First Quarter Net Income Available to Common
Shareholders of $0.16 Per Share
First Quarter Normalized FFO Available to
Common Shareholders of $0.91 Per Share
Hospitality Properties Trust (Nasdaq: HPT) today announced its
financial results for the quarter ended March 31, 2017.
Three Months Ended March 31,
2017 2016 ($ in thousands, except per share and RevPAR data)
Net income available for common shareholders $ 25,843 $ 46,885 Net
income available for common shareholders per share $ 0.16 $ 0.31
Adjusted EBITDA (1) $ 194,576 $ 187,703 Normalized FFO available
for common shareholders (1) $ 148,807 $ 140,154 Normalized FFO
available for common shareholders per share (1) $ 0.91 $ 0.93
Portfolio
Performance
Comparable hotel RevPAR $ 89.40 $ 88.49 Comparable hotel RevPAR
growth 1.0 % — RevPAR (all hotels) $ 89.45 $ 88.67 RevPAR growth
(all hotels) 0.9 % — Coverage of HPT’s minimum returns and rents
for hotels
0.88
x
0.92x Coverage of HPT's minimum rents for travel centers
1.22
x
1.37x
(1) Reconciliations of net income 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
available for common shareholders determined in accordance with
GAAP to funds from operations, or FFO, available for common
shareholders, and Normalized FFO available for common shareholders,
for the quarters ended March 31, 2017 and 2016 appear later in
this press release.
John Murray, President and Chief Operating Officer of HPT, made
the following statement regarding today's announcement:
“HPT's first quarter 2017 comparable hotel RevPAR grew by 1%
despite competition from new room supply and certain market
specific impacts. We continued our steady pace of acquisition
growth, took advantage of debt capital market opportunities to
lower our capital costs and raised our quarterly dividend. We
remain cautiously optimistic regarding performance for the balance
of 2017.”
Results for the Three Months Ended March 31, 2017 and
Recent Activities:
- Net Income Available for Common
Shareholders: Net income available for common shareholders for
the quarter ended March 31, 2017 was $25.8 million, or $0.16
per diluted share, compared to net income available for common
shareholders of $46.9 million, or $0.31 per diluted share, for the
quarter ended March 31, 2016. Net income available for common
shareholders includes $19.6 million, or $0.12 per diluted share,
and $5.3 million, or $0.04 per diluted share, of estimated business
management incentive fee expense for the quarters ended
March 31, 2017 and 2016, respectively. Net income available
for common shareholders for the quarter ended March 31, 2017 was
reduced by $9.9 million, or $0.06 per diluted share, for the amount
by which the liquidation preference for HPT's 7.125% Series D
cumulative redeemable preferred shares that were redeemed during
the period exceeded the carrying value for those preferred shares
as of the date of redemption. The weighted average number of
diluted common shares outstanding was 164.1 million and 151.4
million for the quarters ended March 31, 2017 and 2016,
respectively.
- Adjusted EBITDA: Adjusted EBITDA
for the quarter ended March 31, 2017 compared to the same
period in 2016 increased 3.7% to $194.6 million.
- Normalized FFO Available for Common
Shareholders: Normalized FFO available for common shareholders
for the quarter ended March 31, 2017 was $148.8 million, or
$0.91 per diluted share, compared to Normalized FFO available for
common shareholders of $140.2 million, or $0.93 per diluted share,
for the quarter ended March 31, 2016.
- Hotel RevPAR (comparable
hotels): For the quarter ended March 31, 2017 compared to
the same period in 2016 for HPT’s 302 hotels that were owned
continuously since January 1, 2016: average daily rate, or
ADR, increased 0.9% to $125.03; occupancy increased 0.1 percentage
points to 71.5%; and revenue per available room, or RevPAR,
increased 1.0% to $89.40.
- Hotel RevPAR (all hotels): For
the quarter ended March 31, 2017 compared to the same period
in 2016 for HPT’s 308 hotels: ADR increased 0.7% to $125.63;
occupancy increased 0.1 percentage point to 71.2%; and RevPAR
increased 0.9% to $89.45.
