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: