Normalized FFO for the First Quarter
Increases 12% Year Over Year to $0.93 Per Share
First Quarter Comparable Hotel RevPAR Grows
4.4% Year Over Year
Hospitality Properties Trust (NYSE: HPT) today announced its
financial results for the quarter ended March 31, 2016, compared to
the results for the prior year comparable period:
Three Months Ended March 31, 2016 2015
($ in thousands, except per share
andRevPAR data)
Net income available for common shareholders $ 46,885 $
36,415 Net income available for common shareholders per share
(basic and diluted) $ 0.31 $ 0.24 Adjusted EBITDA (1) $ 187,963 $
168,635 Normalized FFO available for common shareholders (1) $
140,414 $ 125,989 Normalized FFO available for common shareholders
per share (diluted) (1) $ 0.93 $ 0.83
Portfolio
Performance
Comparable hotel RevPAR $ 90.10 $ 86.31 Comparable hotel RevPAR
growth 4.4% - RevPAR (all hotels) $ 88.53 $ 86.21 RevPAR growth
(all hotels) 2.7% - Coverage of HPT’s minimum returns and rents for
hotels 0.95x 0.93x Coverage of HPT's minimum rents for travel
centers 1.39x 1.92x
(1) Reconciliations of net income available for common
shareholders determined in accordance with U.S. generally accepted
accounting principles, or GAAP, to earnings before interest, taxes,
depreciation and amortization, or EBITDA, and EBITDA as adjusted,
or Adjusted EBITDA, and net income to funds from operations, or
FFO, and Normalized FFO available for common shareholders, for the
quarters ended March 31, 2016 and 2015 appear later in this press
release.
John Murray, President and Chief Operating Officer of HPT, made
the following statement regarding today’s announcement:
“We are pleased with the continued strong performance from our
hotel and travel center portfolios which resulted in 12% FFO per
share growth this quarter compared to last year. Our comparable
hotel RevPAR growth remains above historic long term average growth
levels and exceeded the hotel industry’s performance for the
thirteenth consecutive quarter. Our results are especially
noteworthy because they were achieved in the first calendar quarter
which has historically produced weaker seasonal results at both our
hotels and travel centers. This performance, coupled with our
disciplined investment activity and favorable outlook gave HPT’s
Board the confidence to recently increase HPT’s quarterly common
dividend to $0.51 per share, or $2.04 per share per year.”
First Quarter Results and Recent Activities:
- Net Income Available for Common
Shareholders: Net income available for common shareholders for
the quarter ended March 31, 2016 was $46.9 million, or $0.31 per
diluted share, compared to net income available for common
shareholders of $36.4 million, or $0.24 per diluted share, for the
quarter ended March 31, 2015. The weighted average number of
diluted common shares outstanding was 151.4 million and 150.9
million for the quarters ended March 31, 2016 and 2015,
respectively.
- Adjusted EBITDA: Adjusted EBITDA
for the quarter ended March 31, 2016 compared to the same period in
2015 increased 11.5% to $188.0 million.
- Normalized FFO Available for Common
Shareholders: Normalized FFO available for common shareholders
for the quarter ended March 31, 2016 were $140.4 million, or $0.93
per diluted share, compared to Normalized FFO available for common
shareholders of $126.0 million, or $0.83 per diluted share for the
quarter ended March 31, 2015. The 12% increase in Normalized FFO
per diluted share is due primarily to the impact of HPT’s hotel and
travel center acquisitions since January 1, 2015, the increase in
returns realized due to the improvement in operating results at
certain of HPT’s hotels, and increases in FF&E reserve income
and deposits under HPT’s hotel operating agreements.
- Comparable Hotel RevPAR: For the
quarter ended March 31, 2016 compared to the same period in 2015
for HPT’s 291 hotels that it owned continuously since January 1,
2015: average daily rate, or ADR, increased 4.0% to $124.79;
occupancy increased 0.3 percentage points to 72.2%; and revenue per
available room, or RevPAR, increased 4.4% to $90.10.
- RevPAR (all hotels): For the
quarter ended March 31, 2016 compared to the same period in 2015
for HPT’s 305 hotels: ADR increased 3.6% to $124.16; occupancy
decreased 0.6 percentage points to 71.3%; and RevPAR increased 2.7%
to $88.53. Some of the hotels recently acquired are currently
undergoing renovations.
