TA has two leases with HPT: One lease is for 145 travel centers located in 39 states operated under the TA or Travel Centers brands; it extends to 2022 and requires annual rent of $165.1 million per year, increasing to $170.1 million/ per year on February 1, 2011, and increasing to $175.1 million per year [image-nocss] on February 1, 2012, plus increases based upon percentages of increases in gross revenues starting in 2012.
Another lease is for 40 travel centers located in 25 states operated under the Petro brand; it extends to 2024 and requires annual rent of $66.2 million per year plus increases starting in 2013 based upon percentages of increases in gross revenues.
The total contractual rent payable by TA to HPT under these two leases currently is approximately $231.3 million per year. Effective July 1, 2008, in consideration of the impact of market conditions upon TA's business, TA and HPT entered into a rent deferral arrangement whereby TA was permitted to defer up to $5 million per month of its combined rents due to HPT through December 31, 2010, and that required the amount of any such deferred rent, plus any unpaid interest, would be due from TA to HPT on or before July 1, 2011. Pursuant to that agreement TA has deferred a total of $150 million of rent, and all interest due with respect to such deferrals has been paid through December 31, 2010.
Under the new agreements, the TA lease is modified effective January 1, 2011, so that the current rent is reduced from $165.1 million per year to $135.1 million per year. The rent will increase to $140.1 million per year effective February 1, 2012, plus increases thereafter based upon percentages of increases in gross revenues.
The Petro lease is modified effective January 1, 2011, so that the current rent is reduced from $66.2 million per year to $54.2 million per year plus increases starting in 2013 based upon percentages of increases in gross revenues which exceed a threshold amount; and the first $2.5 million of percentage rent which becomes due under the Petro lease shall be waived provided the settlement of certain litigation pending against TA, HPT and others is approved.
In February 2008, a shareholder derivative litigation was begun against TA and its directors which, among other matters, disputed the rent payable by TA under one of its leases with HPT. Counsel for the plaintiff in that case participated in aspects of the negotiations between TA and HPT that resulted in certain of the just-announced lease modifications. Specifically, in exchange for settling the litigation, HPT agreed to waive payment of the first $2.5 million of percentage rent that becomes due under the Petro lease. This settlement is subject to approval by the Delaware Court of Chancery where this case is pending.
The $150 million of previously deferred rent due from TA to HPT is further deferred, without interest, so that $107.1 million will be due in 2022 and $42.9 million shall be due in 2024. These deferred amounts will become due and interest may begin to accrue in certain circumstances set forth in the amended leases, including a change of control of TA.
Westlake, Ohio-based TA's travel centers are operated under the TravelCenters of America, TA and Petro Stopping Centers brand names and offer diesel and gasoline fueling services, restaurants, heavy-truck repair facilities, stores and other services. TA's nationwide business includes travel centers located in 41 U.S. states and in Canada.
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