Hospitality Properties Trust Announces Letter of Intent for Investments with
NH Hoteles in Latin America, Europe and the USA
NEWTON, Mass. -- February 27, 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
*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
*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 Uruguay^1. 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
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,
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
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.
Hospitality Properties Trust
Timothy A. Bonang, 617-796-8232
Vice President, Investor Relations
Carlynn Finn, 617-796-8232
Senior Manager, Investor Relations.
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