Hilton Agrees to Sell Ten Properties in Europe

Hilton Hotels Corporation has announced agreement to sell up to 10 hotels to a fund managed by Morgan Stanley Real Estate for approximately 566 million euros (or approximately $770 million).

Assuming completion of the sale of all 10 hotels, net proceeds after property level debt repayment (approximately 41 million euros), taxes and transaction costs are expected to be approximately 450 million euros. Proceeds from the sale will be used to pay down debt.

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 euros 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 on 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.