- Coverage of Minimum Returns and
Rents: For the quarter ended March 31, 2017, 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 decreased to 0.88x from 0.92x for
the quarter ended March 31, 2016.For the quarter ended
March 31, 2017, 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 1.22x from
1.37x for the quarter ended March 31, 2016.As of
March 31, 2017, 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, in February 2017, HPT
acquired the 483 room Hotel Allegro in Chicago, IL for a purchase
price of $85.5 million, excluding acquisition related costs. HPT
added this Kimpton branded hotel to its management agreement with
InterContinental Hotels Group, plc (LON: IHG; NYSE: IHG
(ADRs)), or InterContinental.In March 2017, HPT acquired the 121
room Hotel Alexis in Seattle, WA for a purchase price of $71.6
million, excluding acquisition related costs. HPT added this
Kimpton branded hotel to its management agreement with
InterContinental.Also in March 2017, HPT entered into an agreement
to acquire the 389 room Chase Park Plaza hotel located in St.
Louis, MO for a purchase price of $87.8 million, excluding
acquisition related costs. HPT currently expects to complete this
acquisition during the second quarter of 2017. HPT plans to
re-brand this hotel to the Royal Sonesta hotel brand and add it to
its management agreement with Sonesta International Hotels
Corporation, or Sonesta.In May 2017, HPT acquired from
TravelCenters of America LLC (Nasdaq: TA), or TA, a newly developed
travel center located in Columbia, SC for a purchase price of $27.6
million, excluding acquisition related costs. HPT added this Petro
branded travel center to its TA No. 4 lease.
- Recent Financing Activities: In
January 2017, HPT issued $600.0 million aggregate principal amount
of senior notes in underwritten public offerings, which included
$200.0 million aggregate principal amount of 4.500% unsecured
senior notes due 2023 and $400.0 million aggregate principal amount
of 4.950% unsecured senior notes due 2027. The proceeds from
these offerings of $593.3 million after discounts and offering
expenses were used to repay amounts outstanding under HPT's
revolving credit facility, to redeem, in February 2017, all of
HPT's 11.6 million outstanding 7.125% Series D cumulative
redeemable preferred shares for $25.00 per share plus accrued and
unpaid dividends (an aggregate of $291.4 million) and for general
business purposes, including acquisitions.In March 2017, HPT
repurchased at par plus accrued and unpaid interest $8.4 million of
the principal amount of its outstanding 3.80% convertible senior
notes due 2027 which were tendered by the holders of these notes
for repurchase by HPT. In April 2017, HPT redeemed at par plus
accrued and unpaid interest the remaining $47,000 of the principal
amount outstanding of these notes.
Tenants and Managers: As of March 31, 2017, HPT had
nine operating agreements with seven hotel operating companies for
308 hotels with 47,187 rooms, which represented 65% of HPT’s total
annual minimum returns and rents, and five lease agreements with
one travel center operating company for 198 travel centers, which
represented 35% of HPT’s total annual minimum returns and
rents.
- Marriott Agreements: As of
March 31, 2017, 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 $68.8 million as of March 31, 2017 (approximately
$17.2 million per quarter). Because there is no guarantee or
security deposit for this agreement, the minimum returns HPT
receives under this agreement are limited to available hotel cash
flows after payment of operating expenses and funding of a FF&E
reserve. During the three months ended March 31, 2017, HPT
realized returns under its Marriott No. 1 agreement of $17.2
million. HPT’s Marriott No. 234 agreement includes 68 hotels and
requires annual minimum returns to HPT of $106.4 million as of
March 31, 2017 (approximately $26.6 million per quarter).
During the three months ended March 31, 2017, 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, 2017, the available security deposit
was replenished by $0.3 million from a share of hotel cash flows in
excess of the minimum returns due to HPT for the period. At
March 31, 2017, the available security deposit from Marriott
for the Marriott No. 234 agreement was $16.7 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
if and 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, 2017 of $2.5 million was paid to HPT.
