NEWTON, MASSACHUSETTS Hospitality Properties Trust has realigned three of its five sets of hotel management contracts with Marriott International Inc., representing 71 hotels.
All 71 hotels will be combined economically so that excess cash-flow from any of the hotels is available to pay priority returns, which combine for US$98.1 million per year due to Hospitality Trust. The new combined contracts extend through 2025, and Marriott has the option to renew the contracts for two consecutive 10-year terms on an all-or-none basis.
The cash security deposits which secure the priority payments to Hospitality Properties under two of the three affected contracts will be combined and will continue to secure the payments. These security deposits, which originally totaled US$64.7 million, now stand at about US$10.9 million, as the deposits were reduced to fund shortfalls in the operating results from 2009 through March 31.
Marriott will provide a limited guaranty for 90% of the owner's priority returns due to Hospitality Properties through 2017. The combined contracts will continue to require that 5% to 6% of gross revenues from hotel operations be escrowed for hotel maintenance and periodic refurbishments. Hospitality Properties will fund approximately US$102 million for a general refurbishment of the hotels during the next two years.
Twenty-one of the hotels will be offered for sale, and Hospitality Trust anticipates the proceeds to be at least equal to the capital investment it will make during the next two years.
At the beginning of 2011, Hospitality Properties set an internal goal to restructure its contractual relationships with Marriott and IHG, and talks with the latter are ongoing.
Massachusetts-based Hospitality Properties Trust is a REIT that owns 289 hotels and 185 travel centers located in 44 U.S. states, Puerto Rico and Canada.
All 71 hotels will be combined economically so that excess cash-flow from any of the hotels is available to pay priority returns, which combine for US$98.1 million per year due to Hospitality Trust. The new combined contracts extend through 2025, and Marriott has the option to renew the contracts for two consecutive 10-year terms on an all-or-none basis.
The cash security deposits which secure the priority payments to Hospitality Properties under two of the three affected contracts will be combined and will continue to secure the payments. These security deposits, which originally totaled US$64.7 million, now stand at about US$10.9 million, as the deposits were reduced to fund shortfalls in the operating results from 2009 through March 31.
Marriott will provide a limited guaranty for 90% of the owner's priority returns due to Hospitality Properties through 2017. The combined contracts will continue to require that 5% to 6% of gross revenues from hotel operations be escrowed for hotel maintenance and periodic refurbishments. Hospitality Properties will fund approximately US$102 million for a general refurbishment of the hotels during the next two years.
Twenty-one of the hotels will be offered for sale, and Hospitality Trust anticipates the proceeds to be at least equal to the capital investment it will make during the next two years.
At the beginning of 2011, Hospitality Properties set an internal goal to restructure its contractual relationships with Marriott and IHG, and talks with the latter are ongoing.
Massachusetts-based Hospitality Properties Trust is a REIT that owns 289 hotels and 185 travel centers located in 44 U.S. states, Puerto Rico and Canada.