Normalized FFO Per Share Increases 12.6%
Year Over Year to $0.98
Comparable Hotel RevPAR Growth of
10.7%
Hospitality Properties Trust (NYSE:HPT) today announced its
financial results for the quarter and six months ended June 30,
2015, compared to the results for the prior year comparable
periods:
Three Months Ended
June 30, Six Months Ended June 30, 2015 2014 2015 2014
($ in thousands,
except per share and RevPAR data)
Net income available for common shareholders $ 77,980 $
48,749 $ 114,395 $ 81,133
Net income available for common
shareholders per share
$ 0.52 $ 0.33 $ 0.76 $ 0.54 Adjusted EBITDA (1) $ 189,819 $ 172,099
$ 358,454 $ 327,050 Adjusted EBITDA growth 10.3% — 9.6% —
Normalized FFO available for common shareholders (1) $ 146,899 $
129,687 $ 272,888 $ 242,747 Normalized FFO available for common
shareholders per share (diluted) (1) $ 0.98 $ 0.87 $ 1.81 $ 1.62
Portfolio
Performance
Comparable hotel RevPAR $ 98.38 $ 88.86 $ 92.10 $ 83.39 Comparable
hotel RevPAR growth 10.7% — 10.4% — RevPAR (all hotels) $ 98.68 $
89.23 $ 92.50 $ 83.80 RevPAR growth (all hotels) 10.6% — 10.4% —
Coverage of HPT’s minimum returns and rents (all hotels) 1.28x
1.10x 1.11x 0.93x Coverage of HPT's minimum rents (all travel
centers) 1.73x 1.79x 1.82x 1.66x
(1)
Reconciliations of net income available
for common shareholders determined in accordance with U.S.
generally accepted accounting principles, or GAAP, to funds from
operations, or FFO, and Normalized FFO available for common
shareholders, and net income to earnings before interest, taxes,
depreciation and amortization, or EBITDA, and Adjusted EBITDA for
the quarters and six months ended June 30, 2015 and 2014 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 strong performance from our hotel and
travel center portfolios which resulted in Normalized FFO per
common share growth of 12.6%. Our RevPAR growth of 10.6% exceeded
the hotel industry’s performance for the tenth consecutive quarter
and this strength was broad based, with eight of our nine hotel
operating agreements exceeding the hotel industry’s RevPAR
performance. We were also active on the acquisition front this
quarter, expanding both our travel center and hotel portfolios.
During the second quarter, we also announced a transaction
involving our manager, RMR, whereby we acquired a 16.2% economic
interest in our manager in exchange for $57.8 million and amended
the management agreements with RMR to extend the terms for 20
years. We believe this transaction further aligns the interests of
RMR management, ourselves and our shareholders, and allows us to
continue benefiting from a low cost management structure.”
Results for the Three and Six Months Ended June 30, 2015 and
Recent Activities:
- Net Income Available for Common
Shareholders: Net income available for common shareholders for
the quarter ended June 30, 2015 was $78.0 million, or $0.52 per
diluted share, compared to $48.7 million, or $0.33 per diluted
share, for the quarter ended June 30, 2014. Net income available
for common shareholders for the second quarter of 2015 includes an
$11.0 million, or $0.07 per share, gain on the sale of real estate.
The weighted average number of diluted common shares outstanding
was 150.3 million for the quarter ended June 30, 2015 and 149.8
million for the quarter ended June 30, 2014.Net income available
for common shareholders for the six months ended June 30, 2015 was
$114.4 million, or $0.76 per diluted share, compared to $81.1
million, or $0.54 per diluted share, for the six months ended June
30, 2014. Net income available for common shareholders for the six
months ended June 30, 2015 includes an $11.0 million, or $0.07 per
share, gain on the sale of real estate. The weighted average number
of diluted common shares outstanding was 150.6 million for the six
months ended June 30, 2015 and 149.7 million for the six months
ended June 30, 2014.
- Adjusted EBITDA: Adjusted EBITDA
for the quarter ended June 30, 2015 compared to the same period in
2014 increased 10.3% to $189.8 million.Adjusted EBITDA for the six
months ended June 30, 2015 compared to the same period in 2014
increased 9.6% to $358.5 million.
