Hospitality Properties Trust to Retain Certain Marriott Branded Hotels and Marriott's Guarantee Extended
NEWTON, Mass.--(BUSINESS WIRE)--
Hospitality Properties Trust (NYSE: HPT) today announced that it has
entered agreements with Marriott International, Inc. (NYSE: MAR) to
retain and renovate certain of its "Marriott" branded hotels previously
offered for sale and to extend the term of MAR's limited guarantee of
the payments due to HPT with regard to those hotels.
In June 2011, HPT announced that it had entered agreements with MAR to
re-align certain contracts affecting 71 Marriott branded hotels. Among
other matters, the June 2011 agreement provided that 21 of the 71
affected hotels would be offered for sale and that MAR would provide a
limited guarantee through 2017 of the owner's priority amounts due to
HPT for those hotels which HPT continued to own.
Since the June 2011 agreement, HPT has agreed to sell one hotel for net
proceeds of approximately $29 million (which amount is net of brokerage
and a renovation discount agreed by HPT and the buyer), and HPT has
concluded that the financial prospects for most or all of the remaining
20 hotels are such that greater long term value may be achieved by
retaining those hotels under HPT ownership and MAR management than by
selling the hotels. Accordingly, HPT has agreed to retain ownership of
and renovate at least 18 of those 20 remaining hotels previously offered
for sale, and MAR has agreed to extend its limited guarantee of owner's
priority amounts due to HPT through 2019. HPT is currently considering
whether the two remaining hotels previously designated for sale should
be retained and managed by MAR or rebranded.
HPT's aggregate owner's priority amount for the 18 hotels that HPT has
decided to retain ownership of under MAR management is approximately $18
million per year. Because these hotels will be retained, HPT currently
expects to provide approximately $43 million to renovate these 18 hotels
to current "Marriott" brand standards; as this HPT funding is paid,
owner's priority amounts due HPT will increase by nine percent (9%) per
year of the amounts funded by HPT.
The agreements announced today also provide that capital expenditures,
or FF&E, reserve funding for all 71 hotels affected by the June 2011
agreement which HPT continues to own and MAR continues to manage will be
eliminated during 2012, reduced in 2013 and 2014 and then increased in
2015 through the remaining contract term. This change in FF&E reserve
funding will decrease HPT's reported net income and funds from
operations, or FFO (a commonly used non-GAAP measure of reporting by
real estate investment trusts), but it will have no impact upon HPT's
cash flows from operating activities. Also, although this change will
modestly increase HPT's renovation fundings in the short term, it is not
expected to have a material impact upon HPT's long term capital
expenditures at the affected hotels.
Hospitality Properties Trust is a real estate investment trust
headquartered in Newton, Massachusetts which currently owns 290 hotels
and 185 travel centers located throughout the United States and in
Puerto Rico and 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
OTHER SECURITIES LAWS. ALSO, WHENEVER HPT USES WORDS SUCH AS "BELIEVE",
"EXPECT", "ANTICIPATE", "INTEND", "PLAN", "ESTIMATE" OR SIMILAR
EXPRESSIONS, HPT IS MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD
LOOKING STATEMENTS ARE BASED UPON HPT'S CURRENT BELIEFS AND EXPECTATIONS
BUT THEY ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR FOR VARIOUS
REASONS, INCLUDING SOME REASONS BEYOND HPT'S CONTROL. HPT'S ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY
HPT'S FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR
EXAMPLE:
-
THIS PRESS RELEASE STATES THAT HPT HAS AGREED TO SELL ONE HOTEL FOR
NET PROCEEDS OF APPROXIMATELY $29 MILLION. THIS SALE HAS NOT CLOSED
AND IS SUBJECT TO CUSTOMARY CLOSING CONDITIONS. SOME OF THESE
CONDITIONS MAY NOT BE SATISFIED AND THIS SALE MAY NOT OCCUR.
