Hospitality Properties Trust Acquires Harbor Court Complex for $78 Million
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Hospitality Properties Trust Acquires Harbor Court Complex for $78 Million
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Category: North America & West Indies / Carribean islands
This is a press release selected by our editorial committee and published online for free on 2006-01-10
Hospitality Properties Trust (NYSE: HPT) today announced
that it has acquired the Harbor Court Complex in Baltimore Inner
Harbor for $78 million.
The Harbor Court Complex is a mixed use development comprised of
the five star, five diamond Harbor Court Hotel, a 72,042 square foot
office building, and a 530 space seven story parking garage. The hotel
has 195 guest rooms, including 22 suites, 8,000 square feet of meeting
space, a roof top fitness center that includes a tennis court, squash
court, indoor pool, aerobics center and spa therapy rooms. The Harbor
Court Hotel is currently the only five star hotel in the state of
Maryland and its five star, five diamond fine dining restaurant,
Hampton's, is among the finest restaurants in the United States
according to Conde Nast Traveler Reader's Poll, Gourmet magazine and
Zagat Survey.
Simultaneously with this purchase, HPT entered into an agreement
with InterContinental Hotels Group, plc (LSE/NYSE: IHG) to manage the
Harbor Court Hotel under its InterContinental Hotels and Resorts
brand. This hotel will be added to an existing agreement with IHG
under which it manages thirteen other high quality hotels owned by HPT
through 2029. HPT has also entered into a management agreement with an
affiliate, Reit Management & Research LLC ("RMR"), to operate the
office building and an agreement with InterPark Incorporated to manage
the parking garage. IHG will not be directly concerned with the
operations of the office building or the garage.
HPT's allocated purchase price for the hotel component of the
Harbor Court Complex was $60 million. In connection with this
transaction, HPT's guaranteed priority return from the amended 14
hotel management contract with IHG will increase by $4.8 million in
2006, $5.2 million in 2007 and $5.3 million thereafter. In addition to
the guaranteed owner's priority returns, HPT may receive other cash
flows available from the 14 hotels managed by IHG, including an
increased owner's second priority return, percentage priorities based
upon gross revenue increases and any remaining net cash flow after IHG
management fees are paid.
HPT has agreed to invest up to $2.3 million over the next two
years in connection with the rebranding of the Harbor Court Hotel as
the InterContinental Harbor Court Baltimore. As these amounts are
funded by HPT, the guaranteed owner's priority return will increase.
In addition to the returns generated from the hotel component of
the Harbor Court, HPT will receive the net operating income from the
office building and garage operations at the Harbor Court Complex. The
2005 net operating income, or NOI, from these two components is
estimated to total approximately $1.5 million.
The InterContinental Harbor Court Baltimore is located on
Baltimore's Inner Harbor within walking distance of the downtown
business district and popular attractions such as Camden Yards and the
Baltimore Museum of Art. It is across the street from Harborplace, The
Gallery, the Maryland Science Center and the National Aquarium.
The Harbor Court Complex was purchased by HPT free and clear of
all mortgage debt. HPT funded this purchase by using cash on hand and
drawing under its unsecured revolving bank credit facility.
HPT is a real estate investment trust, or REIT, which owns 299
hotels located in 38 states, Puerto Rico and Canada. HPT is
headquartered in Newton, Massachusetts.
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
THE FEDERAL SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE
BASED UPON HPT'S CURRENT BELIEFS AND EXPECTATIONS, BUT, FOR VARIOUS
REASONS, THEY MAY NOT OCCUR. FOR EXAMPLE:
-- THIS RELEASE STATES THAT THE HARBOR COURT HOTEL IS A FIVE
STAR, FIVE DIAMOND HOTEL AND THAT ITS RESTAURANT IS HIGHLY
REGARDED. THESE STATEMENTS MAY IMPLY THAT THESE QUALITY
RANKINGS MAY CONTINUE. CIRCUMSTANCES MAY CHANGE SUCH THAT THE
HOTEL MAY LOSE THE ABOVE RATINGS AND OTHER ACCOLADES AS A
RESULT OF CHANGES IN MANAGEMENT, COMPETITION OR OTHER FACTORS
AND ANY SUCH CHANGES MAY CAUSE THE FINANCIAL RESULTS AT THIS
HOTEL TO DECLINE.