- InterContinental Agreement: As
of March 31, 2017, 96 of HPT’s hotels were operated by
subsidiaries of InterContinental under one agreement requiring
annual minimum returns and rents to HPT of $174.4 million
(approximately $43.6 million per quarter). During the three months
ended March 31, 2017, HPT realized returns and rents under its
InterContinental agreement of $41.6 million. HPT’s InterContinental
agreement is partially secured by a security deposit. During the
three months ended March 31, 2017, HPT reduced the available
security deposit by $1.6 million to cover shortfalls in hotel cash
flows available to pay the minimum returns due to HPT for the
period. In connection with the acquisition of the two hotels
described above, InterContinental provided HPT with $12.6 million
to supplement the existing security deposit. At March 31,
2017, the available InterContinental security deposit which HPT
held to pay future payment shortfalls was $83.8 million.
- Wyndham Agreement: As of
March 31, 2017, 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 $27.3 million as of March 31, 2017 (approximately
$6.8 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, 2016, $1.1
million remained available to cover payment shortfalls of minimum
returns due to HPT under the management agreement. During the three
months ended March 31, 2017, the hotels under this agreement
generated cash flows that were less than the minimum returns due to
HPT and the remaining guaranty was depleted. As of May 9,
2017, all amounts due to HPT under the management agreement and the
lease have been paid to HPT.
- Morgans Agreement: As of March
31, 2017, HPT leases one hotel to a subsidiary of Morgans Hotel
Group Co., or Morgans, requiring annual minimum rent to HPT of $7.6
million as of March 31, 2017 (approximately $1.9 million per
quarter). In December 2016, HPT advised Morgans that the closing of
its merger with SBE Entertainment Group, LLC, or SBE, without HPT's
consent was in violation of the Morgans agreement, and HPT filed an
action in California for unlawful detainer against Morgans and SBE.
HPT is currently engaging in discussions with Morgans and SBE
regarding this matter and is pursuing remedies, which may include
terminating the Morgans agreement. As of May 9, 2017, all scheduled
rent payments due to HPT under the lease have been paid.
- Other Hotel Agreements: As of
March 31, 2017, HPT’s remaining 67 hotels were operated under
three agreements: one management agreement with Sonesta (34
hotels), requiring annual minimum returns of $90.2 million as of
March 31, 2017 (approximately $22.6 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, 2017 (approximately $5.5
million per quarter); and one management agreement with a
subsidiary of Carlson Hotels Worldwide (11 hotels), requiring
annual minimum returns of $12.9 million as of March 31, 2017
(approximately $3.2 million per quarter). Minimum returns 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 flows after payment
of operating expenses. The payments due to HPT under these
agreements for the three months ended March 31, 2017 were paid
to HPT.
- Travel Center Agreements: As of
March 31, 2017, HPT’s 198 travel centers located along the
U.S. Interstate Highway system were leased to TA under five lease
agreements, which required aggregate annual minimum rents of $276.2
million (approximately $69.1 million per quarter). As of
March 31, 2017, all payments due to HPT from TA under these
leases were current.
Conference Call:
On Wednesday, May 10, 2017, 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 HPT's first quarter 2017 financial
results. 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 Wednesday, May 17, 2017.
To hear the replay, dial (412) 317-0088. The replay pass code is
10104365.
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 2017 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 and a reconciliation of those amounts to
amounts determined according to GAAP.
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”, "WILL", “MAY” AND NEGATIVES OR
DERIVATIVES OF THESE 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, 2017,
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, CERTAIN OF THESE GUARANTEES AND
SECURITY DEPOSITS ARE LIMITED IN AMOUNT AND DURATION AND ALL THE
GUARANTEES ARE SUBJECT TO THE GUARANTORS’ ABILITY AND WILLINGNESS
TO PAY. FURTHER, WYNDHAM'S GUARANTEE OF THE MINIMUM RETURNS DUE
FROM HPT'S HOTELS THAT ARE MANAGED BY WYNDHAM WAS DEPLETED TO PAY
MINIMUM RETURNS DUE TO HPT FOR THE QUARTER ENDED MARCH 31, 2017.