- Normalized FFO available for common
shareholders: Normalized FFO available for common shareholders
for the quarter ended June 30, 2015 were $146.9 million, or $0.98
per diluted share, compared to Normalized FFO available for common
shareholders for the quarter ended June 30, 2014 of $129.7 million,
or $0.87 per diluted share. The 12.6% increase in Normalized FFO
available for common shareholders per diluted share is due
primarily to increases in annual minimum returns and rents that
resulted from HPT’s funding of improvements to its hotels and
travel centers, increases in FF&E reserve income and deposits
under HPT’s hotel agreements and the impact of its acquisitions
since April 1, 2014.Normalized FFO available for common
shareholders for the six months ended June 30, 2015 were $272.9
million, or $1.81 per diluted share, compared to Normalized FFO
available for common shareholders for the six months ended June 30,
2014 of $242.7 million, or $1.62 per diluted share.
- Comparable Hotel RevPAR: For the
quarter ended June 30, 2015 compared to the same period in 2014 for
HPT’s 290 hotels that it owned continuously since April 1, 2014:
average daily rate, or ADR, increased 8.1% to $122.82; occupancy
increased 1.9 percentage points to 80.1%; and revenue per available
room, or RevPAR, increased 10.7% to $98.38.For the six months ended
June 30, 2015 compared to the same period in 2014 for HPT’s 290
comparable hotels that it owned continuously since January 1, 2014:
ADR increased 8.1% to $121.18; occupancy increased 1.6 percentage
points to 76.0%; and RevPAR increased 10.4% to $92.10.
- RevPAR (all hotels): For the
quarter ended June 30, 2015 compared to the same period in 2014 for
HPT’s 293 hotels: ADR increased 8.0% to $123.20; occupancy
increased 1.9 percentage points to 80.1%; and RevPAR increased
10.6% to $98.68.For the six months ended June 30, 2015 compared to
the same period in 2014 for HPT’s 293 hotels: ADR increased 8.1% to
$121.71; occupancy increased 1.6 percentage points to 76.0%; and
RevPAR increased 10.4% to $92.50.
- Hotel Coverage of Minimum Returns
and Rents: For the three months ended June 30, 2015, the
aggregate coverage ratio of (x) total property level revenues minus
FF&E reserve escrows, if any, and all property level expenses
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 1.28x from 1.10x for the three months ended
June 30, 2014.For the six months ended June 30, 2015, the aggregate
coverage ratio of (x) total property level revenues minus FF&E
reserve escrows, if any, and all property level expenses 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 1.11x from 0.93x for the six months ended June 30,
2014.As of June 30, 2015, approximately 69% of HPT’s aggregate
annual minimum returns and rents from its hotels were secured by
guarantees or security deposits from HPT’s managers and tenants
pursuant to the terms of HPT’s hotel operating agreements.
- Recent Property Acquisition and
Disposition Activities: In May 2015, HPT acquired a 364 room
full service hotel located in Denver, CO for $77.3 million,
excluding acquisition related costs. HPT added this Crowne Plaza®
branded hotel to its management agreement with a subsidiary of
InterContinental Hotels Group, plc (LON: IHG; NYSE: IHG (ADRs)), or
InterContinental.As previously announced, on June 1, 2015, HPT
entered agreements with TravelCenters of America LLC (NYSE: TA), or
TA, to acquire from TA 19 travel centers, including five travel
centers TA is developing, and certain assets at 11 travel centers
which HPT leases to TA for an aggregate purchase price of
approximately $397.0 million. These agreements also provided that
HPT would sell five travel centers to TA. In June 2015, HPT
acquired 12 of these travel centers and certain assets at 10 travel
centers HPT leased to TA for an aggregate purchase price of $227.9
million. Also in June 2015, HPT sold five travel centers to TA for
$45.0 million and recognized a gain on sale of $11.0 million. HPT
expects to acquire three of the remaining travel centers later in
2015 and the five development travel centers before June 30,
2017.In July 2015, HPT acquired nine extended stay hotels with
1,094 suites located in eight states for $85.0 million, excluding
acquisition related costs. HPT converted these hotels to the
Sonesta ES Suites® hotel brand and added these hotels to its
management agreement with Sonesta International Hotels Corporation,
or Sonesta. HPT currently expects to spend approximately $45.0
million to upgrade these hotels to Sonesta ES Suites®
standards.
