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NEWTON,
Mass.--February 28, 2013--Hospitality Properties Trust (NYSE:
HPT) today announced that it has entered a letter of intent and an
exclusive negotiating period for hotel investments with NH Hoteles, SA
(BME: NHH) (NYSE: NHHEY (ADRs)) in Latin America, Europe and the USA
totaling approximately US $375 million.
The outline of terms which have been negotiated between HPT and NHH is
as follows:
- HPT will purchase five hotels (804
keys) in Latin America from NHH for approximately US $70 million. These
hotels will be managed by NHH under long term contracts for 20 years
plus renewal options. NHH will provide a limited guarantee of a
priority return to HPT on HPT’s invested capital at the rate of 10%
p.a. and HPT may receive additional returns after base and incentive
management fees are paid to NHH. This investment and HPT’s returns will
be paid in US Dollars.
- HPT will provide a loan to NHH for
€170 million which will be secured by first mortgages on four hotels
(1,203 keys) in Europe. The loan will be a recourse obligation of NH
Hoteles, have a seven year term and require interest at a floating rate
not less than 10% p.a. In certain circumstances, HPT will have the
option to take ownership of these hotels by cancelling the loan and
paying the difference between the loan amount and the agreed values of
these hotels. The loan will be funded and interest and principal paid
in Euros. HPT expects to hedge its foreign currency risk by borrowing
in Euros an amount approximately equal to the loan.
- NHH and an European partner
currently own a 242 key hotel in New York City. HPT and NHH will form a
joint venture to acquire this hotel. HPT expects to provide up to US
$80 million to retire the ownership of NHH’s current partner and fund a
major refurbishment of this hotel. After this hotel is refurbished, NHH
and Sonesta International Hotels, Inc. (“Sonesta”) will jointly brand
and manage this hotel. HPT will receive a priority return on its
investment in this hotel equal to 8% p.a. Also, after Sonesta and NHH
receive management and branding fees and after NHH receives a return on
its residual investment in this hotel, HPT and NHH will divide the cash
flow based upon their agreed ownership interests.
John G. Murray, President of
HPT, made the following statement at the time this letter of intent was
announced:
NH Hoteles is one of the leading hotel management companies in the
world. NH Hoteles operates approximately 400 hotels in Europe and Latin
America, and it is simultaneously today announcing a strategic
investment by HNA Group of China into NH Hoteles. HPT began its
discussions with NH Hoteles almost one year ago and HPT hopes that,
when the transaction outlined in the letter of intent announced today
is implemented, it will be the beginning of a long term strategic
relationship between our companies, especially in North and South
America and possibly elsewhere.
The hotels in which HPT will be invested are all well located, market
leading hotels. All of the five hotels in Latin America were recently
built or renovated and four of these five hotels are located in the
capital cities of Mexico, Chile, Colombia and Uruguay1.
The four hotels which will be the collateral for HPT’s mortgage loans
are each full service hotels, well located in the city centers of
Madrid, Barcelona, Amsterdam and Brussels. The NYC hotel is located in
Mid-Town Manhattan; when it is fully renovated it will be operated to
top tier brand standards of both NH Hoteles and Sonesta, and HPT
expects that the joint marketing programs to be developed by NH Hoteles
and Sonesta will promote the hotel’s financial success as a “flagship”
type asset for both managers.
The letter of intent announced today is detailed, but it is only an
expression of current intents and not a binding agreement. HPT’s and
NHH’s obligations to undertake this transaction are conditioned upon
their agreement to and entry of final transaction documents and other
matters. Also, because the transaction described in the letter of
intent involves multiple hotels in multiple legal jurisdictions, it is
expected that it may be implemented in a series of closings. At this
time, HPT expects this transaction may be fully completed during the
summer of 2013.
HPT was represented in the negotiation of the transaction announced
today by Morgan Stanley.
Hospitality Properties Trust is a real estate investment trust, or
REIT, which as of December 31, 2012, owned or leased 289 hotels and 185
travel centers located in 44 states, Puerto Rico and Canada. HPT is
headquartered in Newton, Massachusetts, USA.