HPT DOES NOT KNOW WHETHER WYNDHAM WILL CONTINUE TO PAY THE MINIMUM
RETURNS DUE TO HPT DESPITE THE DEPLETED GUARANTEE OR IF WYNDHAM
WILL DEFAULT ON ITS PAYMENTS. THE BALANCE OF HPT’S ANNUAL MINIMUM
RETURNS AND RENTS AS OF MARCH 31, 2017 WAS NOT GUARANTEED NOR
DOES HPT HOLD A SECURITY DEPOSIT WITH RESPECT TO THOSE AMOUNTS. HPT
CANNOT BE SURE OF THE FUTURE FINANCIAL PERFORMANCE OF HPT’S
PROPERTIES AND WHETHER SUCH PERFORMANCE 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 HELD BY HPT ARE NOT SEGREGATED FROM HPT’S OTHER ASSETS AND
THE APPLICATION OF SECURITY DEPOSITS TO COVER PAYMENT SHORTFALLS
WILL RESULT IN HPT RECORDING INCOME, BUT WILL NOT RESULT IN HPT
RECEIVING ADDITIONAL CASH,
- MR. MURRAY NOTES IN THIS PRESS RELEASE
THAT HPT'S COMPARABLE HOTEL REVPAR GREW 1% IN THE FIRST QUARTER OF
2017, DESPITE COMPETITION FROM NEW ROOM SUPPLY AND CERTAIN MARKET
SPECIFIC IMPACTS. THIS MAY IMPLY THAT HPT'S COMPARABLE HOTEL REVPAR
GROWTH WILL CONTINUE TO GROW. HPT'S COMPARABLE HOTEL REVPAR MAY
DECLINE IN FUTURE PERIODS, ESPECIALLY IF HPT'S HOTELS CONTINUE TO
FACE COMPETITIVE PRESSURES FROM NEWER HOTELS,
- MR. MURRAY STATES IN THIS PRESS RELEASE
THAT HPT CONTINUED ITS STEADY ACQUISITION GROWTH, TOOK ADVANTAGE OF
DEBT CAPITAL MARKET OPPORTUNITIES TO LOWER HPT'S CAPITAL COSTS AND
RAISED ITS DIVIDEND. THESE STATEMENTS MAY IMPLY THAT HPT WILL
CONTINUE TO GROW BY ACQUISITIONS, THAT IT WILL MAINTAIN REDUCED
CAPITAL COSTS AND THAT IT WILL MAINTAIN ITS INCREASED DIVIDEND RATE
OR INCREASE IT. HOWEVER, HPT MAY BE UNABLE TO IDENTIFY PROPERTIES
THAT IT WANTS TO ACQUIRE OR TO NEGOTIATE ACCEPTABLE PURCHASE
PRICES, ACQUISITION FINANCING, MANAGEMENT CONTRACTS OR LEASE TERMS
FOR NEW PROPERTIES. IN ADDITION, HPT MAY NOT BE ABLE TO MAINTAIN
THE LOWER CAPITAL COSTS IT RECENTLY ACHIEVED AND ITS CAPITAL COSTS
MAY INCREASE. ALSO, HPT'S DIVIDEND RATES ARE SET AND RESET FROM
TIME TO TIME BY ITS BOARD OF TRUSTEES. THE HPT BOARD CONSIDERS MANY
FACTORS WHEN SETTING DIVIDEND RATES INCLUDING HPT’S HISTORICAL AND
PROJECTED INCOME, NORMALIZED FUNDS FROM OPERATIONS, 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 QUALIFICATION FOR TAXATION AS A REAL ESTATE
INVESTMENT TRUST AND OTHER FACTORS DEEMED RELEVANT BY HPT’S BOARD
OF TRUSTEES IN ITS DISCRETION. ACCORDINGLY, FUTURE DIVIDEND RATES
MAY BE INCREASED OR DECREASED AND THERE IS NO ASSURANCE AS TO THE
RATE AT WHICH FUTURE DIVIDENDS WILL BE PAID,
- MR. MURRAY ALSO STATES IN THIS PRESS
RELEASE THAT HPT IS CAUTIOUSLY OPTIMISTIC ABOUT ITS PERFORMANCE FOR
THE BALANCE OF 2017. HPT'S BUSINESS IS SUBJECT TO VARIOUS RISKS AND
UNCERTAINTIES; HPT'S PERFORMANCE MAY NOT MEET ITS EXPECTATIONS DUE
TO VARIOUS FACTORS, INCLUDING FACTORS BEYOND ITS CONTROL,
- HPT HAS ADVISED MORGANS THAT THE
CLOSING OF ITS MERGER WITH SBE WAS IN VIOLATION OF HPT'S AGREEMENT
WITH MORGANS, HPT HAS FILED AN ACTION FOR UNLAWFUL DETAINER AGAINST
MORGANS AND SBE TO COMPEL MORGANS AND SBE TO SURRENDER POSSESSION
OF THE SAN FRANCISCO HOTEL WHICH MORGANS HISTORICALLY LEASED FROM
HPT, AND HPT IS CURRENTLY ENGAGED IN DISCUSSIONS WITH MORGANS AND
SBE REGARDING THIS MATTER. THE OUTCOME OF THIS PENDING LITIGATION
AND OF THESE DISCUSSIONS WITH MORGANS AND SBE IS NOT ASSURED, BUT
HPT BELIEVES MORGANS MAY SURRENDER POSSESSION OF THIS HOTEL OR THAT
THE COURT WILL DETERMINE THAT MORGANS AND SBE HAVE BREACHED THE
HISTORICAL LEASE. HPT ALSO BELIEVES THAT THIS HOTEL MAY REQUIRE
SUBSTANTIAL CAPITAL INVESTMENT TO REMAIN COMPETITIVE IN ITS MARKET.
