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 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.
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 owner.
`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` brand.”
Hospitality Properties Trust is a real estate investment trust headquartered in Newton, Massachusetts which owns 274 hotels located throughout the United States.