hptreit.com.
The conference call telephone number is (800) 289-0572. Participants
calling from outside the United States and Canada should dial (913)
981-5543. No pass code is necessary to access the call from either
number. Participants should dial in about 15 minutes prior to the
scheduled start of the call. A replay of the conference call will be
available for about one week. To hear the replay, dial (719) 457-0820.
The replay pass code is 9390457.
A live audio webcast of the conference call will also be available in a listen only mode on HPT's web site, at www.hptreit.com.
Participants wanting to access the webcast should visit the company's
web site about five minutes before the call. The archived webcast will
be available for replay on the company's web site for approximately one
week after the call.
Merrill Lynch & Co. acted as exclusive financial adviser to HPT
in this transaction. TravelCenters of America was advised by Lehman
Brothers and Credit Suisse.
Hospitality Properties Trust is a real estate investment trust, or
REIT, which currently owns 310 hotels located throughout the United
States, Puerto Rico and Ontario, Canada. HPT is headquartered in Newton,
Massachusetts.
STATEMENT REGARDING REFERENCE TO NON-GAAP FINANCIAL MEASURES
This press release includes a reference to Funds From Operations, or
FFO, which is a non-GAAP financial measure. HPT computes FFO as net
income available for common shareholders plus FF&E deposits not in
net income, depreciation and amortization. This calculation of FFO
differs from the National Association of Real Estate Investment Trusts,
or NAREIT, definition of FFO because HPT includes FF&E deposits not
included in net income. HPT considers FFO to be an appropriate measure
of performance for a real estate investment trust, or REIT, along with
net income and cash flow from operating, investing and financing
activities. HPT believes that FFO provides useful information to
investors because by excluding the effects of certain historical costs,
such as depreciation expense and gain or loss on asset impairment, FFO
can facilitate comparisons of current operating performance among REITs.
FFO does not represent cash generated by operating activities in
accordance with generally accepted accounting principles, or GAAP, and
should not be considered an alternative to net income or cash flow from
operating activities as a measure of financial performance or liquidity.
FFO is one important factor considered by HPT's board of trustees in
determining the amount of distributions to shareholders. Other important
factors include, but are not limited to, requirements to maintain HPT's
status as a REIT, limitations in HPT's revolving bank credit facility
and public debt covenants, the availability of debt and equity capital
to HPT and HPT's expectation of its future capital needs and operating
performance.
WARNING REGARDING FORWARD LOOKING STATEMENTS
SOME OF THE STATEMENTS IN THIS PRESS RELEASE ARE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 AND FEDERAL SECURITIES LAWS. FORWARD LOOKING
STATEMENTS ARE BASED UPON HPT'S CURRENT BELIEFS AND EXPECTATIONS, BUT
THEY ARE NOT GUARANTEED TO OCCUR AND THEY MAY NOT OCCUR. FOR EXAMPLE:
- THIS PRESS RELEASE STATES THAT HPT EXPECTS ITS ACQUISITION OF
TA, THE SPIN OFF OF TA'S OPERATING BUSINESS AND THE LEASE OF TA'S REAL
ESTATE BY HPT TO NEW TA TO RESULT IN FFO ACCRETION OF $0.10 TO $0.15 PER
SHARE PER YEAR. THIS ESTIMATE IS BASED UPON CERTAIN ASSUMPTIONS BY HPT
WHICH MAY PROVE TO BE INACCURATE. FOR EXAMPLE, HPT'S LONG TERM FINANCING
MAY BE MORE EXPENSIVE THAN HPT'S HISTORICAL COSTS SUGGEST. INCREASED
COSTS MAY RESULT FROM CHANGED MARKET CONDITIONS OR BECAUSE OF SOME OTHER
REASON. AS A RESULT OF SUCH CHANGES, HPT MAY NOT REALIZE THE EXPECTED
ACCRETION BENEFITS FROM THIS TRANSACTION AND MAY EVEN EXPERIENCE LOSSES.
- THIS PRESS RELEASE STATES THAT HPT INVESTORS MAY RECEIVE
SIGNIFICANT VALUE FROM THE SPIN OUT DISTRIBUTION OF NEW TA SHARES. THE
VALUE OF NEW TA SHARES WHICH ARE DISTRIBUTED TO HPT SHAREHOLDERS WILL
DEPEND UPON THE MARKET PRICE OF THOSE SHARES, WHICH IN TURN WILL DEPEND
UPON THE RELATIVE NUMBER OF BUYERS AND SELLERS OF NEW TA SHARES ABOUT
THE TIME OF THE SPIN OUT DISTRIBUTION. SPIN OUTS OFTEN RESULT IN AN
EXCESS OF SHAREHOLDERS INTERESTED TO SELL THE SECURITIES THEY RECEIVE
BECAUSE THOSE SECURITIES DO NOT MATCH THE SHAREHOLDERS' INVESTMENT
GOALS. ACCORDINGLY, HPT SHAREHOLDERS WHO DECIDE TO SELL NEW TA SHARES
WHICH ARE DISTRIBUTED TO THEM MAY BE UNABLE TO REALIZE A FAIR VALUE FOR
THE NEW TA SHARES THEY RECEIVE.
- THIS PRESS RELEASE STATES THAT THE SHARES OF NEW TA WILL BE
SEPARATELY TRADED ON A NATIONAL STOCK EXCHANGE. NO APPLICATION HAS BEEN
MADE YET TO LIST NEW TA SHARES ON ANY SECURITIES EXCHANGE. WHEN AN
APPLICATION IS MADE IT MAY BE DENIED. IF THE NEW TA SHARES ARE NOT
ACCEPTED FOR LISTING ON A NATIONAL STOCK EXCHANGE, THOSE SHARES MAY BE
ILLIQUID AND DIFFICULT TO SELL, WHICH COULD REDUCE THE VALUE OF ANY NEW
TA SHARES DISTRIBUTED TO HPT SHAREHOLDERS.
- THIS PRESS RELEASE STATES THAT HPT EXPECTS TO MAKE FILINGS AT
THE SEC WHICH WILL CONTAIN ADDITIONAL DETAILS OF THIS TRANSACTION. THE
PREPARATION OF THESE SEC FILINGS IS A COMPLEX PROCESS. HPT CURRENTLY
BELIEVES THIS PROCESS CAN BE COMPLETED WITHIN 60 DAYS. HOWEVER, THIS
PROCESS MAY BE DELAYED FOR NUMEROUS REASONS, INCLUDING COMPILATION OF
THE REQUIRED FINANCIAL DATA IN THE FORMAT REQUIRED FOR SEC FILINGS.
ACCORDINGLY, THESE FILINGS MAY BE DELAYED.
- THIS PRESS RELEASE STATES THAT HPT EXPECTS THE TRANSACTION
DISCUSSED TO CLOSE IN EARLY 2007. THE CLOSING OF THIS TRANSACTION
REQUIRES ANTI-TRUST CLEARANCE, SEC CLEARANCE OF A REGISTRATION STATEMENT
FOR THE DISTRIBUTION OF NEW TA SHARES TO HPT SHAREHOLDERS, VARIOUS
STATE AND LOCAL REGULATORY APPROVALS AND VARIOUS APPROVALS FROM THIRD
PARTIES TO TA CONTRACTS. HPT CAN PROVIDE NO ASSURANCE THAT ALL THESE
APPROVALS WILL BE OBTAINED. SOME OF THESE APPROVALS MAY BE DELAYED OR
DENIED AND THE EFFECT MAY BE TO DELAY OR VOID THIS TRANSACTION.
THIS PRESS RELEASE IMPLIES THAT HPT WILL ACQUIRE ADDITIONAL TRAVEL
CENTERS WHICH WILL BE LEASED TO TA. IN FACT, HPT AND NEW TA MAY BE
UNABLE TO LOCATE ADDITIONAL SITES TO INVEST IN OR AGREE UPON TERMS FOR
SUCH INVESTMENTS. THERE ARE NO ASSURANCES THAT HPT WILL INCREASE ITS
INVESTMENTS IN TRAVEL CENTERS OR IN PROPERTIES LEASED TO NEW TA.
INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.
Hospitality Properties Trust
Timothy A. Bonang
617-796-8149
www.hptreit.com