|NEWTON, Mass. - Dec. 9, 2003 -- Hospitality Properties Trust (NYSE:
HPT) today announced that it has entered an agreement with Prime Hospitality
Corp. (NYSE: PDQ) for management of 24 AmeriSuites hotels owned by HPT
and to rebrand 12 additional hotels as "Prime Hotels".
On April 1, 2003, Wyndham International, Inc. (AMEX: WBR) defaulted
its lease for 12 Wyndham hotels owned by HPT. Shortly thereafter HPT terminated
Wyndham's occupancy and assigned the management of the 12 Wyndham hotels
to Crestline Hotels and Resorts, Inc., a USA based company owned by Barcelo
- Corporacion Empresarial, S.A. of Spain. Through today, the 12 Wyndham
hotels have continued to be managed by Crestline.
On July 1, 2003, PDQ defaulted its lease for 24 AmeriSuites hotels owned
by HPT. Since that time, PDQ has continued to manage these 24 AmeriSuites
hotels while HPT and PDQ have had discussions concerning the long term
operations of these hotels.
The New Agreement
The agreement announced today affects all 36 hotels (12 Wyndhams and
24 AmeriSuites) owned by HPT which were the subject of the defaults described
above. These 36 hotels contain 5,250 rooms and are located in 19 states.
A listing of these hotels including locations, number of rooms and additional
data is attached hereto.
Pursuant to the agreement announced today, PDQ will operate all 36 hotels
under one combined management contract. The 24 AmeriSuites hotels will
continue to be operated as AmeriSuites and the 12 Wyndham hotels will become
Prime Hotels. "AmeriSuites" and "Prime Hotels" are trade names of PDQ.
HPT will receive an owner's priority return of $26 million/year plus a
share of operating results from these hotels. Payment of royalty, franchise
and management fees due to PDQ will be subordinated to the priority return
to HPT, and payment of this $26 million/year priority return will be guaranteed
by PDQ under a limited guaranty.
Other terms of this agreement include the following:
The agreement will run for 15 years and PDQ will have two consecutive 15
year renewal options for all, and not less than all, of these hotels.
HPT will provide $25 million during the next two years to pay for re-branding
and other capital improvements, primarily for the 12 hotels which will
become Prime Hotels. Thereafter, an escrow of up to 5% of gross revenues
at all 36 hotels will be established for capital needs.
The agreement between HPT and PDQ is effective January 1, 2004, with respect
to the 24 AmeriSuites hotels and will be effective for the 12 Prime Hotels
on or about February 1, 2004.
Listing of 24 AmeriSuites Hotels
Owned by HPT:
No. of Suites Meeting
Colorado Springs, CO
Fort Wayne, IN
Overland Park, KS
Kansas City, MO
Mt. Laurel, NJ
Pine Knoll Shores, NC
El Paso, TX
San Antonio Riverwalk, TX
24 hotels in 13 states
2,929 suites 38,022
Listing of 12 Hotels Owned by HPT Which
Will be Re-Branded as Prime Hotels:
No. of Rooms Meeting Space
North Phoenix, AZ
Phoenix Airport, AZ
San Diego, CA
Salt Lake City, UT
12 hotels in 8 states
John G. Murray, President of HPT, made the following statement at the
time the agreement between HPT and PDQ was announced:
"Since July, HPT and Prime have had some tough negotiations. Nonetheless,
I believe these negotiations have been conducted in a business like and
professional manner. Prime appears to have made special efforts to improve
the operations of HPT's 24 AmeriSuites hotels while it acknowledged that
HPT had the right to rebrand these hotels. As our discussions evolved,
HPT became convinced that it makes economic sense for these 24 hotels to
remain as AmeriSuites and to be operated by Prime, the AmeriSuites brand
'Prime Hotels' is a proprietary brand recently created by Prime Hospitality
Corp. By investing in improvements and by rebranding all 12 of these full
service hotels, HPT believes it may help establish a foundation upon which
this brand may be expanded. By agreeing to combine its obligations for
these 12 hotels with its obligations for 24 AmeriSuites hotels and to guarantee
the combined owner's priority return to HPT for $26 million/year for 15
years, Prime has demonstrated its own commitment to grow the 'Prime Hotels'
Hospitality Properties Trust is a real estate investment trust headquartered
in Newton, Massachusetts which owns 274 hotels located throughout the United
WARNING REGARDING FORWARD LOOKING STATEMENTS
THE FOREGOING PRESS RELEASE INCLUDES 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 BELIEFS AND EXPECTATIONS, BUT THEY ARE NOT GUARANTEED
TO OCCUR. FOR EXAMPLE:
-- THE FACT THAT AMOUNTS DUE TO PRIME
HOSPITALITY CORP. FOR ROYALTY, FRANCHISE AND MANAGEMENT FEES ARE SUBORDINATED
TO A $26 MILLION/YEAR PRIORITY PAYMENT TO HPT IMPLIES THAT THIS PAYMENT
TO HPT IS ASSURED. HISTORICALLY, IN 2000, 2001 AND 2002 AND THE 12 MONTHS
ENDED SEPTEMBER 30, 2003, THE OPERATING RESULTS OF THESE 36 HOTELS BEFORE
THESE SUBORDINATED CHARGES HAS EXCEEDED $26 MILLION. THIS IS SO AFTER DEDUCTING
A PRO FORMA CAPEX RESERVE EQUAL TO 5% OF REVENUES. HOWEVER, THE COMBINED
OPERATING RESULTS OF THESE 36 HOTELS HAVE DECLINED SINCE 2000. IF SUCH
OPERATING DECLINES CONTINUE, THE 36 HOTELS MAY NOT PRODUCE $26 MILLION/YEAR
EVEN AFTER SUBORDINATION OF THE AMOUNTS DUE PDQ.
-- THE FACT THAT PDQ HAS GUARANTEED
A $26 MILLION/YEAR PRIORITY TO HPT IMPLIES THAT THIS PAYMENT IS ASSURED.
HOWEVER, PDQ'S GUARANTY IS LIMITED TO $30 MILLION. ALSO, ALTHOUGH PDQ HAS
AGREED TO MAINTAIN A TANGIBLE NET WORTH OF AT LEAST $200 MILLION WHILE
ITS GUARANTY OBLIGATION IS OUTSTANDING, HPT CAN PROVIDE NO ASSURANCE THAT
PDQ WILL BE ABLE OR WILLING TO MEET ITS GUARANTY OBLIGATIONS.
-- THE FOREGOING PRESS RELEASE STATES
THAT HPT BELIEVES THAT IT MAKES ECONOMIC SENSE FOR THE 24 AMERISUITES HOTELS
TO REMAIN AS AMERISUITES OPERATED BY PDQ. OTHER HOTELS OPERATING COMPANIES
EXPRESSED INTEREST IN MANAGING OR LEASING SOME OF THESE 24 HOTELS. SOME
OF THESE OTHER COMPANIES HAVE GREATER FINANCIAL AND MANAGEMENT RESOURCES
THAN PDQ. HPT'S DECISION TO ENTER A NEW AGREEMENT WITH PDQ WAS BASED UPON
HPT'S EVALUATION OF AVAILABLE ALTERNATIVES, INCLUDING SOME SUBJECTIVE FACTORS
SUCH AS THE BENEFITS OF RECEIVING REVENUES FROM DIVERSIFIED SOURCES AND
THE VALUES WHICH MIGHT BE RECEIVED IF CERTAIN HOTELS WERE SOLD, LEASED
OR MANAGED SEPARATELY FROM OTHERS. FUTURE FINANCIAL RESULTS AT THESE
HOTELS MAY PROVE THAT HPT'S EVALUATION WAS MISTAKEN.
-- THE FOREGOING PRESS RELEASE STATES
HPT'S BELIEF THAT PDQ MAY BE ABLE TO EXPAND ITS "PRIME HOTELS" BRAND. THIS
STATEMENT IS BASED UPON STATEMENTS MADE TO HPT BY PDQ AND UPON HPT'S KNOWLEDGE
OF THE HOTEL INDUSTRY. HOWEVER, BUILDING A NEW HOTEL BRAND WILL REQUIRE
EXTENSIVE FINANCIAL AND MANAGEMENT RESOURCES, AND HPT CAN PROVIDE NO ASSURANCES
THAT PDQ WILL BE ABLE TO DO SO. IF THE "PRIME HOTELS" BRAND DOES NOT EXPAND,
THE FINANCIAL RESULTS WHICH HPT EXPECTS TO BE REALIZED AT ITS HOTELS MAY
NOT BE ACHIEVED.
-- THE FOREGOING PRESS RELEASE STATES
THAT HPT WILL PROVIDE $25 MILLION TO FUND RE-BRANDING AND OTHER CAPITAL
IMPROVEMENTS PRIMARILY FOR THE 12 HOTELS WHICH WILL BECOME PRIME HOTELS.
AN IMPLICATION OF THIS STATEMENT IS THAT $25 MILLION WILL BE SUFFICIENT
TO CORRECT ALL DEFERRED MAINTENANCE AND PURCHASE APPROPRIATE IMPROVEMENTS.
HOWEVER, THIS AMOUNT IS ONLY AN ESTIMATE AGREED BY HPT AND PDQ AND MAY
BE INSUFFICIENT. HPT HAS ALSO AGREED TO PROVIDE ADDITIONAL FUNDING, IF
NEEDED, IN RETURN FOR AN INCREASE IN IT'S OWNER'S PRIORITY ACCORDING TO
A FORMULA. ANY INCREASE IN THE AMOUNT OF HPT'S PRIORITY PAYMENT WILL STRESS
PDQ'S ABILITY TO PAY HPT'S PRIORITY.
INVESTORS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE.