NEWTON, Mass.--Hospitality Properties Trust (NYSE: HPT) today
announced that it has sent a notice of default and lease termination to
Lightstone Group with respect to 18 Homestead Village hotels.
In February 1999 HPT purchased 18 Homestead Village hotels and leased
them to a subsidiary of Homestead Village Incorporated ("Homestead")
for an initial term ending December 31, 2015. At that time, Homestead
was a publicly owned company with a substantial net worth, the tenant
provided HPT a lease security deposit of $15.96 million and Homestead
guaranteed the lease obligations to HPT. In 2001 an entity affiliated
with Blackstone Group acquired Homestead; thereafter Homestead's net
worth declined and Blackstone secured Homestead's guaranty obligations
to HPT with a bank letter of credit for an additional $15.96 million.
HPT's decision to declare a lease default and termination is based
upon the facts that a Lightstone Group affiliate acquired control of the
Homestead tenant on June 11, 2007, without first obtaining HPT's
consent and without providing HPT with timely evidence by which HPT
might reasonably determine that the tenant has a sufficient net worth,
as required by the Lease.
The 18 hotels which are the subject of this lease have 2,399 rooms
and are located in five states. The historical minimum rent payable to
HPT under this lease is $1.33 million/month (or $15.96 million/ year).
In addition, HPT receives percentage rent under this lease based upon
increases in gross revenues at the leased hotels; in 2006, this
percentage rent was approximately $509,000. The rent payment due June 1,
2007, while Blackstone continued to own Homestead, was timely paid; and
HPT continues to hold a security deposit equal to $15.96 million and a
bank letter of credit to secure the lease guaranty for an additional
$15.96 million.
Hospitality Properties Trust is a real estate investment trust based
in Newton, MA which owns 310 hotels and 186 hospitality and travel
centers located throughout the United States, in Puerto Rico and in
Ontario, Canada.
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 PRESENT INTENT, BELIEFS AND EXPECTATIONS; BUT, FOR VARIOUS
REASONS, THEY ARE NOT GUARANTEED TO OCCUR AND THEY MAY NOT OCCUR. FOR
EXAMPLE:
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THIS PRESS RELEASE STATES THAT HPT HAS DECLARED AN EVENT OF
DEFAULT AND TERMINATED THE LEASE FOR 18 HOMESTEAD VILLAGE HOTELS. THE
IMPLICATIONS OF THIS STATEMENT MAY BE THAT HPT CAN NOW TAKE POSSESSION
OF THESE HOTELS AND LEASE THEM TO A THIRD PARTY. HOWEVER, LIGHTSTONE HAS
DISPUTED THAT AN EVENT OF DEFAULT HAS OCCURRED AND IT MAY DISPUTE THAT
THE LEASE HAS BEEN TERMINATED. THESE TYPES OF DISPUTES SOMETIMES RESULT
IN LITIGATION. LITIGATION IS ALMOST ALWAYS EXPENSIVE AND THE RESULTS OF
LITIGATION MAY BE DIFFERENT FROM THE IMPLICATIONS SET FORTH IN THIS
PRESS RELEASE.
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THIS PRESS RELEASE STATES THAT HPT HOLDS A CASH SECURITY DEPOSIT
FOR $15.96 MILLION AND A LETTER OF CREDIT FOR $15.96 MILLION TO SECURE A
LEASE GUARANTY. THE CASH SECURITY DEPOSIT IS NOT REQUIRED TO BE HELD
SEPARATELY IN ESCROW, AND IT IS NOT SO HELD. LIGHTSTONE GROUP HAS
REQUESTED THAT HPT RETURN THE LETTER OF CREDIT WHICH IS SECURITY FOR THE
LEASE GUARANTY. HPT BELIEVES THAT IT HAS THE RIGHT TO RETAIN BOTH THIS
SECURITY DEPOSIT AND THIS LETTER OF CREDIT AS SECURITY FOR THE DAMAGES
IT MAY INCUR AS A RESULT OF THE LEASE DEFAULT AND TERMINATION, INCLUDING
ANY LOST OR REDUCED RENT WHICH HPT MAY REALIZE FROM THESE HOTELS.
LIGHTSTONE MAY DISPUTE HPT'S RIGHTS TO RETAIN AND APPLY THE SECURITY
DEPOSIT AND THE LETTER OF CREDIT TO HPT'S DAMAGES. THIS DISPUTE MAY
RESULT IN LITIGATION; AND, AS NOTED, LITIGATION IS ALMOST ALWAYS
EXPENSIVE AND THE RESULT OF LITIGATION MAY BE DIFFERENT THAN HPT NOW
BELIEVES.
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THE HISTORICAL LEASE STATES THAT A CHANGE OF CONTROL OF THE
TENANT REQUIRES HPT CONSENT OR THAT THE TENANT PROVIDE REASONABLE
EVIDENCE OF ITS HAVING A MINIMUM NET WORTH AT LEAST TWENTY (20) DAYS
PRIOR TO CONSUMMATION OF A CHANGE OF CONTROL. HPT HAS NOT CONSENTED TO
THE CHANGE OF CONTROL; AND HPT BELIEVES IT FIRST RECEIVED ANY EVIDENCE
OF THE PURPORTED NET WORTH FROM LIGHTSTONE GROUP ON JUNE 5, 2007 AND
THAT THE CHANGE OF CONTROL OCCURRED ON JUNE 11, 2007. SINCE THEN, THE
LIGHTSTONE TENANT HAS REFUSED TO PROVIDE ANY CLARIFICATION OR ADDITIONAL
EVIDENCE OF ITS NET WORTH REASONABLY REQUESTED BY HPT. DESPITE THESE
FACTS, LIGHTSTONE HAS ASSERTED THAT IT HAS COMPLIED WITH THE LEASE
REQUIREMENTS. THIS DISPUTE MAY RESULT IN LITIGATION; AND, AS NOTED
ABOVE, LITIGATION IS ALMOST ALWAYS EXPENSIVE AND THE RESULT OF
LITIGATION MAY BE DIFFERENT THAN HPT NOW EXPECTS.
FOR ALL OF THE FOREGOING REASONS, AMONG OTHERS, INVESTORS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS
WHICH APPEAR IN THIS PRESS RELEASE.
Hospitality Properties Trust
Timothy A. Bonang
617-796-8149
Manager of Investor Relations
www.hptreit.com