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Hospitality Properties Trust Contracts with Prime
Hospitality Corp. to Operate 36 Hotels
Under One Management Contract; 
24 AmeriSuites Remain AmeriSuites and 12 Former
Wyndham Hotels will Be Branded Prime Hotels
NEWTON, Mass. - Dec. 9, 2003 -- 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".

Background

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 New Agreement

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.
Listing of 24 AmeriSuites Hotels
Owned by HPT:

Location            No. of Suites          Meeting Space
                                                         (square feet)
 Tempe, AZ                                 125              1,600
 Tucson, AZ                                122              1,600
 Colorado Springs, CO                 126              1,586
 Orlando, FL                               135              1,600
 Tampa, FL                                  59              2,500
 Atlanta, GA                               135              1,600
 Gwinnett, GA                              125              1,586
 Smyrna, GA                                125              1,612
 Fort Wayne, IN                            122              1,222
 Indianapolis, IN                          135              1,586
 Overland Park, KS                     135              1,586
 Utica, MI                                 124              1,600
 Kansas City, MO                       135              1,586
 Mt. Laurel, NJ                            125              1,600
 Charlotte, NC                             124              1,580
 Pine Knoll Shores, NC                111                780
 Columbus, OH                         125              1,586
 Hendersonville, TN                    100              1,612
 Austin, TX                                122              1,586
 Dallas, TX                                125              1,600
 El Paso, TX                               113              1,586
 San Antonio Riverwalk, TX           132              2,028
 Chantilly, VA                             124              1,200
 Sterling, VA                              135              1,600

 24 hotels in 13 states        2,929 suites      38,022

Listing of 12 Hotels Owned by HPT Which
Will be Re-Branded as Prime Hotels:

 Location               No. of Rooms        Meeting Space
                                                     (square feet)
 Chandler, AZ                              159              2,050
 North Phoenix, AZ                      166              2,318
 Phoenix Airport, AZ                      210              2,895
 San Diego, CA                            180              4,095
 Sunnyvale, CA                            180              2,200
 Atlanta, GA                               143              2,200
 Naperville, IL                              143              2,292
 Bloomington, MN                        209              5,532
 Nashville, TN                             190              3,620
 Salt Lake City, UT                       381             15,000
 Bothell, WA                               166              4,095
 Seattle, WA                               204              4,227

 12 hotels in 8 states                   2,321             48,229

Commentary

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."