THE CONTINUATION OF THIS DISPUTE WITH MORGANS AND SBE REQUIRES HPT
TO EXPEND LEGAL FEES AND HPT BELIEVES THE RESULT OF THIS DISPUTE
MAY CAUSE SOME LOSS OF RENT AT LEAST UNTIL THIS HOTEL MAY BE
RENOVATED AND OPERATIONS IMPROVE. LITIGATION AND DISPUTES WITH
TENANTS OFTEN PRODUCE UNEXPECTED RESULTS AND HPT CAN PROVIDE NO
ASSURANCE REGARDING THE RESULTS OF THIS DISPUTE, AND
- HPT HAS ENTERED INTO AN AGREEMENT TO
ACQUIRE A HOTEL FOR A PURCHASE PRICE OF $87.8 MILLION, EXCLUDING
ACQUISITION RELATED COSTS, AND HPT EXPECTS TO COMPLETE THIS
TRANSACTION DURING THE SECOND QUARTER OF 2017 AND TO ADD THIS HOTEL
TO ITS EXISTING MANAGEMENT AGREEMENT WITH SONESTA. THIS TRANSACTION
IS SUBJECT TO CONDITIONS. THESE CONDITIONS MAY NOT BE SATISFIED. AS
A RESULT, THIS ACQUISITION AND THE EXPECTED MANAGEMENT ARRANGEMENT
MAY NOT OCCUR, MAY BE DELAYED OR THEIR TERMS MAY CHANGE.
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 share
data)
(Unaudited)
Three Months Ended March 31, 2017 2016 Revenues: Hotel
operating revenues (1) $ 407,587 $ 396,503 Rental income (2) 79,788
76,259 FF&E reserve income (3) 1,227 1,356 Total
revenues 488,602 474,118 Expenses: Hotel
operating expenses (1) 282,723 276,305 Depreciation and
amortization 93,451 87,271 General and administrative (4) 32,346
16,023 Acquisition related costs (5) — 612 Total
expenses 408,520 380,211 Operating income
80,082 93,907 Dividend income 626 — Interest income 257 98
Interest expense (including amortization
of debt issuance costs and debt discounts and
(43,566 ) (41,586 )
premiums of $2,152 and $1,865,
respectively)
Loss on early extinguishment of debt (6) — (70 ) Income
before income taxes and equity in earnings of an investee 37,399
52,349 Income tax expense (356 ) (375 ) Equity in earnings of an
investee 128 77 Net income 37,171 52,051 Preferred
distributions (1,435 ) (5,166 ) Excess of liquidation preference
over carrying value of preferred shares redeemed (7) (9,893 ) —
Net income available for common shareholders $ 25,843
$ 46,885 Weighted average common shares outstanding
(basic) 164,120 151,402 Weighted average common
shares outstanding (diluted) 164,149 151,415
Net income available for common shareholders per common share
(basic and diluted) $ 0.16 $ 0.31
See Notes on pages 10 and 11
HOSPITALITY PROPERTIES TRUST
RECONCILIATIONS OF FUNDS FROM
OPERATIONS,
NORMALIZED FUNDS FROM OPERATIONS,
EBITDA AND ADJUSTED EBITDA
(amounts in thousands, except share
data)
(Unaudited)
Three Months Ended March 31, 2017 2016
Calculation of Funds from Operations (FFO)
and Normalized FFO available for common shareholders: (8)
Net income available for common shareholders $ 25,843 $ 46,885
Add:
Depreciation and amortization
93,451 87,271 FFO available for common shareholders 119,294
134,156
Add:
Acquisition related costs (5)
— 612 Estimated business management incentive fees (4) 19,620 5,316
Loss on early extinguishment of debt (6) — 70 Excess of liquidation
preference over carrying value of preferred shares redeemed (7)
9,893 — Normalized FFO available for common shareholders $
148,807 $ 140,154 Weighted average common shares
outstanding (basic) 164,120 151,402 Weighted average common
shares outstanding (diluted) 164,149 151,415 Basic
and diluted per common share amounts: FFO available for common
shareholders $ 0.73 $ 0.89 Normalized FFO available for common
shareholders $ 0.91 $ 0.93 Distributions declared per share $ 0.51
$ 0.50
Three Months Ended March 31, 2017 2016 Calculation of EBITDA and