-- THIS PRESS RELEASE STATES THAT THE INTERCONTINENTAL HOTELS
GROUP, OR IHG, WILL BEGIN MANAGING THE HOTEL, THAT REIT
MANAGEMENT & RESEARCH LLC, OR RMR, WILL MANAGE THE OFFICE
BUILDING, AND INTERPARK INCORPORATED WILL MANAGE THE PARKING
GARAGE. THESE STATEMENTS MAY IMPLY THAT FINANCIAL PERFORMANCE
WITH THIS NEW MANAGEMENT WILL BE MAINTAINED OR IMPROVED. THERE
IS NO GUARANTEE THAT IHG, RMR OR INTERPARK WILL BE AS
EFFECTIVE AS PRIOR MANAGEMENT OR THAT OTHER CIRCUMSTANCES,
SUCH AS LABOR ISSUES OR ENERGY COSTS, WILL NOT NEGATIVELY
AFFECT THE FUTURE PERFORMANCE OF THIS PROPERTY.
-- THIS PRESS RELEASE MENTIONS A NUMBER OF IMPORTANT DEMAND
GENERATORS WHICH MAY BENEFIT THE HARBOR COURT COMPLEX AND MAY
IMPLY THAT THESE ATTRACTIONS WILL ALWAYS POSITIVELY AFFECT THE
PERFORMANCE OF THE HOTEL, OFFICE AND GARAGE OPERATIONS.
ACTIVITY LEVELS AT THESE DEMAND GENERATORS MAY CHANGE AND
OTHER HOTELS, GARAGES AND OFFICE PROPERTIES MAY BE DEVELOPED
CLOSER TO THESE ATTRACTIONS WHICH REDUCE THE BENEFITS NOW
REALIZED BY THE HARBOR COURT COMPLEX FROM THESE DEMAND
GENERATORS
-- THIS PRESS RELEASE STATES THAT CERTAIN OWNER'S PRIORITY
PAYMENTS TO HPT WILL BE GUARANTEED BY IHG. IHG HAS PROVIDED A
LIMITED GUARANTY AND THIS LIMITED GUARANTY COVERS IHG'S
OBLIGATIONS TO HPT ARISING FROM THIS HOTEL AND OTHER HOTELS.
IHG'S LIMITED GUARANTY MAY BE EXHAUSTED OR IHG MAY BECOME
UNABLE TO HONOR ITS GUARANTY OBLIGATIONS. THE EXISTENCE OF
THIS IHG GUARANTY DOES NOT INSURE THAT THE OWNER'S PRIORITY
AMOUNTS DESCRIBED WILL BE PAID TO HPT.
-- THIS PRESS RELEASE STATES HPT HAS AGREED TO INVEST $2.3
MILLION FOR IMPROVEMENTS TO THE HARBOR COURT HOTEL. THESE
PLANNED CAPITAL EXPENDITURES MAY PROVE TO BE INADEQUATE AND
ADDITIONAL CAPITAL MAY BE REQUIRED TO MEET INTERCONTINENTAL
BRAND STANDARDS OR OTHERWISE. THE MANAGEMENT CONTRACT WITH IHG
REQUIRES THAT A COMBINED ESCROW ACCOUNT BE MAINTAINED FOR THE
14 HOTELS INCLUDED IN THE MANAGEMENT CONTRACT WHICH INCLUDES
THE HARBOR COURT HOTEL, BUT THERE IS NO ASSURANCE THAT THESE
AMOUNTS WILL BE ADEQUATE TO MEET THE CAPITAL NEEDS OF THESE
HOTELS.
-- THIS PRESS RELEASE STATES THAT THE NOI WHICH HAS BEEN REALIZED
FROM THE OFFICE BUILDING AND GARAGE COMPONENTS OF THE HARBOR
COURT COMPLEX IN 2005 IS ESTIMATED TO BE APPROXIMATELY $1.5
MILLION. THE FINANCIAL RESULTS FOR 2005 ARE NOT YET COMPLETED
OR AUDITED, AND THEY MAY CHANGE. ALSO, THIS STATEMENT MAY
IMPLY THAT HPT WILL REALIZE A SIMILAR AMOUNT IN THE FUTURE.
THE NOI WHICH HPT WILL RECEIVE FROM THE FUTURE OPERATIONS OF
THE HARBOR COURT OFFICE BUILDING AND GARAGE WILL DEPEND ON
MANY FACTORS, SUCH AS THE OCCUPANCIES OR UTILIZATIONS
ACHIEVED, THE RENTS OR USAGE CHARGES REALIZED, THE OPERATING
EXPENSES INCURRED, THE SKILLS OF THE MANAGERS SELECTED FOR
THESE OPERATIONS AND MARKET CONDITIONS GENERALLY. THERE IS NO
ASSURANCE REGARDING WHAT LEVEL OF FUTURE INCOME, IF ANY, HPT
MAY REALIZE FROM THESE COMPONENTS. IN FACT, THESE COMPONENT
OPERATIONS MAY PRODUCE LOSSES.
FOR THESE AND OTHER REASONS, INVESTORS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.
Hospitality Properties Trust Manager of Investor Relations Timothy
A. Bonang, 617-964-8389 www.hptreit.com
© Business Wire , 2006 - 01/06/2006 03:17 PM
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