Hospitality Properties Trust says Prime Hospitality is in Default

Hospitality Properties Trust owns 24 AmeriSuites Hotels, which are leased to a subsidiary of Prime, located in 14 states. HPT also holds a guaranty for the lease obligation. The lease and the guaranty are secured by deposits totaling $42.1 million. In addition, Prime's obligation to maintain these hotels is partially secured by a reserve account and in which there is approximately $4.2 million. The notices of default sent by Hospitality say that the locally based REIT intends to retain the security and guaranty deposits and to take control of the improvement reserve account.

Fairfield, NJ-based Prime owes $1.98 million a month, says Hospitality. The firm adds in a statement that Prime's management and franchise arrangements for these 24 hotels are subordinated to the lease obligations to Hospitality. Trust officials say they have the right to install a new manager and to re-brand these hotels. It also notes that the firm intends to meet with Prime "in the near future" and it has not determined whether to change the management of these hotels or their brand.

This past April, HPT threw Wyndham International Inc. out of 27 hotels after Wyndham missed rent payments.

In a statement, Glen Rock Holding Corp., a subsidiary of Prime Hospitality, acknowledges that received a default notice from Hospitality for failure to pay the July 1 rent. The statement says that for the past twelve months, lease payments have exceeded operating cash flow by approximately $9 million. Prime also notes that it intends to meet with HPT to discuss the management and franchise agreements on these hotels.