Hospitality Properties Terminates Wyndham Operations at 12 Hotels

In a release issued by Wyndham, the Dallas-based company says that "each lease termination resulted from a strategic business decision on the part of the subsidiary due to the extraordinary high cost of the lease, which could not deliver positive EBITDA and required a greater rent payment than cash generated. GHALP Partnership, LP and Summerfield HPT Lease Company, LP [the subsidiaries operating these hotels] could not continue to operate under the original lease terms."

Fred J. Kleisner, a director of both subsidiaries and chairman and CEO of Wyndham International, Inc. adds that "With both leases operating at a deficit, the appropriate steps had to be taken to relieve the subsidiaries of these leases that were negotiated at the peak of the hotel market. The financial impact to both subsidiaries has been greatly improved, increasing their cash flow on an annualized basis by approximately $14.3 million and resulting in a $150 million non-cash write-off of the leases' remaining book value."

Hospitality Properties has now terminated Wyndham's occupancy of the 12 Wyndham hotels and these hotels are being operated for Hospitality Properties under a management agreement with Crestline Hotels & Resorts Inc. Crestline Hotels & Resorts is a US subsidiary of the Spanish hotel company Barcelo Corporacion Empresarial, SAJohn G. Murray, president of Hospitality Properties, says in a statement, that he chose Crestline because the company "is one of the largest multi-brand, independent hotel management companies in the US." He adds that Hospitality Properties and Barcelo Crestline have a "long and mutually successful business relationship" in which an affiliate of Barcelo Crestline leases 14 hotels from Hospitality Properties which are operated under various Marriott brands.

Hospitality Properties and Wyndham are currently negotiating concerning continuation of the Wyndham brand affiliation for these 12 hotels, at least for a transitional period. The new management contract between Hospitality Properties and Crestline is terminable upon 30 days notice. Hospitality Properties says that it has not yet decided whether the best long-term affiliation for these hotels is with the Wyndham brand and Crestline management or with an alterative brand or manager. Hospitality Properties notes that it has determined that its interests may be served by stabilizing these hotels and thereafter reconsidering these issues together with Crestline.

Hospitality Properties Trust is a locally-based REIT which owns 251 hotels located throughout the US.