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CNL Hospitality Properties, Inc. and Hilton Hotels Form Partnership Which Acquired Two Hotels |
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Partnership Also Intends to Acquire the Hilton San Diego Convention Center Hotel |
CNL Hospitality Properties, Inc. ("CNL") and Hilton Hotels Corporation (NYSE:HLT) today announced the formation of a partnership which acquired two hotel properties -- the 544-room Capital Hilton in Washington, D.C. and the 394-room Hilton La Jolla Torrey Pines outside of San Diego, California. The total investment made by the partnership is $212 million. The transaction is being funded in part by a $127 million, 5-year first mortgage loan at a fixed rate of 5.5%. CNL will own a majority interest in the partnership and Hilton will retain a minority interest in the partnership and will operate both properties under long-term management agreements. This transaction represents the third joint venture between CNL and Hilton.
Separately, CNL and Hilton have also signed a non-binding term sheet for the partnership to acquire the 1,200-room Hilton San Diego Convention Center Hotel once construction is completed in 2006.
Hilton contributed both the Capital Hilton and Hilton La Jolla Torrey Pines to the partnership. Hilton will recognize a book gain on the transaction of approximately $61 million, which will be deferred and recognized over the life of the long-term management contracts retained on the properties. Hilton will generate approximately $189 million in cash proceeds from this transaction, which will be used to pay down debt. In addition, Hilton will be able to utilize a portion of its available tax loss carryforwards to offset a majority of the tax gain on the transaction.
"We are delighted to continue our relationship with CNL," said Matthew J. Hart, executive vice president and chief financial officer of Hilton Hotels Corporation. "This transaction allows us to continue to reduce the amount of long-term debt of the company and secure long-term management contracts on two solid hotels while still retaining an ownership interest. We are particularly excited to partner with CNL on the potential development of the Hilton San Diego Convention Center Hotel on a fantastic site in one of the nation's best convention center destinations."
"CNL's partnership with Hilton on these two exceptional hotel acquisitions and the anticipated investment in the future Hilton San Diego Convention Center Hotel is another confirmation of our strategy to create long-term value," said Thomas J. Hutchison III, CEO of CNL Hospitality Properties, Inc. "In particular, we continue to build a significant presence of CNL-owned properties in the Southern California area, which we believe is an important market with meaningful upside potential over the next several years."
The Capital Hilton is located two blocks from the White House in the heart of Washington, D.C. and features two restaurants, a newly renovated 11,000 square foot health club and spa and more than 33,000 square feet of meeting space. The four diamond Hilton Torrey Pines overlooks the Southern Californian coastline and the legendary Torrey Pines Golf Course, which is scheduled to host the 2008 U.S. Open. Amenities include three tennis courts, fitness center, whirlpool and putting green.
The 30-floor Hilton San Diego Convention Center Hotel will be situated on San Diego Bay, adjacent to the recently expanded San Diego Convention Center and across from the new San Diego Padres ballpark. Once completed, the property will feature 106,500 square feet of meeting space, spa, parking garage, three restaurants, retail space, waterfront park and water taxi dock. Construction on the hotel is expected to begin in late 2004.
John A. Griswold, President of CNL Hospitality Properties, Inc. added, "We are extremely pleased to strengthen our relationship with Hilton Hotels, one of the world's leading hotel owners and operators, and remain committed to executing our investment and asset management strategies to build a world- class portfolio of hotels and resorts."
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Hilton International, a subsidiary of Hilton Group plc, and Hilton Hotels Corporation have a worldwide alliance to market Hilton, the world's best-known hotel brand. Collectively offering over 2,400 hotels in 78 countries worldwide, both companies are recognized as leaders in the hospitality industry. |
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