- Investment in Reit Management &
Research: As previously announced, on June 5, 2015, HPT
acquired approximately 5.0 million shares of Reit Management &
Research Inc., or RMR Inc., for $57.8 million, excluding
transactions costs. As payment for the shares, HPT issued 1,490,000
of its common shares valued at the volume weighted average trading
prices during the 20 days prior to the acquisition and paid the
remainder of the purchase price in cash. Through HPT’s acquisition
of the RMR Inc. shares, HPT indirectly acquired an economic
ownership of 16.2% of Reit Management & Research LLC, or RMR
LLC, HPT’s manager. HPT currently expects to distribute half of its
RMR Inc. shares to its shareholders by year end 2015, but HPT will
not distribute its RMR Inc. shares until a registration statement,
including a prospectus, is declared effective by the Securities and
Exchange Commission, or SEC. In connection with entering into a
transaction agreement with RMR Inc., HPT and RMR LLC entered into
amended and restated business and property management agreements,
which among other things, extend the terms of these agreements for
20 years.
Tenants and Managers: As of June 30, 2015, HPT had nine
operating agreements with seven hotel operating companies for 293
hotels with 44,761 rooms, which represented 65% of HPT’s total
annual minimum returns and rents.
- Marriott Agreements: During the
three months ended June 30, 2015, 122 hotels owned by HPT 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 up to $68.1 million (approximately $17.0
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 flow after
payment of operating expenses and funding of the FF&E reserve.
During the three months ended June 30, 2015, HPT realized returns
under its Marriott No. 1 agreement of $17.0 million. HPT’s Marriott
No. 234 agreement includes 68 hotels and requires annual minimum
returns to HPT of $106.2 million (approximately $26.6 million per
quarter). During the three months ended June 30, 2015, HPT realized
returns under its Marriott No. 234 agreement of $28.0 million.
During the three months ended June 30, 2015, HPT replenished the
available security deposit by $0.8 million with the payments HPT
received during the period in excess of the minimum returns due for
the period. At June 30, 2015, the available security deposit which
HPT held to pay future payment shortfalls for the Marriott No. 234
agreement was $0.8 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 June 30, 2015 of $2.5 million was
paid to HPT.
- InterContinental Agreement:
During the three months ended June 30, 2015, HPT realized returns
and rents of $39.9 million under its agreement with subsidiaries of
InterContinental, which includes 93 hotels and requires annual
minimum returns/rent to HPT of $149.8 million (approximately $37.5
million per quarter). During the three months ended June 30, 2015,
HPT replenished the available security deposit by $4.7 million with
a portion of the payments HPT received during the period in excess
of the minimum returns and rents due for the period. At June 30,
2015, the available security deposit which HPT held to pay future
payment shortfalls was $41.3 million.
- Other Hotel Agreements: As of
June 30, 2015, HPT’s remaining 78 hotels are operated under five
agreements: one management agreement with Sonesta (22 hotels),
requiring annual minimum returns of $73.4 million (approximately
$18.4 million per quarter); one management agreement with a
subsidiary of Wyndham Worldwide Corporation (NYSE: WYN), or Wyndham
(22 hotels), requiring annual minimum returns of $27.7 million
(approximately $6.9 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
(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
(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 (approximately $1.9
million per quarter). Minimum returns and rents due HPT are
partially guaranteed under the Wyndham, Hyatt and Carlson
agreements. There is no guarantee or security deposit for the
Sonesta agreement and the minimum returns HPT receives under this
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 June 30, 2015 were paid to HPT.
- Travel Center Agreements: As of
June 30, 2015, HPT had five leases with TA for 191 travel centers
located along the U.S. Interstate Highway system requiring
aggregate annual minimum rents of $247.0 million ($61.8 million per
quarter), which represent 35% of HPT’s total annual minimum returns
and rents. As of June 30, 2015, all payments due to HPT from TA
under these leases were current.For the three months ended June 30,
2015, the aggregate coverage ratio of (x) total cash flow at the
leased travel centers available to pay HPT’s minimum rent due from
TA to (y) HPT’s minimum rent due from TA decreased to 1.73x from
1.79x for the three months ended June 30, 2014. For the six months
ended June 30, 2015, the aggregate coverage ratio of (x) total cash
flow at the leased travel centers available to pay HPT’s minimum
rent due from TA to (y) HPT’s minimum rent due from TA increased to
1.82x from 1.66x for the six months ended June 30, 2014.