Adjusted EBITDA: (9) Net income $ 37,171 $ 52,051
Add:
Interest expense
43,566 41,586 Income tax expense 356 375 Depreciation and
amortization 93,451 87,271 EBITDA 174,544 181,283
Add:
Acquisition related costs (5)
— 612 General and administrative expense paid in common shares (10)
412 422 Estimated business management incentive fees (4) 19,620
5,316 Loss on early extinguishment of debt (6) — 70 Adjusted
EBITDA $ 194,576 $ 187,703
See Notes on pages 10 and 11
(1) At March 31, 2017, HPT owned 308 hotels; 305 of these
hotels were managed by hotel operating companies and three hotels
were leased to hotel operating companies. At March 31, 2017,
HPT also owned 198 travel centers; all 198 of these travel centers
were 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, $16,924 and $16,429 less than the minimum returns due to
HPT in the three months ended March 31, 2017 and 2016,
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 $6,662 and $4,377 in the three months ended
March 31, 2017 and 2016, 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 $11,889 and $12,052 in the
three months ended March 31, 2017 and 2016, respectively,
which represent the unguaranteed portions of HPT's minimum returns
from Sonesta. Certain of HPT’s managed hotel portfolios had net
operating results that were, in the aggregate, $2,791 and $8,363
more than the minimum returns due to HPT in the three months ended
March 31, 2017 and 2016, respectively. Certain guarantees to
HPT and security deposits held by HPT may be replenished by a share
of these excess cash flows from the applicable hotel operations
pursuant to the terms of the respective operating agreements or the
guarantees. When these guarantees and 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 were increased by $1,504 and $2,522 in the three months
ended March 31, 2017 and 2016, respectively, as a result of
such replenishments.
(2) Rental income includes $3,008 and $3,752 in the three months
ended March 31, 2017 and 2016, 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) 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.
(4) 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, in the first, second and third quarters. Although
HPT recognizes this expense, if any, in the first, second and third
quarters 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 business management incentive fee
expense amount for the year, if any, is determined. Net income
includes $19,620 and $5,316 of estimated business management
incentive fee expense in the three months ended March 31, 2017
and 2016, respectively.
(5) Represents costs associated with HPT’s acquisition
activities. Acquisition costs incurred during the 2017 period have
been capitalized in purchase accounting pursuant to a change in
GAAP.
(6) HPT recorded a loss on early extinguishment of debt of $70
in the three months ended March 31, 2016, in connection with
the redemption of certain senior unsecured notes.
(7) On February 10, 2017, HPT redeemed all 11,600,000 of its
outstanding 7.125% Series D cumulative redeemable preferred shares
at the stated liquidation preference of $25.00 per share plus
accrued and unpaid distributions to the date of redemption (an
aggregate of $291,435). The liquidation preference of the redeemed
shares exceeded the carrying amount for the redeemed shares as of
the date of redemption by $9,893, or $0.06 per share, and HPT
reduced net income available to common shareholders in the three
months ended March 31, 2017 by that excess amount.
