Hotels has signed an agreement to sell up to 10 hotels (approx. 3,330 rooms) to a fund managed by Morgan Stanley Real Estate for
approximately €566 million (or approximately US$770 million). Assuming completion of the sale of all 10 hotels, net proceeds after property level
debt repayment (approx. €41 million), taxes and transaction costs are expected to be approximately €450 million.
Based on trailing 12-month earnings from the 10 hotels before interest, taxes, depreciation and amortization (EBITDA), the sale price represents
an EBITDA multiple of approximately 15.2x.
Hilton and Morgan Stanley Real Estate have agreed to long-term management contracts on five of the 10 hotels, including the Hiltons in
Düsseldorf, Dresden, Paris Charles de Gaulle, Strasbourg and Zurich. Morgan Stanley Real Estate has agreed to make an extensive and
immediate investment of approximately €18 million in these five hotels. Of the remaining hotels, long term management agreements are expected
to be established on the Hilton hotels in Brussels, Barcelona and Luxembourg subject to Hilton and Morgan Stanley Real Estate agreeing to
capital plans. For the remaining two hotels, the Los Zocos Club Resort (an unbranded all-inclusive resort in the Canary Islands) is being sold
without an ongoing contract, and Morgan Stanley Real Estate and Hilton will evaluate the future intent for the Hilton Weimar in Germany where
Hilton branding will remain in place for a short term period pending such evaluation.
The sale of seven of the hotels is subject to a number of conditions including clearance from the European Union regulators, but is expected to
be completed by the end of June 2007. The sales of the remaining three hotels (Paris Charles de Gaulle, Barcelona and Zurich) are also subject to
certain conditions and require further legal and statutory discussions and approvals. Sale of these three hotels is anticipated to be taking place in
the third quarter, 2007.
On completion of these transactions, Hilton will have sold over $3 billion of assets that it obtained in the acquisition of Hilton International in late
February 2006, and over $4.5 billion of assets will have been sold since the company began its disposition program in 2005.
Robert M. La Forgia, Executive Vice President and Chief Financial Officer of Hilton Hotels Corporation, commented on the proposed
sale, "This transaction is a significant step for Hilton as we continue to focus on our strategy of growing our managed and franchise business, while
reducing asset ownership and strengthening our balance sheet.
Morgan Stanley Real Estate is a highly respected real estate investor and an important business partner and currently owns or has an interest in
13 Hilton family hotels. This transaction builds significantly on this relationship and provides a platform for continued growth of our brands as we
look expand our reach globally.”
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