-
THIS PRESS RELEASE STATES THAT THE FINANCIAL PROSPECTS FOR AT LEAST 18
HOTELS PREVIOUSLY OFFERED FOR SALE BY HPT HAVE IMPROVED TO A LEVEL
WHICH HAS CAUSED HPT TO CONCLUDE THAT GREATER LONG TERM VALUE MAY BE
ACHIEVED BY RETAINING THOSE HOTELS UNDER HPT OWNERSHIP AND MAR
MANAGEMENT THAN BY SELLING THE HOTELS. AN IMPLICATION OF THIS
STATEMENT MAY BE THAT THESE 18 HOTELS' OPERATIONS WILL PRODUCE
ACCEPTABLE FINANCIAL RETURNS ON HPT'S INVESTED CAPITAL. THE FINANCIAL
RESULTS OF THESE HOTELS' OPERATIONS DEPEND UPON MANY FACTORS,
INCLUDING THE LOCATIONS OF THE HOTELS, COMPETITIVE CONDITIONS AT THOSE
LOCATIONS, THE QUALITY OF THE HOTELS' PHYSICAL CHARACTERISTICS AND THE
QUALITY OF THE HOTELS MANAGEMENT. FOR COMBINATIONS OF HOTELS IN
DIVERSE LOCATIONS SUCH AS THOSE REFERENCED IN THIS PRESS RELEASE, THE
FINANCIAL RESULTS OF OPERATIONS OFTEN REFLECT GENERAL ECONOMIC
CONDITIONS. SOME OF THESE FACTORS, SUCH AS COMPETITIVE CIRCUMSTANCES
AND GENERAL ECONOMIC CONDITIONS ARE BEYOND HPT'S CONTROL. ALSO, THE
MANAGEMENT CONTRACTS WHICH HPT HAS ENTERED WITH MAR GRANT MAR
CONSIDERABLE DISCRETION TO OPERATE THE HOTELS. FOR THESE REASONS, HPT
CAN PROVIDE NO ASSURANCE THAT THE FUTURE FINANCIAL RESULTS OF
OPERATIONS OF THESE HOTELS WILL PROVIDE ACCEPTABLE RETURNS ON HPT'S
INVESTED CAPITAL.
-
THIS PRESS RELEASE STATES THAT MAR HAS AGREED TO EXTEND ITS LIMITED
GUARANTEE OF OWNER'S PRIORITY AMOUNTS DUE TO HPT THROUGH 2019. AN
IMPLICATION OF THIS STATEMENT MAY BE THAT HPT'S OWNER'S PRIORITY
AMOUNTS WILL BE PAID THROUGH 2019. THE OWNER'S PRIORITY AMOUNTS DUE TO
HPT FOR THE AFFECTED HOTELS ARE PAID FROM THE OPERATING CASH FLOW OF
THESE MAR MANAGED HOTELS AFTER PAYING HOTEL LEVEL OPERATING EXPENSES
AND AFTER FUNDING FF&E RESERVES. IF THE FINANCIAL RESULTS OF THESE
MANAGED HOTELS ARE NOT SUFFICIENT TO PAY THE OWNER'S PRIORITY AMOUNTS
DUE TO HPT, THESE AMOUNTS MAY NOT BE PAID. MAR'S GUARANTEE IS LIMITED
BY BOTH AMOUNT AND TIME. MAR'S GUARANTEE DESCRIBED IN THIS PRESS
RELEASE APPLIES TO AMOUNTS DUE TO HPT FROM OPERATIONS OF ALL 71 OF THE
HOTELS AFFECTED BY THE JUNE 2011 CONTRACTS RE-ALIGNMENT. MAR HAS
GUARANTEED ONLY 90% OF THE OWNER'S PRIORITY AMOUNTS DUE TO HPT, THE
MAXIMUM AMOUNT OF MAR'S PAYMENTS UNDER ITS GUARANTEE IS $40 MILLION,
AND APPROXIMATELY $9.1 MILLION OF THIS AMOUNT HAS BEEN PAID TO HPT
THROUGH DECEMBER 31, 2011. ACCORDINGLY, FOR AMOUNTS IN EXCESS OF 90%
OF OWNER'S PRIORITY AMOUNTS DUE HPT, FOR AMOUNTS IN EXCESS OF THE
APPROXIMATELY $30.9 MILLION REMAINING AVAILABLE UNDER THIS LIMITED
GUARANTEE AS OF DECEMBER 31, 2011 AND FOR AMOUNTS DUE TO HPT AFTER
2019, THERE IS NO MAR GUARANTEE. FOR THESE REASONS THERE CAN BE NO
ASSURANCE THAT OWNER'S PRIORITY AMOUNTS DUE HPT THROUGH 2019 OR
THEREAFTER WILL BE PAID IN FULL, AT THE 90% LEVEL TO WHICH MAR'S
LIMITED GUARANTEE APPLIES OR AT ALL.