- Coverage of Minimum Returns and
Rents: For the quarter ended March 31, 2016, the aggregate
coverage ratio of (x) total hotel revenues minus all hotel expenses
and FF&E reserve escrows which are not subordinated to minimum
returns and minimum rent payments to HPT to (y) HPT’s minimum
returns and rents due from hotels increased to 0.95x from 0.93x for
the quarter ended March 31, 2015.For the quarter ended March 31,
2016, the aggregate coverage ratio of (x) total travel center
revenues less travel center expenses to (y) HPT’s minimum rent due
from leased travel centers decreased to 1.39x from 1.92x for the
quarter ended March 31, 2015.As of March 31, 2016, approximately
79% of HPT’s aggregate annual minimum returns and rents were
secured by guarantees or security deposits from HPT’s managers and
tenants pursuant to the terms of HPT’s operating agreements.
- Recent Property Acquisition
Activities: As previously disclosed, on February 1, 2016, HPT
acquired two extended stay hotels with 262 combined suites located
in Cleveland and Westlake, OH for an aggregate purchase price of
$12.0 million, excluding acquisition related costs. HPT converted
these hotels to the Sonesta ES Suites® hotel brand and added them
to its management agreement with Sonesta International Hotels
Corporation, or Sonesta.On March 16, 2016, HPT acquired the Kimpton
Hotel Monaco, a full service lifestyle hotel with 221 rooms located
in Portland, OR for a purchase price of $114.0 million, excluding
acquisition related costs. HPT added this hotel to its management
agreement with InterContinental Hotels Group, plc (LON: IHG; NYSE:
IHG (ADRs)), or InterContinental.On March 31, 2016, HPT acquired
from TravelCenters of America LLC (NYSE: TA), or TA, a newly
developed travel center in Hillsboro, TX for $19.7 million,
excluding acquisition related costs. HPT added this TA branded
travel center to its TA No. 4 lease.
- Recent Financing Activities: As
previously disclosed, on February 3, 2016, HPT issued $750.0
million aggregate principal amount of unsecured senior notes in
underwritten public offerings, which included: $400.0 million
aggregate principal amount of 4.25% unsecured senior notes due 2021
and $350.0 million aggregate principal amount of 5.25% unsecured
senior notes due 2026. Net proceeds from these offerings of $731.5
million after original issue discounts and offering expenses were
used to repay amounts outstanding under HPT’s unsecured revolving
credit facility and for general business purposes.On March 11,
2016, HPT redeemed at par plus accrued interest all $275.0 million
of its 6.30% senior notes due 2016.
Tenants and Managers: As of March 31, 2016, HPT had nine
operating agreements with seven hotel operating companies for 305
hotels with 46,347 rooms, which represented 66% of HPT’s total
annual minimum returns and rents.
- Marriott Agreements: During the
three months ended March 31, 2016, 122 of HPT’s hotels were
operated by subsidiaries of Marriott International, Inc. (NASDAQ:
MAR), or Marriott, under three agreements. HPT’s Marriott No. 1
agreement includes 53 hotels, and provides for annual minimum
return payments to HPT of $68.4 million as of March 31, 2016
(approximately $17.1 million per quarter). Because there is no
guarantee or security deposit for this agreement, the minimum
returns HPT receives under this agreement may be limited to
available hotel cash flow after payment of operating expenses and
funding of the FF&E reserve. During the three months ended
March 31, 2016, HPT realized returns under its Marriott No. 1
agreement of $17.9 million. HPT’s Marriott No. 234 agreement
includes 68 hotels and requires annual minimum returns to HPT of
$106.2 million as of March 31, 2016 (approximately $26.6 million
per quarter). During the three months ended March 31, 2016, HPT
realized returns under its Marriott No. 234 agreement of $26.6
million. HPT’s Marriott No. 234 agreement is partially secured by a
security deposit and a limited guarantee from Marriott; during the
three months ended March 31, 2016, HPT replenished the available
security deposit by $0.8 million from a share of hotel cash flows
in excess of the minimum returns due for the period. At March 31,
2016, the available security deposit from Marriott for the Marriott
No. 234 agreement was $7.0 million and there was $30.7 million
remaining under Marriott’s guaranty for up to 90% of the minimum
returns due to HPT to cover future payment shortfalls after the
available security deposit is depleted. HPT’s Marriott No. 5
agreement includes one resort hotel in Kauai, HI which is leased to
Marriott on a full recourse basis. The contractual rent due to HPT
for this hotel for the three months ended March 31, 2016 of $2.5
million was paid to HPT.