(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, if any, 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 business management
incentive fees, if any, only in the fourth quarter versus the
quarter when they are recognized as expense in accordance with GAAP
due to their quarterly volatility not necessarily being indicative
of HPT’s core operating performance and the uncertainty as to
whether any such business management incentive fees will be payable
when all contingencies for determining such fees are known at the
end of the calendar year, and HPT excludes excess of liquidation
preference over carrying value of preferred shares redeemed,
acquisition related costs expensed under GAAP and loss on early
extinguishment of debt. HPT considers FFO available for common
shareholders and Normalized FFO available for common shareholders
to be appropriate supplemental measures of operating performance
for a REIT, along with net income, net income available for common
shareholders and operating income. 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 credit 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 or operating income as an
indicator of HPT’s operating performance or as a measure of HPT’s
liquidity. These measures should be considered in conjunction with
net income, net income available for common shareholders and
operating income as presented in HPT’s condensed consolidated
statements of income. 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
supplemental measures of its operating performance, along with net
income, net income available for common shareholders and operating
income. 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. In calculating Adjusted EBITDA, HPT
includes business management incentive fees only in the fourth
quarter versus the quarter when they are recognized as expense in
accordance with GAAP due to their quarterly volatility not
necessarily being indicative of HPT’s core operating performance
and the uncertainty as to whether any such business management
incentive fees will be payable when all contingencies for
determining such fees are known at the end of the calendar year.
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 or operating income as an indicator of
operating performance or as a measure of HPT’s liquidity. These
measures should be considered in conjunction with net income, net
income available for common shareholders and operating income as
presented in HPT’s condensed consolidated statements of income.
Other real estate companies and REITs may calculate EBITDA and
Adjusted EBITDA differently than HPT does.
(10) Amounts represent the equity compensation for HPT’s
trustees, its officers and certain other employees of HPT’s
manager.
HOSPITALITY PROPERTIES TRUST
CONDENSED CONSOLIDATED BALANCE
SHEETS
(amounts in thousands, except share
data)
(Unaudited)
March 31, December 31, 2017 2016 ASSETS Real estate
properties: Land $ 1,604,366 $ 1,566,630 Buildings, improvements
and equipment 7,307,972 7,156,759 Total real estate
properties, gross 8,912,338 8,723,389 Accumulated depreciation
(2,590,844 ) (2,513,996 ) Total real estate properties, net
6,321,494 6,209,393 Cash and cash equivalents 23,772 10,896
Restricted cash (FF&E reserve escrow) 56,713 60,456 Due from
related persons 68,920 65,332 Other assets, net 318,535
288,151 Total assets $ 6,789,434 $ 6,634,228
LIABILITIES AND SHAREHOLDERS’ EQUITY Unsecured
revolving credit facility $ 130,000 $ 191,000 Unsecured term loan,
net 398,587 398,421 Senior unsecured notes, net 3,160,757 2,565,908
Convertible senior unsecured notes 47 8,478 Security deposits
100,640 89,338 Accounts payable and other liabilities 162,137
188,053 Due to related persons 24,180 58,475 Dividends payable —
5,166 Total liabilities 3,976,348 3,504,839
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; zero and 11,600,000shares issued and
outstanding, respectively, aggregate liquidation preference ofzero
and $290,000, respectively
— 280,107
Common shares of beneficial interest, $.01
par value; 200,000,000 shares
1,643 1,643
authorized; 164,268,199 shares issued and
outstanding
Additional paid in capital 4,539,673 4,539,673 Cumulative net
income 3,132,044 3,104,767 Cumulative other comprehensive income
61,322 39,583 Cumulative preferred distributions (343,412 )
(341,977 ) Cumulative common distributions (4,578,184 ) (4,494,407
) Total shareholders’ equity 2,813,086 3,129,389
Total liabilities and shareholders’ equity $ 6,789,434 $
6,634,228
A Maryland Real Estate Investment Trust with
transferable shares of beneficial interest listed on the Nasdaq.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/20170510005379/en/
Hospitality Properties TrustKatie Strohacker, 617-796-8232Senior
Director, Investor Relations
Hospitality Properties (NASDAQ:HPT)
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