WARNING REGARDING FORWARD
LOOKING STATEMENTS
THIS PRESS RELEASE INCLUDES FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND
OTHER SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON
HPT’S PRESENT BELIEFS AND EXPECTATIONS, BUT THEY ARE NOT GUARANTEED TO
OCCUR AND MAY NOT OCCUR FOR VARIOUS REASONS, SOME OF WHICH ARE BEYOND
HPT’S CONTROL. FOR EXAMPLE:
- THIS PRESS RELEASE STATES THAT
HPT’S INVESTMENTS WITH NHH WILL TOTAL APPROXIMATELY US $375 MILLION.
THE INVESTMENTS HPT INTENDS TO MAKE INCLUDE CAPITAL INVESTMENTS FOR
IMPROVEMENTS TO THE HOTELS IN LATIN AMERICA AND NEW YORK CITY. THE
FINAL COSTS OF THESE CAPITAL INVESTMENTS HAS NOT YET BEEN DETERMINED.
ACCORDINGLY, THE TOTAL AMOUNT OF HPT’S INVESTMENT WITH NHH MAY BE MORE
OR LESS THAN US $375 MILLION.
- THIS PRESS RELEASE STATES THAT HPT
WILL RECEIVE A PRIORITY RETURN ON HPT’S INVESTED CAPITAL IN THE LATIN
AMERICA HOTELS AT THE RATE OF 10% P.A., THAT HPT’S PRIORITY RETURN WILL
BE SECURED BY A LIMITED GUARANTEE FROM NHH AND THAT HPT MAY RECEIVE AN
ADDITIONAL RETURN ON THIS INVESTMENT AFTER BASE AND INCENTIVE
MANAGEMENT FEES ARE PAID TO NHH. AN IMPLICATION OF THESE STATEMENTS MAY
BE THAT HPT WILL RECEIVE AT LEAST A 10% P.A. RETURN ON ITS INVESTMENT
IN THE LATIN AMERICA HOTELS. HOWEVER, THE AMOUNT OF NHH’S GUARANTEE
WILL BE LIMITED AND THE FINANCIAL RESULTS REALIZED AT THESE HOTELS MAY
NOT PRODUCE SUFFICIENT CASH FLOW TO PAY HPT’S PRIORITY RETURN OR ANY
RETURN ON HPT’S INVESTMENT.
- THIS PRESS RELEASE STATES THAT THE
PRIORITY RETURN HPT WILL RECEIVE FROM ITS INVESTMENTS IN LATIN AMERICA
WILL BE AT 10% P.A. AND THE INTEREST RATE ON HPT’S MORTGAGE LOAN TO NHH
WILL BE NO LESS THAN 10% P.A. EARNINGS OR INTEREST HPT RECEIVES FROM
ITS INVESTMENTS OR MORTGAGE LOANS IN FOREIGN COUNTRIES WILL BE TAXED IN
THOSE COUNTRIES AT CUSTOMARY RATES OR AT RATES SET BY THE TREATIES
BETWEEN THE USA AND THE COUNTRIES WHERE THE HOTELS ARE LOCATED.
ACCORDINGLY, THE AFTER TAX EARNINGS THAT HPT WILL REALIZE FROM
INVESTMENTS AND LOANS OUTSIDE THE USA MAY BE LESS THAN INVESTMENTS AND
LOANS MADE IN THE USA AND HPT MAY HAVE LESS NET EARNINGS FROM SUCH
INVESTMENTS TO PAY DIVIDENDS TO SHAREHOLDERS OR OTHER OBLIGATIONS.
- THIS PRESS RELEASE STATES THAT THE
€170 MILLION LOAN HPT INTENDS TO MAKE TO NHH WILL BE A RECOURSE
OBLIGATION OF NHH. AN IMPLICATION OF THIS STATEMENT MAY BE THAT NHH
WILL PAY THE INTEREST AND REPAY THE PRINCIPAL OF THIS LOAN TO HPT. HPT
EXPECTS NHH WILL HONOR ITS OBLIGATIONS; HOWEVER, HPT CANNOT PROVIDE ANY
ASSURANCE THAT NHH WILL BE WILLING OR ABLE TO PAY INTEREST AND REPAY
THE PRINCIPAL DUE HPT.