- InterContinental Agreement:
During the three months ended March 31, 2016, HPT realized returns
and rents of $38.5 million under its agreement with subsidiaries of
InterContinental which includes 94 hotels and requires annual
minimum returns/rent to HPT of $160.3 million as of March 31, 2016
(approximately $40.1 million per quarter). During the three months
ended March 31, 2016, HPT replenished the available security
deposit by $0.5 million from a share of hotel cash flows in excess
of the returns and rents due for the period. In connection with the
acquisition of the Kimpton Hotel Monaco described above,
InterContinental provided HPT $9.0 million of cash to supplement
the existing security deposit. At March 31, 2016, the available
InterContinental security deposit which HPT held to pay future
payment shortfalls was $56.7 million.
- Wyndham Agreement: As of March
31, 2016, 22 of HPT’s hotels were operated under a management
agreement with a subsidiary of Wyndham Worldwide Corporation (NYSE:
WYN), or Wyndham, requiring annual minimum returns of $26.7 million
as of March 31, 2016 (approximately $6.7 million per quarter). HPT
also leases 48 vacation units in one of the hotels to Wyndham
Vacation Resorts, Inc., a subsidiary of Wyndham, which requires
annual minimum rent of $1.4 million (approximately $0.4 million per
quarter). The guarantee provided by Wyndham with respect to the
lease is unlimited. The guarantee provided by Wyndham with respect
to the management agreement is limited to $35.7 million and as of
December 31, 2015, $4.0 million remained available to cover payment
shortfalls of HPT’s minimum returns due under the management
agreement. During the three months ended March 31, 2016, the hotels
under this agreement generated cash flows that were less than the
minimum returns due to HPT and the remaining guaranty was depleted.
HPT currently expects that for the year ending December 31, 2016,
the hotels under this agreement will produce cash flows in excess
of the minimum returns due to HPT under the management agreement.
As of May 9, 2016, all amounts due to HPT under the management
agreement and the lease have been paid to HPT.
- Other Hotel Agreements: As of
March 31, 2016, HPT’s remaining 67 hotels are operated under four
agreements: one management agreement with Sonesta (33 hotels),
requiring annual minimum returns of $84.0 million as of March 31,
2016 (approximately $21.0 million per quarter); one management
agreement with a subsidiary of Hyatt Hotels Corporation (NYSE: H),
or Hyatt (22 hotels), requiring annual minimum returns of $22.0
million as of March 31, 2016 (approximately $5.5 million per
quarter); one management agreement with a subsidiary of Carlson
Hotels Worldwide, or Carlson (11 hotels), requiring annual minimum
returns of $12.9 million as of March 31, 2016 (approximately $3.2
million per quarter); and one lease with a subsidiary of Morgans
Hotel Group Co. (NASDAQ: MHGC) (1 hotel) requiring annual minimum
rent of $7.6 million as of March 31, 2016 (approximately $1.9
million per quarter). Minimum returns and rents due to HPT are
partially guaranteed under the Hyatt and Carlson agreements. There
is no guarantee or security deposit for the Sonesta agreement and
the minimum returns HPT receives under that agreement are limited
to available hotel cash flow after payment of operating expenses.
The payments due to HPT under these agreements for the three months
ended March 31, 2016 were paid to HPT.
- Travel Center Agreements: As of
March 31, 2016, HPT had five leases with TA for 194 travel centers
located along the U.S. Interstate Highway system requiring
aggregate annual minimum rents of $261.1 million (approximately
$65.3 million per quarter), which represent 34% of HPT’s total
annual minimum returns and rents. As of March 31, 2016, all
payments due to HPT from TA under these leases were current.
Conference Call:
On Tuesday, May 10, 2016, at 10:00 a.m. Eastern Time, John
Murray, President and Chief Operating Officer, and Mark Kleifges,
Chief Financial Officer and Treasurer, will host a conference call
to discuss the results for the quarter ended March 31, 2016. The
conference call telephone number is (877) 329-3720. Participants
calling from outside the United States and Canada should dial (412)
317-5434. No pass code is necessary to access the call from either
number. Participants should dial in about 15 minutes prior to the
scheduled start of the call. A replay of the conference call will
be available through Tuesday, May 17, 2016. To hear the replay,
dial (412) 317-0088. The replay pass code is 10084013.
A live audio webcast of the conference call will also be
available in a listen only mode on HPT’s website, which is located
at www.hptreit.com. Participants wanting to access the webcast
should visit HPT’s website about five minutes before the call. The
archived webcast will be available for replay on HPT’s website for
about one week after the call. The transcription, recording and
retransmission in any way of HPT’s first quarter conference call is
strictly prohibited without the prior written consent of
HPT.
Supplemental Data:
A copy of HPT’s First Quarter 2016 Supplemental Operating and
Financial Data is available for download at HPT’s website,
www.hptreit.com. HPT’s website is not incorporated as part of this
press release.
Hospitality Properties Trust is a real estate investment trust,
or REIT, which owns a diverse portfolio of hotels and travel
centers located in 45 states, Puerto Rico and Canada. HPT’s
properties are operated under long term management or lease
agreements. HPT is managed by the operating subsidiary of The RMR
Group Inc. (NASDAQ: RMR), an alternative asset management company
that is headquartered in Newton, Massachusetts.
Please see the following pages for a more detailed statement of
HPT’s operating results and financial condition and for an
explanation of HPT’s calculation of FFO available for common
shareholders and Normalized FFO available for common shareholders,
EBITDA and Adjusted EBITDA.
WARNING CONCERNING
FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO,
WHENEVER HPT USES WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”,
“INTEND”, “PLAN”, “ESTIMATE”, “MAY” OR SIMILAR EXPRESSIONS, HPT IS
MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS
ARE BASED UPON HPT’S PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT
FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT
OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN
OR IMPLIED BY HPT’S FORWARD LOOKING STATEMENTS AS A RESULT OF
VARIOUS FACTORS. FOR EXAMPLE:
- AS OF MARCH 31, 2016, APPROXIMATELY 79%
OF HPT’S AGGREGATE ANNUAL MINIMUM RETURNS AND RENTS WERE SECURED BY
GUARANTEES OR SECURITY DEPOSITS FROM HPT’S MANAGERS AND TENANTS.
THIS MAY IMPLY THAT THESE MINIMUM RETURNS AND RENTS WILL BE PAID.
IN FACT, THESE GUARANTEES AND SECURITY DEPOSITS ARE LIMITED IN
AMOUNT AND DURATION AND THE GUARANTEES ARE SUBJECT TO THE
GUARANTORS’ ABILITY AND WILLINGNESS TO PAY. THE BALANCE OF HPT’S
ANNUAL MINIMUM RETURNS AND RENTS AS OF MARCH 31, 2016 WAS NOT
GUARANTEED NOR DOES HPT HOLD A SECURITY DEPOSIT WITH RESPECT TO
THOSE AMOUNTS. HPT CAN PROVIDE NO ASSURANCE WITH REGARD TO THE
FUTURE PERFORMANCE OF HPT’S PROPERTIES AND WHETHER THEY WILL COVER
HPT’S MINIMUM RETURNS AND RENTS, WHETHER THE GUARANTEES OR SECURITY
DEPOSITS WILL BE ADEQUATE TO COVER FUTURE SHORTFALLS IN THE MINIMUM
RETURNS OR RENTS DUE TO HPT, OR REGARDING HPT’S MANAGERS’, TENANTS’
OR GUARANTORS’ FUTURE ACTIONS IF AND WHEN THE GUARANTEES AND
SECURITY DEPOSITS EXPIRE OR ARE DEPLETED OR THEIR ABILITY OR
WILLINGNESS TO PAY MINIMUM RETURNS AND RENTS OWED TO HPT. MOREOVER,
THE SECURITY DEPOSITS ARE NOT SEGREGATED FROM HPT’S OTHER ASSETS
AND THE APPLICATION OF SECURITY DEPOSITS TO COVER SHORTFALLS WILL
RESULT IN HPT RECORDING INCOME, BUT WILL NOT RESULT IN HPT
RECEIVING ADDITIONAL CASH,
- HPT’S COMPARABLE REVPAR GROWTH HAS
EXCEEDED THE HOTEL INDUSTRY’S PERFORMANCE FOR THIRTEEN CONSECUTIVE
QUARTERS. THIS STATEMENT MAY IMPLY THAT HPT’S COMPARABLE REVPAR
WILL CONTINUE TO GROW AND EXCEED THE INDUSTRY’S PERFORMANCE. HPT’S
HOTEL BUSINESS IS SUBJECT TO VARIOUS RISKS, SOME OF WHICH ARE
BEYOND HPT’S CONTROL. THERE CAN BE NO ASSURANCE THAT HPT’S
COMPARABLE REVPAR WILL CONTINUE TO GROW, OR THAT HPT’S REVPAR
RESULTS WILL CONTINUE TO EXCEED THE INDUSTRY’S PERFORMANCE. THE
COMPARABLE REVPAR AT HPT’S HOTELS IN THE FUTURE MAY NOT EXCEED
HOTEL INDUSTRY PERFORMANCE MEASURES AND IT MAY DECLINE,
- HPT’S QUARTERLY DIVIDEND WAS RECENTLY
INCREASED TO $0.51 PER SHARE ($2.04 PER SHARE PER YEAR. A POSSIBLE
IMPLICATION OF THIS STATEMENT IS THAT HPT WILL CONTINUOUSLY PAY
QUARTERLY DIVIDENDS OF $0.51 PER SHARE PER QUARTER OR $2.04 PER
SHARE PER YEAR IN THE FUTURE. HPT'S DIVIDEND RATES ARE SET AND
RESET FROM TIME TO TIME BY HPT'S BOARD OF TRUSTEES. HPT’S BOARD
CONSIDERS MANY FACTORS WHEN SETTING DIVIDEND RATES INCLUDING HPT'S
HISTORICAL AND PROJECTED INCOME, NORMALIZED FFO, THE THEN CURRENT
AND EXPECTED NEEDS AND AVAILABILITY OF CASH TO PAY HPT'S
OBLIGATIONS, DISTRIBUTIONS WHICH MAY BE REQUIRED TO BE PAID TO
MAINTAIN HPT'S TAX STATUS AS A REIT AND OTHER FACTORS DEEMED
RELEVANT BY HPT'S BOARD OF TRUSTEES IN ITS DISCRETION. ACCORDINGLY,
FUTURE DIVIDEND RATES MAY BE INCREASED, DECREASED OR EVEN
ELIMINATED AND THERE IS NO ASSURANCE AS TO THE RATE AT WHICH FUTURE
DIVIDENDS WILL BE PAID, AND
- HPT CURRENTLY EXPECTS THAT ITS HOTELS
MANAGED BY WYNDHAM WILL PRODUCE CASH FLOWS IN EXCESS OF THE MINIMUM
RETURNS DUE TO HPT DURING 2016. WYNDHAM’S MANAGEMENT OF HPT’S
HOTELS HAS HISTORICALLY NOT PRODUCED CASH FLOWS EQUAL TO OR IN
EXCESS OF THE MINIMUM RETURNS CONTRACTUALLY DUE TO HPT AND THE FULL
AMOUNT OF WYNDHAM’S CONTRACTUAL GUARANTEE WAS DEPLETED DURING THE
QUARTER ENDED MARCH 31, 2016. THERE IS NO ASSURANCE THAT WYNDHAM’S
MANAGEMENT OF HPT OWNED HOTELS WILL PRODUCE THE CONTRACTUAL MINIMUM
RETURNS DUE TO HPT AND HPT DOES NOT KNOW WHETHER WYNDHAM WILL PAY
THE MINIMUM RETURNS DESPITE THE DEPLETED GUARANTEE OR IF WYNDHAM
WILL DEFAULT THE PAYMENTS DUE TO HPT.
THE INFORMATION CONTAINED IN HPT’S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER THE CAPTION “RISK
FACTORS” IN HPT’S PERIODIC REPORTS, OR INCORPORATED THEREIN,
IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES
FROM HPT’S FORWARD LOOKING STATEMENTS. HPT’S FILINGS WITH THE SEC
ARE AVAILABLE ON THE SEC’S WEBSITE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING
STATEMENTS.
EXCEPT AS REQUIRED BY LAW, HPT DOES NOT INTEND TO UPDATE OR
CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
HOSPITALITY PROPERTIES TRUST CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands,
except per share data) (Unaudited)
Three Months Ended March 31, 2016 2015 Revenues:
Hotel operating revenues (1) $ 396,503 $ 369,596 Rental income (2)
(3) 76,259 64,751 FF&E reserve income (4) 1,356
1,165 Total revenues 474,118 435,512 Expenses:
Hotel operating expenses (1) 276,305 257,658 Depreciation and
amortization 87,271 78,969 General and administrative (5) 16,023
21,304 Acquisition related costs (6) 612 338 Total
expenses 380,211 358,269 Operating income
93,907 77,243 Interest income 98 11
Interest expense (including amortization
of debt issuance costs and debt discounts of$1,865 and $1,458,
respectively)
(41,586) (35,454) Loss on early extinguishment of debt (7)
(70) - Income before income taxes and equity in earnings of
an investee 52,349 41,800 Income tax expense (375) (291) Equity in
earnings of an investee 77 72 Net income 52,051
41,581 Preferred distributions (5,166) (5,166) Net
income available for common shareholders $ 46,885 $ 36,415
Weighted average common shares outstanding (basic) 151,402
149,792 Weighted average common shares outstanding (diluted)
151,415 150,906 Net income available for
common shareholders per common share: Basic and diluted $ 0.31 $
0.24
See Notes on pages 9 and 10
HOSPITALITY PROPERTIES TRUST
RECONCILIATIONS OF FUNDS FROM OPERATIONS, NORMALIZED
FUNDS FROM OPERATIONS, EBITDA AND ADJUSTED EBITDA (amounts
in thousands, except per share data) (Unaudited)
Three Months Ended March 31, 2016 2015
Calculation of Funds from Operations (FFO)
and Normalized FFO available for commonshareholders: (8)
Net income available for common shareholders $ 46,885 $ 36,415 Add:
Depreciation and amortization 87,271 78,969 FFO
available for common shareholders 134,156 115,384 Add: Acquisition
related costs (6) 612 338 Estimated business management incentive
fees (5) 5,316 9,027 Loss on early extinguishment of debt (7) 70 -
Deferred percentage rent (3) 260 1,240 Normalized FFO
available for common shareholders $ 140,414 $ 125,989
Weighted average common shares outstanding (basic) 151,402
149,792 Weighted average common shares outstanding (diluted)
151,415 150,906 Basic and diluted per common
share amounts: FFO available for common shareholders (basic) $ 0.89
$ 0.77 FFO available for common shareholders (diluted) $ 0.89 $
0.76 Normalized FFO available for common shareholders (basic) $
0.93 $ 0.84 Normalized FFO available for common shareholders
(diluted) $ 0.93 $ 0.83 Three Months Ended
March 31, 2016 2015 Calculation of EBITDA and Adjusted EBITDA: (9)
Net income $ 52,051 $ 41,581 Add: Interest expense 41,586 35,454
Income tax expense 375 291 Depreciation and amortization
87,271 78,969 EBITDA 181,283 156,295 Add: Acquisition
related costs (6) 612 338 General and administrative expense paid
in common shares (10) 422 1,735 Estimated business management
incentive fees (5) 5,316 9,027 Loss on early extinguishment of debt
(7) 70 - Deferred percentage rent (3) 260 1,240
Adjusted EBITDA $ 187,963 $ 168,635
See Notes on pages 9 and 10
(1) At March 31, 2016, HPT owned 305 hotels; 302 of these hotels
are managed by hotel operating companies and three hotels are
leased to hotel operating companies. At March 31, 2016, HPT also
owned 194 travel centers; all 194 of these travel centers are
leased to a travel center operating company under five lease
agreements. HPT’s condensed consolidated statements of income
include hotel operating revenues and expenses of managed hotels and
rental income from its leased hotels and travel centers. Certain of
HPT’s managed hotels had net operating results that were, in the
aggregate, $16,429 and $15,492 less than the minimum returns due to
HPT in the three months ended March 31, 2016 and 2015,
respectively. When the managers of these hotels fund the shortfalls
under the terms of HPT’s operating agreements or their guarantees,
HPT reflects such fundings (including security deposit
applications) in its condensed consolidated statements of income as
a reduction of hotel operating expenses. Hotel operating expenses
were reduced by $4,377 and $4,006 in the three months ended March
31, 2016 and 2015, respectively, as a result of such fundings. HPT
had shortfalls at certain of its managed hotel portfolios not
funded by the managers of these hotels under the terms of its
operating agreements of $12,052 and $11,486 in the three months
ended March 31, 2016 and 2015, respectively, which represent the
unguaranteed portions of HPT’s minimum returns from Sonesta.
Certain guarantee payments and the amounts of certain security
deposits received by HPT may be replenished by future cash flows
from the applicable hotel operations pursuant to the terms of the
respective operating agreements. When HPT’s guarantees and its
security deposits are replenished by cash flows from hotel
operations, HPT reflects such replenishments in its condensed
consolidated statements of income as an increase to hotel operating
expenses. Hotel operating expenses have increased by $2,522 and
$3,351 in the three months ended March 31, 2016 and 2015,
respectively, as a result of such replenishments.
(2) Rental income includes $3,752 and $545 in the three months
ended March 31, 2016 and 2015, respectively, of adjustments
necessary to record scheduled rent increases under certain of HPT’s
leases, the deferred rent obligations under HPT’s travel center
leases and the estimated future payments to HPT under its travel
center leases for the cost of removing underground storage tanks on
a straight line basis.
(3) In calculating net income in accordance with GAAP, HPT
generally recognizes percentage rental income received for the
first, second and third quarters in the fourth quarter, which is
when all contingencies have been met and the income is earned. HPT
includes estimated amounts of percentage rent in the calculation of
Normalized FFO and Adjusted EBITDA for each quarter of the year.
The fourth quarter Normalized FFO and Adjusted EBITDA calculations
exclude the estimated amounts of percentage rent recognized during
the first three quarters.
(4) Various percentages of total sales at certain of HPT’s
hotels are escrowed as reserves for future renovations or
refurbishment, or FF&E reserve escrows. HPT owns all the
FF&E reserve escrows for its hotels. HPT reports deposits by
its tenants into the escrow accounts under its three hotel leases
as FF&E reserve income. HPT does not report the amounts which
are escrowed as FF&E reserves for its managed hotels as
FF&E reserve income.
(5) Incentive fees under HPT’s business management agreement are
payable after the end of each calendar year, are calculated based
on common share total return, as defined, and are included in
general and administrative expense in HPT’s condensed consolidated
statements of income. In calculating net income in accordance with
GAAP, HPT recognizes estimated business management incentive fee
expense, if any, each quarter. Although HPT recognizes this
expense, if any, each quarter for purposes of calculating net
income, HPT does not include these amounts in the calculation of
Normalized FFO available for common shareholders or Adjusted EBITDA
until the fourth quarter, which is when the actual incentive fee
expense amount for the year is determined. HPT recorded $5,316 and
$9,027 of estimated incentive fees during the three months ended
March 31, 2016 and 2015, respectively.
HPT recorded a liability for the amount by which the estimated
fair value for accounting purposes exceeded the price HPT paid for
its investment in RMR common stock in June 2015. A portion of
this liability is being amortized on a straight line basis
through December 31, 2035, the then 20 year life of HPT's
business management agreement with the operating subsidiary of RMR
as a reduction to business management fees, which are included in
general and administrative expense. General and administrative
expense was reduced by $896 during the three months
ended March 31, 2016 as a result of this amortization.
(6) Represents costs associated with HPT’s acquisition
activities.
(7) HPT recorded a $70 loss on early extinguishment of debt in
the first quarter of 2016 in connection with the redemption of
certain senior unsecured notes.
(8) HPT calculates FFO available for common shareholders and
Normalized FFO available for common shareholders as shown above.
FFO available for common shareholders is calculated on the basis
defined by The National Association of Real Estate Investment
Trusts, or NAREIT, which is net income available for common
shareholders calculated in accordance with GAAP, excluding any gain
or loss on sale of properties and loss on impairment of real estate
assets, plus real estate depreciation and amortization, as well as
certain other adjustments currently not applicable to HPT. HPT’s
calculation of Normalized FFO available for common shareholders
differs from NAREIT's definition of FFO available for common
shareholders because HPT includes estimated percentage rent in the
period to which HPT estimates that it relates rather than when it
is recognized as income in accordance with GAAP, HPT includes
business management incentive fees, if any, only in the fourth
quarter versus the quarter when they are recognized as expense in
accordance with GAAP and HPT excludes acquisition related costs and
loss on early extinguishment of debt. HPT considers FFO available
for common shareholders and Normalized FFO available for common
shareholders to be appropriate measures of operating performance
for a REIT, along with net income, net income available for common
shareholders, operating income and cash flow from operating
activities. HPT believes that FFO available for common shareholders
and Normalized FFO available for common shareholders provide useful
information to investors because by excluding the effects of
certain historical amounts, such as depreciation expense, FFO
available for common shareholders and Normalized FFO available for
common shareholders may facilitate a comparison of HPT’s operating
performance between periods and with other REITs. FFO available for
common shareholders and Normalized FFO available for common
shareholders are among the factors considered by HPT’s Board of
Trustees when determining the amount of distributions to
shareholders. Other factors include, but are not limited to,
requirements to maintain HPT’s qualification for taxation as a
REIT, limitations in its unsecured revolving credit facility and
unsecured term loan agreement and public debt covenants, the
availability to HPT of debt and equity capital, HPT’s expectation
of its future capital requirements and operating performance, and
HPT’s expected needs for and availability of cash to pay its
obligations. FFO available for common shareholders and Normalized
FFO available for common shareholders do not represent cash
generated by operating activities in accordance with GAAP and
should not be considered as alternatives to net income, net income
available for common shareholders, operating income or cash flow
from operating activities determined in accordance with GAAP, or as
indicators of HPT’s financial performance or liquidity, nor are
these measures necessarily indicative of sufficient cash flow to
fund all of HPT’s needs. These measures should be considered in
conjunction with net income, net income available for common
shareholders, operating income and cash flow from operating
activities as presented in HPT’s condensed consolidated statements
of income and condensed consolidated statements of cash flows.
