Hospitality Properties Trust (NYSE: HPT) today announced that it has entered agreements with Marriott International, Inc. (NYSE: MAR) to retain and renovate certain of its “Marriott” branded hotels previously offered for sale and to extend the term of MAR’s limited guarantee of the payments due to HPT with regard to those hotels.
In June 2011, HPT announced that it had entered agreements with MAR to re-align certain contracts affecting 71 Marriott branded hotels. Among other matters, the June 2011 agreement provided that 21 of the 71 affected hotels would be offered for sale and that MAR would provide a limited guarantee through 2017 of the owner’s priority amounts due to HPT for those hotels which HPT continued to own.
Since the June 2011 agreement, HPT has agreed to sell one hotel for net proceeds of approximately $29 million (which amount is net of brokerage and a renovation discount agreed by HPT and the buyer), and HPT has concluded that the financial prospects for most or all of the remaining 20 hotels are such that greater long term value may be achieved by retaining those hotels under HPT ownership and MAR management than by selling the hotels. Accordingly, HPT has agreed to retain ownership of and renovate at least 18 of those 20 remaining hotels previously offered for sale, and MAR has agreed to extend its limited guarantee of owner’s priority amounts due to HPT through 2019. HPT is currently considering whether the two remaining hotels previously designated for sale should be retained and managed by MAR or rebranded.
HPT’s aggregate owner’s priority amount for the 18 hotels that HPT has decided to retain ownership of under MAR management is approximately $18 million per year. Because these hotels will be retained, HPT currently expects to provide approximately $43 million to renovate these 18 hotels to current “Marriott” brand standards; as this HPT funding is paid, owner’s priority amounts due HPT will increase by nine percent (9%) per year of the amounts funded by HPT.