Conference Call:
On Monday, August 10, 2015, at 10:00 a.m. Eastern Time, John
Murray, President and Chief Operating Officer, and Mark Kleifges,
Treasurer and Chief Financial Officer, will host a conference call
to discuss the results for the quarter ended June 30, 2015. 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 Monday, August 17, 2015. To hear the replay,
dial (412) 317-0088. The replay pass code is 10068830.
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 second quarter conference call
is strictly prohibited without the prior written consent of
HPT.
Supplemental Data:
A copy of HPT’s Second Quarter 2015 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 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, 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” 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 THESE FORWARD
LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:
- HPT EXPECTS THAT MARRIOTT WILL PAY HPT
UP TO 90% OF ITS MINIMUM RETURNS INCLUDED IN HPT’S MARRIOTT NO. 234
AGREEMENT UNDER A LIMITED GUARANTY AFTER HPT DEPLETES THE SECURITY
DEPOSIT IT HOLDS FOR ANY PAYMENT SHORTFALLS. THIS STATEMENT IMPLIES
THAT MARRIOTT WILL FULFILL ITS OBLIGATION UNDER THIS GUARANTY OR
THAT ANY FUTURE SHORTFALLS IN THE MINIMUM RETURNS DUE TO HPT FROM
ITS HOTELS MANAGED BY MARRIOTT WILL NOT EXHAUST THE GUARANTY AND
SECURITY DEPOSIT HPT HOLDS. HOWEVER, THIS GUARANTY IS LIMITED IN
AMOUNT AND EXPIRES ON DECEMBER 31, 2019, AND HPT CAN PROVIDE NO
ASSURANCE WITH REGARD TO MARRIOTT’S FUTURE ACTIONS OR THE FUTURE
PERFORMANCE OF HPT’S HOTELS TO WHICH THE MARRIOTT LIMITED GUARANTY
APPLIES OR AFTER MARRIOTT’S GUARANTY EXPIRES,
- HPT EXPECTS THAT INTERCONTINENTAL WILL
CONTINUE TO PAY THE MINIMUM RETURNS INCLUDED IN HPT’S MANAGEMENT
AGREEMENT WITH INTERCONTINENTAL AND THAT HPT WILL UTILIZE THE
SECURITY DEPOSIT IT HOLDS FOR ANY PAYMENT SHORTFALLS. HOWEVER, THE
SECURITY DEPOSIT HPT HOLDS FOR INTERCONTINENTAL’S OBLIGATIONS IS
FOR A LIMITED AMOUNT AND HPT CAN PROVIDE NO ASSURANCE THAT THE
SECURITY DEPOSIT WILL BE ADEQUATE TO COVER FUTURE SHORTFALLS IN THE
MINIMUM RETURNS DUE TO HPT FROM ITS HOTELS MANAGED BY
INTERCONTINENTAL. MOREOVER, THIS SECURITY DEPOSIT IS NOT ESCROWED
OR OTHERWISE SEGREGATED FROM HPT’S OTHER ASSETS AND LIABILITIES;
ACCORDINGLY, IF HPT APPLIES THIS SECURITY DEPOSIT TO COVER MINIMUM
PAYMENTS DUE, HPT WILL RECORD INCOME BUT IT WILL NOT RECEIVE ANY
ADDITIONAL CASH,
- AS OF JUNE 30, 2015, APPROXIMATELY 69%
OF HPT’S AGGREGATE ANNUAL MINIMUM RETURNS AND RENTS FOR ITS HOTELS
WERE SECURED BY GUARANTEES AND 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. FURTHER, 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,
- THE PURCHASE PRICE HPT PAID FOR THE RMR
INC. SHARES AND HPT’S ECONOMIC OWNERSHIP INTEREST IN RMR LLC MAY
IMPLY THAT THE RMR INC. SHARES HPT EXPECTS TO DISTRIBUTE TO HPT’S
SHAREHOLDERS WILL HAVE A MARKET VALUE AT LEAST EQUAL TO THE VALUE
HPT PAID FOR THE RMR INC. SHARES. IN FACT, THE VALUE OF THE RMR
INC. SHARES MAY BE DIFFERENT FROM THE PRICE HPT PAID FOR THE RMR
INC. SHARES. THE MARKET VALUE OF THE RMR INC. SHARES WILL DEPEND
UPON VARIOUS FACTORS, INCLUDING SOME THAT ARE BEYOND HPT’S CONTROL,