Other real estate companies and REITs may calculate FFO available
for common shareholders and Normalized FFO available for common
shareholders differently than HPT does.
(9) HPT calculates EBITDA and Adjusted EBITDA as shown above.
HPT considers EBITDA and Adjusted EBITDA to be appropriate measures
of its operating performance, along with net income, net income
available for common shareholders, operating income and cash flow
from operating activities. HPT believes that EBITDA and Adjusted
EBITDA provide useful information to investors because by excluding
the effects of certain historical amounts, such as interest,
depreciation and amortization expense, EBITDA and Adjusted EBITDA
may facilitate a comparison of current operating performance with
HPT’s past operating performance. EBITDA and Adjusted EBITDA do not
represent cash generated by operating activities in accordance with
GAAP and should not be considered an alternative to net income, net
income available for common shareholders, operating income or cash
flow from operating activities, determined in accordance with GAAP
or as an indicator of financial performance or liquidity, nor are
these measures necessarily indicative of sufficient cash flow to
fund all of HPT’s needs. These measures should be considered in
conjunction with net income, net income available for common
shareholders, operating income and cash flow from operating
activities as presented in HPT’s condensed consolidated statements
of income and condensed consolidated statements of cash flows.
Other real estate companies and REITs may calculate EBITDA and
Adjusted EBITDA differently than HPT does.
(10) Amounts represent the portion of business management fees
that were payable in HPT’s common shares as well as equity based
compensation for HPT’s trustees, its officers and certain other
employees of HPT’s manager. Beginning June 1, 2015, all business
management fees are paid in cash.
HOSPITALITY PROPERTIES TRUST CONDENSED
CONSOLIDATED BALANCE SHEETS (amounts in thousands, except
share data) (Unaudited)
March 31, December 31, 2016 2015 ASSETS Real estate
properties: Land $ 1,544,954 $ 1,529,004 Buildings, improvements
and equipment 6,898,854 6,740,423 Total real estate
properties, gross 8,443,808 8,269,427 Accumulated depreciation
(2,290,066) (2,218,499) Total real estate properties,
net 6,153,742 6,050,928 Cash and cash equivalents 15,816 13,682
Restricted cash (FF&E reserve escrow) 55,891 51,211 Due from
related persons 55,517 50,987 Other assets, net 251,174
227,989 Total assets $ 6,532,140 $ 6,394,797
LIABILITIES AND SHAREHOLDERS’ EQUITY Unsecured revolving
credit facility $ 230,000 $ 465,000 Unsecured term loan, net
397,922 397,756 Senior unsecured notes, net 2,861,294 2,403,439
Convertible senior unsecured notes 8,478 8,478 Security deposits
63,831 53,579 Accounts payable and other liabilities 150,416
179,783 Due to related persons 14,172 69,514 Dividends payable
5,166 5,166 Total liabilities 3,731,279
3,582,715 Commitments and contingencies Shareholders’
equity: Preferred shares of beneficial interest, no par value;
100,000,000 shares authorized:
Series D preferred shares; 7 1/8%
cumulative redeemable; 11,600,000 shares issued andoutstanding,
aggregate liquidation preference of $290,000
280,107 280,107
Common shares of beneficial interest, $.01
par value; 200,000,000 shares authorized; 151,547,288shares issued
and outstanding
1,515 1,515 Additional paid in capital 4,165,982 4,165,911
Cumulative net income 2,933,708 2,881,657 Cumulative other
comprehensive income (loss) 2,074 (15,523) Cumulative preferred
distributions (326,479) (321,313) Cumulative common distributions
(4,256,046) (4,180,272) Total shareholders’ equity
2,800,861 2,812,082 Total liabilities and
shareholders’ equity $ 6,532,140 $ 6,394,797
A Maryland Real Estate Investment Trust with
transferable shares of beneficial interest listed on the New York
Stock Exchange.
No shareholder, Trustee or officer is
personally liable for any act or obligation of the Trust.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160510005397/en/
Hospitality Properties TrustKatie Strohacker, 617-796-8232Senior
Director, Investor Relations
Hospitality Properties (NASDAQ:HPT)
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