NEWTON, Mass. -- Hospitality Properties Trust (HPT) has acquired 40 travel centers from Petro Stopping Centers LP for $630 million plus closing costs, as reported in a CSP Daily News Flash yesterday, while its subsidiary, TravelCenters of America LLC (TA) acquired 24 Petro franchise agreements and five other Petro sites.
With HPT leasing the 40 sites it purchased to TA for an initial net rent of approximately $62.2 million a year, TA has added 69 sites to its previous stable of 164 travel centers. To hear TA CEO and president Thomas O'Brien discuss these [image-nocss] deals and possible future growth, click here.
TA has also acquired substantially all of the operating assets of Petro, including inventory, working capital and certain personal property at the centers leased from HPT, for about $70 million in cash on hand, including closing costs and the cost of certain Petro employee retention payments.
HPT funded this transaction using cash on hand and drawings under its unsecured revolving credit facility. In addition to the purchase price, HPT has agreed to pay certain costs associated with defeasance and prepayment of debt secured by the Petro properties plus customary closing costs. HPT estimated that these costs may be about $25 million.
HPT's lease of the 40 centers to TA has many features similar to other HPT transactions. It is one lease for all 40 centers. It is a long-term lease through June 30, 2024 (17 years), plus renewal options thereafter, which may only be exercised for all, and not less than all, of the centers combined. Starting after 2012, HPT's rent will increase annually based upon percentages of increased gross revenues at the leased centers.
When HPT agreed to purchase TravelCenters of America and to create TA as a separate public company in September 2006, HPT said that it expected it would find financially accretive growth opportunities in the travel center industry, said John G. Murray, president of HPT.
O'Brien added, The Petro brands and the TA brands will be operated separately after the transaction closes, and we expect to seek to expand both brands through acquisitions, development and franchising. Each of the TA and Petro operations excel at certain aspects of the travel centers business, and I expect the combined company will benefit by utilizing the best practices of each company.
Prior to this deal, El Paso, Texas-based Petro Stopping Centers Holdings LP was a privately owned company that was majority owned by a Texas family and minority owned by affiliates of ExxonMobil and AB Volvo of Sweden.
Petro operated and franchised 69 travel centers along the U.S. Interstate Highway System in 33 states. It owned and operated 44 locations, franchised 24 locations and operated one location for a joint venture. The travel centers operated by Petro are similar to, but generally newer and larger than the 164 locations Westlake, Ohio-based TA currently operates and franchises in 41 states and Canada.
The Petro assets TA acquired include two owned centers, one partially owned center and two leased centers operated by Petro, Petro's franchisee business that provides services to 24 centers operated by Petro franchisees, related businesses, land sites acquired for future development of new travel centers, inventory and other working capital.
Details on the Petro Stopping Centers acquired by Hospitality Properties Trust:
40 travel centers located in 25 states: Alabama (1), Arkansas (2), Arizona (2), California (1), Florida (1), Georgia (2), Indiana (1), Illinois (1), Kentucky (1), Louisiana (3), Missouri (1), Nebraska (1), Nevada (2), New Jersey (1), New Mexico (1), New York (1), North Carolina (1), Ohio (4), Oklahoma (1), Oregon (1), Pennsylvania (1), Tennessee (2), Texas (6), Washington (1) and Wyoming (1). Land area (total/average per center): 1,036 acres/26 acres. Full-service restaurants (38 centers/average per center): 7,440/196 seats. Truck parking spaces (40 centers/average per center): 10,226/256 spaces. Car parking spaces (39 centers/average per center): 5,532/142 spaces. Diesel dispensers (40 centers/average per center): 461/12 dispensers. Gasoline dispensers (38 centers/average per center): 201/5 dispensers. Truck repair shops (38 centers/average per center): 190/5 bays. Petro:Lube truck service centers. 16 quick-serve restaurants (QSRs) operated under nationally known franchises such as Pizza Hut, Subway, and others at 13 of the locations. Iron Skillet restaurants. Private shower facilities (40 centers/average per center): 591/15 stalls. All of the centers offer retail travel and convenience stores, movie theater-type facilities for professional drivers, electronic game rooms and other entertainment and recreational facilities, including casino gambling in locations where it is legally permitted.For the year ended Dec. 31, 2006, Petro reported total revenue, net of fuel taxes, of $1.8 billion. Petro's earnings before interest, taxes, depreciation and amortization (EBITDA, including Petro's share of joint-venture EBITDA) was $65.2 million. Included as costs in this EBITDA was $21 million of centralized selling, general and administrative expenses. TA said it expects the stabilized EBITDA from these new centers plus reduced costs and other operating efficiencies from the combined TA and Petro businesses may total about $14 million per year; these amounts are expected to begin to be realized about six months after the acquisition is completed and to be fully realized in the second year.
To hear TA CEO and president Thomas O'Brien discuss these deals and possible future growth, click the Download Now button below.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.