SUCH AS MARKET CONDITIONS GENERALLY AT THE TIME THE RMR INC. SHARES
ARE AVAILABLE FOR TRADING. THERE CAN BE NO ASSURANCE PROVIDED
REGARDING THE PRICE AT WHICH THE RMR INC. SHARES WILL TRADE IF AND
WHEN THEY ARE DISTRIBUTED AND LISTED ON A NATIONAL STOCK
EXCHANGE,
- HPT CURRENTLY EXPECTS TO DISTRIBUTE
HALF OF THE RMR INC. SHARES HPT ACQUIRED TO HPT’S SHAREHOLDERS AND
HPT CURRENTLY EXPECTS THE DISTRIBUTION OF THE RMR INC. SHARES WILL
OCCUR BY YEAR END 2015. THE PROCESS OF PREPARING A REGISTRATION
STATEMENT FOR THE DISTRIBUTION OF RMR INC. SHARES REQUIRES
EXTENSIVE LEGAL AND ACCOUNTING SERVICES. AFTER A REGISTRATION
STATEMENT IS FILED, IT WILL BE SUBJECT TO REVIEW BY SEC STAFF,
WHICH MAY ALSO TAKE CONSIDERABLE TIME. HPT CAN PROVIDE NO ASSURANCE
WHEN OR IF THE REGISTRATION STATEMENT WILL BE DECLARED EFFECTIVE BY
THE SEC, THAT THE RMR INC. SHARES WILL BE APPROVED FOR LISTING ON A
NATIONAL STOCK EXCHANGE OR IF THE DISTRIBUTION OF THE RMR INC.
SHARES WILL OCCUR BY YEAR END 2015, OR EVER,
- THE BUSINESS MANAGEMENT AND PROPERTY
MANAGEMENT AGREEMENTS BETWEEN HPT AND RMR LLC HAVE BEEN AMENDED AND
EXTENDED FOR 20 YEAR TERMS. THE AMENDED MANAGEMENT AGREEMENTS
INCLUDE TERMS WHICH PERMIT EARLY TERMINATION AND EXTENSIONS IN
CERTAIN CIRCUMSTANCES. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT
THESE AGREEMENTS WILL REMAIN IN EFFECT FOR 20 YEARS OR FOR SHORTER
OR LONGER TERMS,
- HPT CURRENTLY EXPECTS TO SPEND
APPROXIMATELY $45.0 MILLION TO UPGRADE NINE HOTELS IT HAS ACQUIRED
TO SONESTA ES SUITES® STANDARDS. IT IS DIFFICULT TO PROPERLY
ESTIMATE THE COST OF HOTEL RENOVATIONS. ONCE A RENOVATION PROJECT
HAS BEGUN IT IS OFTEN COMMERCIALLY APPROPRIATE TO COMPLETE THE
PROJECT EVEN IF COSTS INCREASE. THIS PLANNED RENOVATION PROJECT MAY
COST MORE OR LESS THAN HPT CURRENTLY EXPECTS,
- HPT EXPECTS TO ACQUIRE FROM AND
LEASEBACK TO TA TWO ADDITIONAL TRAVEL CENTERS AND CERTAIN ASSETS AT
A TRAVEL CENTER HPT CURRENTLY LEASES TO TA FOR $51.5 MILLION LATER
IN 2015. THESE ACQUISITIONS ARE SUBJECT TO CONDITIONS. THESE
ACQUISITIONS MAY NOT OCCUR, MAY BE FURTHER DELAYED OR THEIR TERMS
MAY CHANGE, AND
- HPT ALSO EXPECTS TO ACQUIRE FROM AND
LEASEBACK TO TA FIVE TRAVEL CENTERS WHICH TA IS DEVELOPING, AND
THAT THE PURCHASE AND LEASEBACK OF THESE FIVE TRAVEL CENTERS IS
EXPECTED TO OCCUR AS DEVELOPMENT OF THESE TRAVEL CENTERS IS
COMPLETED BEFORE JUNE 30, 2017. TA HAS BEGUN CONSTRUCTION AT SOME,
BUT NOT ALL, OF THESE TRAVEL CENTERS. OBTAINING GOVERNMENTAL
APPROVALS TO BUILD TRAVEL CENTERS IS OFTEN A COMPLEX AND TIME
CONSUMING PROCESS. HPT CAN PROVIDE NO ASSURANCE THAT TA WILL OBTAIN
ALL REQUIRED APPROVALS TO DEVELOP ALL FIVE TRAVEL CENTERS. IF
REQUIRED DEVELOPMENT APPROVALS ARE NOT OBTAINED OR IF CERTAIN
TRAVEL CENTERS ARE NOT DEVELOPED FOR OTHER REASONS, HPT MAY ACQUIRE
LESS THAN FIVE TRAVEL CENTERS OR DIFFERENT TRAVEL CENTERS MAY BE
AGREED FOR SALE AND LEASEBACK BETWEEN HPT AND TA. IT IS DIFFICULT
TO ESTIMATE THE COST TO DEVELOP NEW TRAVEL CENTERS. HPT AND TA HAVE
AGREED THAT HPT WILL PURCHASE THESE PROPERTIES FOR TA’S COST OF
DEVELOPMENT, WHICH IS ESTIMATED TO BE UP TO APPROXIMATELY $118
MILLION, BUT THAT COST MAY BE MORE OR LESS THAN THE $118 MILLION
ESTIMATE. ALSO, CONSTRUCTION OF NEW TRAVEL CENTERS MAY BE DELAYED