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THIS PRESS RELEASE STATES THAT THE AGGREGATE OWNER'S PRIORITY AMOUNTS
DUE HPT FOR THE 18 HOTELS WHICH WILL BE RETAINED BY HPT AND MANAGED BY
MAR IS APPROXIMATELY $18 MILLION PER YEAR AND THAT THIS AMOUNT WILL
INCREASE AS CAPITAL IS INVESTED BY HPT BY NINE PERCENT (9%) PER YEAR
OF THE AMOUNTS FUNDED BY HPT. AN IMPLICATION OF THESE STATEMENTS MAY
BE THAT HPT WILL BE PAID APPROXIMATELY $18 MILLION PER YEAR PLUS NINE
PERCENT (9%) PER YEAR OF ANY ADDITIONAL CAPITAL INVESTED IN THESE
HOTELS. AS NOTED ABOVE, THE PAYMENT OF OWNER'S PRIORITY AMOUNTS DUE
HPT IS SUBJECT TO THERE BEING SUFFICIENT CASH FLOWS AT THESE HOTELS
AND AT THE OTHER HOTELS INCLUDED IN THE COMBINATION MANAGEMENT
CONTRACTS TO MAKE SUCH PAYMENTS; AND THE CASH FLOW REALIZED AT THESE
HOTELS DEPENDS UPON VARIOUS FACTORS, INCLUDING SOME WHICH ARE BEYOND
HPT'S CONTROL. ACCORDINGLY THERE CAN BE NO ASSURANCE THAT THE OWNER'S
PRIORITY AMOUNTS DUE HPT WILL BE PAID IN FULL, AT THE 90% LEVEL TO
WHICH MAR'S LIMITED GUARANTEE APPLIES, OR AT ALL.
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THIS PRESS RELEASE STATES THAT HPT CURRENTLY EXPECTS TO PROVIDE
APPROXIMATELY $43 MILLION TO RENOVATE THE 18 HOTELS WHICH HPT WILL
RETAIN TO CURRENT "MARRIOTT" BRAND STANDARDS. AN IMPLICATION OF THIS
STATEMENT MAY BE THAT THE RENOVATION OF THESE HOTELS TO CURRENT
"MARRIOTT" BRAND STANDARDS CAN BE COMPLETED FOR APPROXIMATELY $43
MILLION. THE COST OF HOTEL RENOVATIONS IS DIFFICULT TO ESTIMATE. AFTER
A RENOVATION PROJECT IS BEGUN, UNANTICIPATED PROBLEMS AND COSTS MAY BE
ENCOUNTERED. HPT CAN PROVIDE NO ASSURANCE THAT THESE RENOVATIONS CAN
BE COMPLETED FOR APPROXIMATELY $43 MILLION; HPT MAY NEED TO FURTHER
INCREASE ITS INVESTMENT IN THESE HOTELS.
THE INFORMATION CONTAINED IN HPT'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER "RISK FACTORS" IN HPT'S
PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT
FACTORS THAT COULD CAUSE HPT'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE STATED IN HPT'S FORWARD LOOKING STATEMENTS. HPT'S FILINGS WITH THE
SEC ARE AVAILABLE AT THE SEC'S WEBSITE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON HPT'S FORWARD LOOKING
STATEMENTS.
EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, HPT DOES NOT INTEND TO
UPDATE OR CHANGE FORWARD LOOKING STATEMENTS AS A RESULT OR FROM NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
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
Source: Hospitality Properties Trust
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