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

WARNING REGARDING FORWARD LOOKING STATEMENTS

THE FOREGOING PRESS RELEASE INCLUDES 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 PRESENT BELIEFS AND EXPECTATIONS, BUT THEY ARE NOT GUARANTEED TO OCCUR. FOR EXAMPLE:
    -- THE FACT THAT AMOUNTS DUE TO PRIME HOSPITALITY CORP. FOR ROYALTY, FRANCHISE AND MANAGEMENT FEES ARE SUBORDINATED TO A $26 MILLION/YEAR PRIORITY PAYMENT TO HPT IMPLIES THAT THIS PAYMENT TO HPT IS ASSURED. HISTORICALLY, IN 2000, 2001 AND 2002 AND THE 12 MONTHS ENDED SEPTEMBER 30, 2003, THE OPERATING RESULTS OF THESE 36 HOTELS BEFORE THESE SUBORDINATED CHARGES HAS EXCEEDED $26 MILLION. THIS IS SO AFTER DEDUCTING A PRO FORMA CAPEX RESERVE EQUAL TO 5% OF REVENUES. HOWEVER, THE COMBINED OPERATING RESULTS OF THESE 36 HOTELS HAVE DECLINED SINCE 2000. IF SUCH OPERATING DECLINES CONTINUE, THE 36 HOTELS MAY NOT PRODUCE $26 MILLION/YEAR EVEN AFTER SUBORDINATION OF THE AMOUNTS DUE PDQ.
    -- THE FACT THAT PDQ HAS GUARANTEED A $26 MILLION/YEAR PRIORITY TO HPT IMPLIES THAT THIS PAYMENT IS ASSURED. HOWEVER, PDQ'S GUARANTY IS LIMITED TO $30 MILLION. ALSO, ALTHOUGH PDQ HAS AGREED TO MAINTAIN A TANGIBLE NET WORTH OF AT LEAST $200 MILLION WHILE ITS GUARANTY OBLIGATION IS OUTSTANDING, HPT CAN PROVIDE NO ASSURANCE THAT PDQ WILL BE ABLE OR WILLING TO MEET ITS GUARANTY OBLIGATIONS.
    -- THE FOREGOING PRESS RELEASE STATES THAT HPT BELIEVES THAT IT MAKES ECONOMIC SENSE FOR THE 24 AMERISUITES HOTELS TO REMAIN AS AMERISUITES OPERATED BY PDQ. OTHER HOTELS OPERATING COMPANIES EXPRESSED INTEREST IN MANAGING OR LEASING SOME OF THESE 24 HOTELS. SOME OF THESE OTHER COMPANIES HAVE GREATER FINANCIAL AND MANAGEMENT RESOURCES THAN PDQ. HPT'S DECISION TO ENTER A NEW AGREEMENT WITH PDQ WAS BASED UPON HPT'S EVALUATION OF AVAILABLE ALTERNATIVES, INCLUDING SOME SUBJECTIVE FACTORS SUCH AS THE BENEFITS OF RECEIVING REVENUES FROM DIVERSIFIED SOURCES AND THE VALUES WHICH MIGHT BE RECEIVED IF CERTAIN HOTELS WERE SOLD, LEASED OR MANAGED SEPARATELY FROM OTHERS.  FUTURE FINANCIAL RESULTS AT THESE HOTELS MAY PROVE THAT HPT'S EVALUATION WAS MISTAKEN.
    -- THE FOREGOING PRESS RELEASE STATES HPT'S BELIEF THAT PDQ MAY BE ABLE TO EXPAND ITS "PRIME HOTELS" BRAND. THIS STATEMENT IS BASED UPON STATEMENTS MADE TO HPT BY PDQ AND UPON HPT'S KNOWLEDGE OF THE HOTEL INDUSTRY. HOWEVER, BUILDING A NEW HOTEL BRAND WILL REQUIRE EXTENSIVE FINANCIAL AND MANAGEMENT RESOURCES, AND HPT CAN PROVIDE NO ASSURANCES THAT PDQ WILL BE ABLE TO DO SO. IF THE "PRIME HOTELS" BRAND DOES NOT EXPAND, THE FINANCIAL RESULTS WHICH HPT EXPECTS TO BE REALIZED AT ITS HOTELS MAY NOT BE ACHIEVED.
    -- THE FOREGOING PRESS RELEASE STATES THAT HPT WILL PROVIDE $25 MILLION TO FUND RE-BRANDING AND OTHER CAPITAL IMPROVEMENTS PRIMARILY FOR THE 12 HOTELS WHICH WILL BECOME PRIME HOTELS. AN IMPLICATION OF THIS STATEMENT IS THAT $25 MILLION WILL BE SUFFICIENT TO CORRECT ALL DEFERRED MAINTENANCE AND PURCHASE APPROPRIATE IMPROVEMENTS. HOWEVER, THIS AMOUNT IS ONLY AN ESTIMATE AGREED BY HPT AND PDQ AND MAY BE INSUFFICIENT. HPT HAS ALSO AGREED TO PROVIDE ADDITIONAL FUNDING, IF NEEDED, IN RETURN FOR AN INCREASE IN IT'S OWNER'S PRIORITY ACCORDING TO A FORMULA. ANY INCREASE IN THE AMOUNT OF HPT'S PRIORITY PAYMENT WILL STRESS PDQ'S ABILITY TO PAY HPT'S PRIORITY.

    INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE.

 

 
Contact:

Hospitality Properties Trust
John G. Murray or Mark L. Kleifges
617-964-8389
www.hptreit.com

Also See: Hospitality Properties Trust Removes Wyndham Management from 15 Summerfield Hotels; Appoints Candlewood Hotel Company As Manager / April 2003
Prime Hospitality Corp. Creates New Hotel Brand, Prime Hotels & Resorts with the Rebranding of the Sheraton Hotel Saratoga Springs as the Prime Hotel and Conference Center, Saratoga Springs / Jan 2003


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