FOR VARIOUS REASONS SUCH AS LABOR STRIFE, WEATHER CONDITIONS, THE
UNAVAILABILITY OF CONSTRUCTION MATERIALS, ETC.; AND THE PURCHASE
AND LEASEBACK OF THESE TRAVEL CENTERS MAY BE DELAYED BEYOND JUNE
30, 2017.
THE INFORMATION CONTAINED IN HPT’S FILINGS
WITH THE 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 June 30, Six Months Ended June 30,
2015 2014 2015 2014 Revenues: Hotel operating revenues (1) $
436,977 $ 387,248 $ 806,573 $ 717,184 Minimum rent (1) 67,015
63,736 131,766 127,122 Percentage rent (2) 2,048 - 2,048 - FF&E
reserve income (3) 1,026 916 2,191
1,844 Total revenues 507,066 451,900 942,578
846,150 Expenses: Hotel operating expenses (1)
304,428 270,778 562,086 501,395 Depreciation and amortization
80,582 78,763 159,551 157,050 General and administrative (4) 12,685
13,166 33,989 24,631 Acquisition related costs (5) 797
162 1,135 223 Total expenses 398,492
362,869 756,761 683,299 Operating
income 108,574 89,031 185,817 162,851 Interest income 10 25
21 50
Interest expense (including amortization
of deferred financingcosts and debt discounts of $1,458 and $1,319,
and $2,916and $2,672, respectively)
(35,836) (34,941) (71,290) (69,797) Loss on early extinguishment of
debt (6) - - - (726)
Income before income taxes, equity in
earnings of an investeeand gain on sale of real estate
72,748 54,115 114,548 92,378 Income tax expense (640) (455) (931)
(1,071) Equity in earnings of an investee 23 125 95 28 Income
before gain on sale of real estate 72,131 53,785 113,712 91,335
Gain on sale of real estate (7) 11,015 130 11,015 130 Net income
83,146 53,915 124,727 91,465 Preferred distributions (5,166)
(5,166) (10,332) (10,332) Net income available
for common shareholders $ 77,980 $ 48,749 $ 114,395 $ 81,133
Weighted average common shares outstanding (basic) 150,260
149,610 150,028 149,591 Weighted average
common shares outstanding (diluted) 150,292 149,789
150,594 149,740 Net income available for
common shareholders per common share: Basic and diluted $ 0.52 $
0.33 $ 0.76 $ 0.54
HOSPITALITY PROPERTIES
TRUSTRECONCILIATIONS OF FUNDS FROM
OPERATIONS,NORMALIZED FUNDS FROM OPERATIONS, EBITDA AND
ADJUSTED EBITDA(amounts in thousands, except per share
data)(Unaudited)
Three Months Ended June 30, Six Months Ended June 30, 2015
2014 2015 2014
Calculation of Funds from Operations (FFO)
and Normalized FFOavailable for common shareholders: (8)
Net income available for common shareholders $ 77,980 $ 48,749 $
114,395 $ 81,133 Add: Depreciation and amortization 80,582 78,763
159,551 157,050 Less: Gain on sale of real estate (7)
(11,015) (130) (11,015) (130) FFO available
for common shareholders 147,547 127,382 262,931 238,053 Add:
(Less:) Acquisition related costs (5) 797 162 1,135 223 Estimated
business management incentive fees (4) (205) 1,445 8,822 2,173 Loss
on early extinguishment of debt (6) - - - 726 Deferred percentage
rent (2) (1,240) 698 - 1,572 Normalized
FFO available for common shareholders $ 146,899 $ 129,687 $ 272,888
$ 242,747 Weighted average common shares outstanding (basic)
150,260 149,610 150,028 149,591
Weighted average common shares outstanding (diluted) 150,292
149,789 150,594 149,740 Basic and