- THIS PRESS RELEASE STATES THAT
HPT’S €170 MILLION LOAN TO NHH WILL HAVE A TERM OF SEVEN YEARS. HPT
EXPECTS THAT THE LOAN TERMS WILL PERMIT NHH TO PREPAY THE LOAN IN WHOLE
OR IN PART UPON CERTAIN CONDITIONS. ALSO, HPT EXPECTS THAT ITS OPTION
TO ACQUIRES THE MORTGAGED HOTELS BY CANCELING THE LOAN AND PAYING THE
BALANCE TO THE AGREED VALUES OF THE MORTGAGED HOTELS MAY BE EXERCISED
BEFORE THE SEVEN YEAR MATURITY OF THE LOAN IF THE LOAN IS NOT PREPAID.
ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THIS LOAN WILL BE
OUTSTANDING IN WHOLE OR IN PART FOR SEVEN YEARS.
- THIS PRESS RELEASE STATES THAT HPT
EXPECTS TO HEDGE ITS FOREIGN CURRENCY RISK ARISING FROM A LOAN IN EUROS
BY BORROWING AN AMOUNT APPROXIMATELY EQUAL TO THE LOAN AMOUNT IN EUROS.
HPT HAS NOT YET ARRANGED A EURO CURRENCY BORROWING AND THERE IS NO
ASSURANCE IT WILL BE ABLE TO DO SO. ALSO, A EURO DENOMINATED LOAN WILL
NOT MITIGATE HPT’S FOREIGN CURRENCY RISK RELATED TO THE INTEREST
PAYMENTS HPT RECEIVES IN EUROS: IF THE US DOLLAR DECLINES IN VALUE
COMPARED TO THE EURO, THE INTEREST HPT RECEIVES IN EUROS WILL PRODUCE
FEWER US DOLLARS FOR HPT TO PAY DISTRIBUTIONS TO HPT’S SHAREHOLDERS AND
HPT’S OTHER OBLIGATIONS.
- THIS PRESS RELEASE STATES THAT HPT
EXPECTS TO PROVIDE UP TO US $80 MILLION TO RETIRE THE OWNERSHIP OF
NHH'S CURRENT PARTNER IN NHH’S NEW YORK CITY HOTEL AND TO FUND
RENOVATIONS TO THAT HOTEL. THE COST OF HOTEL RENOVATIONS IS DIFFICULT
TO PROJECT. AFTER A RENOVATION PROJECT IS BEGUN IT OFTEN MUST BE
COMPLETED DESPITE COST OVERRUNS. ACCORDINGLY, HPT MAY NEED TO INVEST
MORE THAN US $80 MILLION TO COMPLETE THE RETIREMENT OF NHH’S CURRENT
PARTNER AND THE NEW YORK CITY HOTEL RENOVATION.
- THIS PRESS RELEASE STATES THAT HPT
WILL RECEIVE A PRIORITY RETURN ON ITS INVESTMENT IN THE NEW YORK CITY
HOTEL EQUAL TO 8% P.A. THIS STATEMENT IMPLIES THAT HPT WILL EARN AT
LEAST 8% P.A. ON THIS INVESTMENT. HPT’S PRIORITY RETURN ON THIS
INVESTMENT IS NOT GUARANTEED, AND THAT RETURN WILL BE PAID FROM THE
EARNINGS AT THAT HOTEL. THE EARNINGS AT THAT HOTEL WILL DEPEND UPON THE
ABILITY OF SONESTA AND NHH TO PROFITABLY OPERATE THAT HOTEL, UPON
MARKET CONDITIONS IN THE NEW YORK CITY HOTEL INDUSTRY AND NUMEROUS
OTHER FACTORS, MANY OF WHICH ARE BEYOND HPT’S CONTROL. ACCORDINGLY,
THERE CAN BE NO ASSURANCE THAT HPT WILL EARN 8% P.A. ON ITS INVESTMENT
IN THE NEW YORK CITY HOTEL OR ANY RETURN ON THIS INVESTMENT.
