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:
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.
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.