diluted per common share amounts: FFO available for common
shareholders (basic and diluted) $ 0.98 $ 0.85 $ 1.75 $ 1.59
Normalized FFO (basic) $ 0.98 $ 0.87 $ 1.82 $ 1.62 Normalized FFO
(diluted) $ 0.98 $ 0.87 $ 1.81 $ 1.62
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014 Calculation of EBITDA and Adjusted EBITDA: (9)
Net income $ 83,146 $ 53,915 $ 124,727 $ 91,465 Add: Interest
expense 35,836 34,941 71,290 69,797 Income tax expense 640 455 931
1,071 Depreciation and amortization 80,582 78,763
159,551 157,050 EBITDA 200,204 168,074 356,499
319,383 Add: (Less:) Acquisition related costs (5) 797 162 1,135
223 General and administrative expense paid in common shares (10)
1,278 1,850 3,013 3,103 Estimated business management incentive
fees (4) (205) 1,445 8,822 2,173 Loss on early extinguishment of
debt (6) - - - 726 Deferred percentage rent (2) (1,240) 698 - 1,572
Gain on sale of real estate (7) (11,015) (130)
(11,015) (130) Adjusted EBITDA $ 189,819 $ 172,099 $ 358,454
$ 327,050
(1)
At June 30, 2015, HPT owned 293 hotels;
290 of these hotels are leased by HPT to its taxable REIT
subsidiaries, or TRSs, and managed by hotel operating companies and
three hotels are leased to hotel operating companies. At June 30,
2015, HPT also owned 191 travel centers; all 191 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. Net
operating results of HPT’s managed hotel portfolios exceeded the
minimum returns due to HPT in the three months ended June 30, 2015.
Certain of HPT’s managed hotels had net operating results that
were, in the aggregate, $4,449 less than the minimum returns due to
HPT in the three months ended June 30, 2014 and $11,443 and $25,291
less than the minimum returns due to HPT in the six months ended
June 30, 2015 and 2014, 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. There was no reduction to hotel operating expenses for
the three months ended June 30, 2015 and 2014 and reductions of
$1,903 and $5,331 in the six months ended June 30, 2015 and 2014,
respectively. 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 $4,449 in the three months
ended June 30, 2014, and $9,540 and $19,960 in the six months ended
June 30, 2015 and 2014, respectively, which represent the
unguaranteed portions of HPT’s minimum returns from Marriott and
from Sonesta. Certain of HPT’s guarantees and its security deposits
may be replenished by future cash flows from the applicable hotel
operations pursuant to the terms of the respective agreements. HPT
had $14,976 and $8,120 of guarantee and security deposit
replenishments during the three months ended June 30, 2015 and
2014, respectively. HPT had $16,189 and $2,574 of guarantee and
security deposit replenishments during the six months ended June
30, 2015 and 2014, respectively.
(2)
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. In calculating net income in accordance with GAAP
for the second quarter of 2015, HPT recognized $2,048 of percentage
rent as a result of its lease modifications with TA. The second
quarter 2015 Normalized FFO available for common shareholders and
Adjusted EBITDA calculations exclude the $1,240 of deferred
percentage rent included in the first quarter 2015 calculation.