- THIS PRESS RELEASE STATES THAT NHH
HAS SIMULTANEOUSLY ANNOUNCED A STRATEGIC INVESTMENT BY HNA GROUP OF
CHINA INTO NHH. HPT CAN NOT PROVIDE ANY ASSURANCE THAT HNA’S INVESTMENT
INTO NHH WILL BE SUCCESSFULLY CONCLUDED. SIMILARLY, THIS PRESS RELEASE
STATES THAT THE TRANSACTION DESCRIBED IN THIS PRESS RELEASE MAY BE THE
BEGINNING OF A LONG TERM STRATEGIC RELATIONSHIP BETWEEN HPT AND NHH IN
NORTH AND SOUTH AMERICA AND ELSEWHERE; HOWEVER, THERE CAN BE NO
ASSURANCE THAT HPT AND NHH WILL DECIDE TO DO FUTURE BUSINESS WITH EACH
OTHER AND NEITHER HPT NOR NHH HAVE COMMITTED TO DO SO.
- SONESTA IS OWNED BY HPT’S MANAGING
TRUSTEES. THE SONESTA MANAGEMENT AGREEMENT FOR THE NEW YORK CITY HOTEL
WILL BE ENTERED BY A JOINT VENTURE INCLUDING BOTH NHH AND HPT AND IT
WILL BE SUBJECT TO APPROVAL BY HPT’S INDEPENDENT TRUSTEES WHO ARE NOT
OWNERS OF SONESTA. THIS PROCESS AND OTHER PROCEDURAL SAFEGUARDS WHICH
HPT EXPECTS TO EMPLOY IMPLY THAT THIS AGREEMENT WILL BE ON TERMS AT
LEAST AS FAVORABLE AS HPT COULD ACHIEVE AS A RESULT OF ARM’S LENGTH
NEGOTIATIONS WITH AN UNRELATED HOTEL MANAGEMENT COMPANY. NONETHELESS,
THE SONESTA MANAGEMENT AGREEMENT FOR THE NEW YORK CITY HOTEL SHOULD BE
CONSIDERED A RELATED PERSON TRANSACTION BY HPT. THE INFORMATION
CONTAINED IN HPT’S FILINGS WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION (“SEC”), INCLUDING UNDER THE CAPTION “RISK FACTORS” IN HPT’S
ANNUAL AND QUARTERLY REPORTS, IDENTIFIES IMPORTANT RISKS THAT COULD
ARISE FROM HPT’S RELATIONSHIPS WITH SONESTA AND OTHER AFFILIATED AND
RELATED PERSONS AND ENTITIES. HPT’S FILINGS WITH THE SEC ARE AVAILABLE
ON THE SEC WEBSITE AT: WWW.SEC.GOV.
- THIS PRESS RELEASE STATES THAT HPT
EXPECTS THAT THE TRANSACTION DESCRIBED WILL BE COMPLETED DURING THE
SUMMER OF 2013. HPT AND NHH HAVE AGREED TO A DETAILED OUTLINE OF TERMS,
BUT HAVE NOT AGREED ON FINAL DOCUMENTATION. THE PROCESS OF DOCUMENTING
AND CLOSING COMPLEX INTERNATIONAL TRANSACTIONS MAY REVEAL MATERIAL
ISSUES WHICH HAVE NOT BEEN CONSIDERED BY THE PARTIES TO A LETTER OF
INTENT AND THAT MAY NOT BE SUCCESSFULLY RESOLVED. ALSO, THIS COMPLEX
INTERNATIONAL TRANSACTION INVOLVES MULTIPLE LEGAL REQUIREMENTS THAT CAN
TAKE LONGER THAN ANTICIPATED TO ADDRESS OR THAT MAY PREVENT THE
TRANSACTION FROM CLOSING. THERE CAN BE NO ASSURANCE THAT THE
TRANSACTION DESCRIBED IN THIS PRESS RELEASE OR ANY PART OF IT WILL
CLOSE OR THAT IT WILL BE COMPLETED BY THE SUMMER OF 2013.
FOR THESE REASONS, AMONG
OTHERS, THE FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE AND THEIR
IMPLICATIONS MAY NOT OCCUR. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE UPON THE FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE.
EXCEPT AS MAY BE REQUIRED BY LAW, HPT DOES NOT INTEND TO UPDATE ANY
FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
1 The fifth Latin America hotel is also in Mexico.
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.
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