NEWTON, Mass. -- Hospitality Properties Trust (NYSE: HPT) today
announced that it has agreed to purchase nine (9) hotels for $196.2
million.
The 9 hotels to be purchased include five (5) upscale Crowne Plaza
Hotels, one (1) full service Holiday Inn Select Hotel, two (2) upscale,
extended stay Staybridge Suites Hotels and one (1) Holiday Inn SunSpree
Resort Hotel. These hotels have 2,712 rooms/suites and over 68,000
sq.ft. of meeting space. In addition, all of these hotels have exercise
rooms/fitness centers and swimming pools and a total of 12 restaurants
and 13 bars/lounge areas. These nine (9) hotels are located as follows:
No. of
Approx. sq. Food and
No. of ft. of Beverage
Location Hotel Keys Meeting Space Outlets
-------- ----- ------ ------------- --------
San Jose, CA Crowne Plaza 304 6,643 sq.ft. 2
Atlanta (Airport),
GA Crowne Plaza 378 14,882 sq.ft. 2
Atlanta
(Perimeter), GA Crowne Plaza 296 21,004 sq.ft. 2
Dallas, TX Crowne Plaza Suites 295 9,614 sq.ft. 2
Irvine, CA Crowne Plaza 335 7,476 sq.ft. 2
Houston, TX Holiday Inn Select 349 3,444 sq.ft. 2
Montego Bay, Holiday Inn
Jamaica SunSpree Resort 524 4,200 sq.ft. 11
Dallas, TX Staybridge Suites 114 460 sq.ft. 1
Las Colinas, TX Staybridge Suites 117 375 sq.ft. 1
------ -------------- ---------
Totals: 2,712 68,098 sq.ft. 25
meeting space
Seven of these hotels are being purchased from FelCor Lodging Trust
(NYSE: FCH) and two are being purchased from InterContinental Hotels
Group, plc (LSE/NYSE: IHG). Simultaneously with this purchase, HPT will
enter a long term management contract for eight (8) of these hotels with
a subsidiary of IHG. Because of tax law issues affecting the Holiday
Inn SunSpree Resort in Jamaica, it will be leased to a separate
subsidiary of IHG, but this lease and the management contract for the
eight (8) hotels will be subject to cross guarantees and combined
renewal options. The management contract and the lease will have terms
similar to other contracts entered by HPT including: initial terms of 25
years, plus two consecutive 15 year renewal options; escrowed reserves
for anticipated capital expenditures; subordination of IHG management
fees to the payment of defined owner's priority returns to HPT; and a
limited guaranty from IHG for the rent and certain priority returns to
HPT.
In addition to the purchase price, HPT will invest $25.1 million in
these hotels during the three years following the closing to fund
capital improvements. HPT's annual owner's priority payments, which are
guaranteed by IHG, will be initially $15.8 million/year in 2006,
increase to $17.8 million/year in 2007, $18.7 million/year in 2008 and
approximately $19.0 million/year after the full $25.1 million of planned
hotel improvements are funded. HPT may also receive additional
non-guaranteed priority payments, a percentage of gross revenue
increases at these hotels starting in 2008 and the cash flow remaining
after payment of management fees to IHG at the managed hotels.
The agreement announced today represents the first time HPT has
agreed to purchase a hotel located in Jamaica. Jamaica and most other
countries generally do not provide the full tax benefits available to
real estate investment trusts, or REITs, in the USA. Nonetheless, HPT
expects it may reduce its taxes due in Jamaica through 2015 as a result
of certain tax concessions granted by the Government of Jamaica to
promote investment in its tourism industry. Also, to reduce the risks to
HPT which may arise from changes in currency exchange rates, the
purchase price and the rent for the Jamaica hotel were set and will be
paid in U.S. dollars.
The hotels will be purchased free and clear of all mortgage debt. HPT
expects to fund this transaction by drawing under its unsecured
revolving bank credit facility.
The transactions announced were effective Friday, January 20, 2006,
except for the Jamaican resort which will be delayed pending certain
third party approvals, such as Jamaican tax and regulatory approval.
Hospitality Properties Trust is a REIT which upon completion of this
transaction will own 308 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 THE LEASE FOR THE HOLIDAY INN
SUNSPREE RESORT AND THE MANAGEMENT CONTRACTS FOR THE NINE (9) OTHER
HOTELS ARE 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.
- THIS PRESS RELEASE STATES THAT PAYMENT TO HPT OF RENT AND A
PORTION OF ITS OWNER'S PRIORITY RETURNS WILL BE GUARANTEED BY IHG.
HOWEVER, THE IHG GUARANTY ALSO APPLIES TO OTHER MANAGEMENT CONTRACTS
WITH HPT AFFECTING AN ADDITIONAL 120 HOTELS, AND THIS GUARANTY IS
LIMITED TO A MAXIMUM LIABILITY BY IHG OF $125 MILLION. 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 CASH FLOWS FROM THE AFFECTED HOTELS
EXCEED CERTAIN AMOUNTS AND THIS RELEASE WILL BE EFFECTIVE EVEN IF CASH
FLOWS SUBSEQUENTLY DECLINE.
- THIS PRESS RELEASE STATES THAT $25.1 MILLION WILL BE INVESTED BY
HPT FOR CERTAIN CAPITAL IMPROVEMENTS TO THE PURCHASED HOTELS AND THAT
THE LEASE AND MANAGEMENT CONTRACTS BETWEEN HPT AND IHG WILL REQUIRE
ESCROWED RESERVES FOR ANTICIPATED CAPITAL EXPENDITURES THEREAFTER. IT IS
DIFFICULT TO ACCURATELY ANTICIPATE HOTEL CAPITAL REQUIREMENTS. THIS IS
ESPECIALLY SO AT FULL SERVICE AND UPSCALE HOTELS OF THE TYPES WHICH HPT
HAS AGREED TO PURCHASE. IF ESCROWED AMOUNTS ARE INSUFFICIENT TO MAINTAIN
THESE HOTELS, HPT MAY HAVE TO INVEST ADDITIONAL AMOUNTS IN ORDER 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 CAPITAL COSTS INCURRED TO FUND THIS
TRANSACTION, TAXES PAYABLE IN JAMAICA 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, HIGHER
TAX RATES 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 PENDING THIRD PARTY
APPROVALS. IN FACT, CIRCUMSTANCES MAY DELAY THIS PURCHASE FOR AN
EXTENDED PERIOD OR PREVENT IT OCCURRING. SHOULD THE PURCHASE OF THIS
HOTEL NOT CLOSE, HPT'S ANNUAL PRIORITY PAYMENTS STATED IN THIS PRESS
RELEASE WOULD BE DECREASED BY $2.6 MILLION/YEAR IN 2006, $3.1
MILLION/YEAR IN 2007 AND $3.4 MILLION/YEAR THEREAFTER.
- THIS PRESS RELEASE STATES THE PURCHASE PRICE AND THE RENT FOR
THE HOLIDAY INN SUNSPREE RESORT IN JAMAICA HAVE BEEN SET AND WILL BE
PAID IN U.S. DOLLARS IN ORDER TO REDUCE THE RISKS TO HPT FROM CHANGES IN
CURRENCY EXCHANGE RATES. HOWEVER, HPT'S INVESTMENT IN JAMAICA AND THE
RESULTS OF OPERATIONS AT THIS HOTEL WILL BE AFFECTED BY CHANGES IN
CURRENCY EXCHANGE RATES. THE AMOUNTS EARNED AT THIS HOTEL AND AVAILABLE
CASH FLOW TO PAY RENT IN U.S. DOLLARS WILL BE DETERMINED BASED UPON
CURRENCY EXCHANGE RATES IN EFFECT FROM TIME TO TIME.
- THE FOREGOING PRESS RELEASE STATES THAT HPT EXPECTS ITS TAXES
DUE IN JAMAICA MAY BE REDUCED BY REASON OF CERTAIN TAX CONCESSIONS
GRANTED BY THE JAMAICAN GOVERNMENT. THAT GOVERNMENT HAS NOT YET
CONFIRMED THAT THIS TAX CONCESSION WILL BE GRANTED. THIS TAX CONCESSION
MAY NOT BE GRANTED, GOVERNMENT POLICIES SOMETIMES CHANGE AND HPT CAN
PROVIDE NO ASSURANCE THAT ANY TAX REDUCTIONS FOR INCOME IT EARNS IN
JAMAICA WILL BE AVAILABLE.
FOR THESE REASONS AMONG OTHERS, INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.
A Maryland Real Estate 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
617-964-8389
Manager of Investor Relations
www.hptreit.com