(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 third party tenants into the escrow accounts 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)
Estimated incentive fees under HPT’s
business management agreement calculated based on common share
total return, as defined, are included in general and
administrative expense in HPT’s condensed consolidated financial
statements. In 2014, this incentive fee was payable in HPT’s common
shares; beginning in 2015, any such fees will be payable in cash.
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 and Adjusted EBITDA until the fourth quarter, which is
when the actual expense amount for the year is determined. During
the three months ended June 30, 2015, HPT reversed $205 of
incentive fees accrued in the first quarter of 2015. HPT recorded
$1,445 of estimated business management incentive fees during the
three months ended June 30, 2014. HPT recorded $8,822 and $2,173 of
estimated business management incentive fees during the six months
ended June 30, 2015 and 2014, respectively.
(5)
Represents costs associated with HPT’s
acquisition activities.
(6)
HPT recorded a $726 loss on early
extinguishment of debt in the first quarter of 2014 in connection
with amending the terms of its unsecured revolving credit facility
and unsecured term loan and the redemption of its 7.875% senior
unsecured notes due 2014.
(7)
HPT recorded an $11,015 gain on sale of
real estate in the second quarter of 2015 in connection with the
sale of five travel centers in June 2015. HPT recorded a $130 gain
on sale of real estate in the second quarter of 2014 in connection
with the sale of its Sonesta ES Suites hotel in Myrtle Beach, SC in
April 2014.
(8)
HPT calculates FFO per common share and
Normalized FFO per common share as shown above. FFO 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 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 losses on early
extinguishment of debt. HPT considers FFO 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 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 and Normalized FFO
available for common shareholders may facilitate a comparison of
HPT’s operating performance between periods and with other REITs.
FFO 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 status as a
REIT, limitations in its revolving credit facility and term loan
agreement and public debt covenants, the availability of debt and
equity capital to HPT, 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 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, operating
income, net income available for common shareholders 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, operating income, net income available
for common shareholders and cash flow from operating activities as
presented in HPT’s condensed consolidated statements of income and
comprehensive income and condensed consolidated statements of cash
flows. Other REITs and real estate companies may calculate FFO 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 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, operating
income, net income available for common shareholders and cash flow
from operating activities as presented in HPT’s condensed
consolidated statements of income and comprehensive income and
condensed consolidated statements of cash flows. Other REITs and
real estate companies 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 employees of HPT’s manager.
HOSPITALITY PROPERTIES
TRUSTCONDENSED CONSOLIDATED BALANCE SHEETS(amounts in
thousands, except share data)(Unaudited)
June 30, December 31, 2015 2014 ASSETS Real estate
properties, at cost: Land $ 1,505,174 $ 1,484,210 Buildings,
improvements and equipment 6,504,575 6,171,983 Total
real estate properties, gross 8,009,749 7,656,193 Accumulated
depreciation (2,080,718) (1,982,033) Total real
estate properties, net 5,929,031 5,674,160 Cash and cash
equivalents 18,395 11,834 Restricted cash (FF&E reserve escrow)
39,106 33,982 Due from related persons 42,997 40,253 Other assets,
net 371,619 222,333 Total assets $ 6,401,148 $
5,982,562 LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility $ 319,000 $ 18,000 Unsecured
term loan 400,000 400,000 Senior unsecured notes, net of discounts
2,413,065 2,412,135 Convertible senior unsecured notes 8,478 8,478
Security deposits 42,143 33,069 Accounts payable and other
liabilities 185,956 106,903 Due to related persons 17,698 8,658
Dividends payable 5,166 5,166 Total liabilities
3,391,506 2,992,409 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; 151,485,368and
149,920,449 shares issued and outstanding, respectively
1,515 1,499 Additional paid in capital 4,164,468 4,118,551
Cumulative net income 2,839,966 2,715,239 Cumulative other
comprehensive income 33,412 25,804 Cumulative preferred
distributions (310,981) (300,649) Cumulative common distributions
(3,998,845) (3,850,398) Total shareholders’ equity
3,009,642 2,990,153 Total liabilities and
shareholders’ equity $ 6,401,148 $ 5,982,562
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/20150810005405/en/
Hospitality Properties TrustKatie Strohacker,
617-796-8232Director, Investor Relations
Hospitality Properties (NASDAQ:HPT)
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