Hospitality Properties Trust Announces 2008 Third Quarter Results

November 10, 2008

NEWTON, Mass.--Hospitality Properties Trust (NYSE: HPT) today announced its operating results for the quarter and nine months ended September 30, 2008.

Results for the quarter and nine months ended September 30, 2008:

HPT's net income available for common shareholders for the three and nine month periods ended September 30, 2008 compared to the same periods in 2007 were as follows:

                                                        Nine Months
                                      Quarter Ended    Ended September
                                      September 30,          30,
                                     ---------------- ----------------
                                       2008    2007     2008    2007
                                     ------- -------- ------- --------
                                     (in thousands, except per share
                                                   data)
Net income available for common
 shareholders                        $32,915 $142,390 $56,652 $228,215
Net income available for common
 shareholders per share              $  0.35 $   1.52 $  0.60 $   2.46
Weighted average common shares
 outstanding                          93,954   93,872  93,930   92,845

Net income available for common shareholders for the quarter ended September 30, 2007, includes a $95.7 million, or $1.02 per share, gain from the sale of real estate. During the quarter ended September 30, 2008, TravelCenters of America LLC (NYSE Alternext:TA), or TA, exercised its option to defer up to $5 million of rent per month under the previously announced rent deferral agreement, which resulted in a $15 million, or $0.16 per share, reduction in net income available for common shareholders. The results for the quarter ended September 30, 2008 also reflect the non-accrual of $3.5 million, or $0.04 per share, of straight line rent under HPT's lease with TA for 145 travel centers.

Net income available for common shareholders for the nine months ended September 30, 2007 includes a $95.7 million, or $1.03 per share, gain from the sale of real estate and $2.7 million, or $0.03 per share, of costs associated with the spin off of TA to HPT's shareholders on January 31, 2007. The results for the nine months ended September 30, 2008 include the impact of the $15 million, or $0.16 per share, rent deferral described above and a non-cash impairment charge of $53.2 million, or $0.57 per share, related to the write down of certain intangible assets arising from HPT's January 2007 acquisition of TravelCenters of America, Inc. to their estimated fair market value. The year to date 2008 results also reflect the non-accrual of $7 million, or $0.07 per share, of straight line rent for the quarters ended June 30, 2008 and September 30, 2008, related to HPT's lease with TA for 145 travel centers, and a non-cash charge of $19.6 million, or $0.21 per share, to record a reserve for the straight line rent receivable recorded in periods prior to April 1, 2008.

HPT's funds from operations, or FFO, for the three and nine month periods ended September 30, 2008 compared to the same periods in 2007 were as follows:

                                     Quarter Ended   Nine Months Ended
                                      September 30,    September 30,
                                    ---------------- -----------------
                                      2008    2007     2008     2007
                                    ------- -------- -------- --------
                                     (in thousands, except per share
                                                   data)
Funds from operations               $99,758 $113,572 $308,153 $323,575
FFO per share                       $  1.06 $   1.21 $   3.28 $   3.49
Weighted average common shares
 outstanding                         93,954   93,872   93,930   92,845

FFO for the quarter ended September 30, 2008 was affected by TA's deferral of rent and the non-accrual of straight line rent discussed above.

FFO for the nine months ended September 30, 2008 was affected by TA's deferral of rent, the non-accrual of straight line rent and the non-cash charge to record a reserve for straight line rent discussed above. See page 5 for a reconciliation of FFO to net income available to common shareholders.

Hotel Portfolio Performance:

For the quarter and nine months ended September 30, 2008 compared to the same periods last year, hotels owned by HPT produced revenue per available room, or RevPAR, average daily rate, or ADR, and occupancy as follows:

                 Quarter Ended September 30, Nine Months Ended September
                                                       30,
               --------------------------- ---------------------------
                 2008      2007    Change    2008      2007    Change
               --------  -------- -------- --------  -------- --------

RevPAR         $ 79.92   $ 79.70      0.3% $ 79.80   $ 78.57      1.6%
ADR            $106.99   $105.42      1.5% $109.76   $107.19      2.4%
Occupancy         74.7%     75.6% -0.9 pt     72.7%     73.3% -0.6 pt

Common Dividend:

On October 2, 2008, HPT announced a regular quarterly common dividend of $0.77 per share payable to shareholders of record on October 15, 2008; this dividend will be paid on or about November 17, 2008.

Conference Call:

On Tuesday, November 11, 2008, at 11:00 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 and nine months ended September 30, 2008.

The conference call telephone number is (800) 811-8830. Participants calling from outside the United States and Canada should dial (913) 312-1267. 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, November 18, 2008. To hear the replay, dial (888) 203-1112. The replay pass code is 7613249.

A live audio webcast of the conference call will also be available in a listen only mode on the company's web site, which is located at www.hptreit.com. Participants wanting to access the webcast should visit the company's web site about five minutes before the call. The archived webcast will be available for replay on HPT's web site for about one week after the call.

Supplemental Data:

A copy of HPT's Third Quarter 2008 Supplemental Operating and Financial Data is available for download at HPT's web site, www.hptreit.com.

Hospitality Properties Trust is a real estate investment trust, or REIT, which owns 290 hotels and 185 travel centers located in 44 states, Puerto Rico and Canada. HPT is headquartered in Newton, Massachusetts.

                     Hospitality Properties Trust
      CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
                (in thousands, except per share data)
                             (Unaudited)

                                 Quarter Ended     Nine Months Ended
                                  September 30,       September 30,
                               ------------------- -------------------
                                   2008      2007      2008      2007
                               --------- --------- --------- ---------
Revenues:
  Hotel operating revenues (1) $233,393  $240,179  $700,399  $714,424
  Rental income (1)(2)           72,824    87,669   250,341   222,819
  FF&E reserve income (3)         6,095     5,785    18,620    16,993
  Interest income                   271       677     1,177     4,483
                               --------- --------- --------- ---------
    Total revenues              312,583   334,310   970,537   958,719
                               --------- --------- --------- ---------

Expenses:
  Hotel operating expenses (1)  166,896   174,533   500,743   519,242
  Interest (including
   amortization of deferred
   financing costs of $1,009,
   $956, $3,056 and $2,608,
   respectively)                 36,529    38,038   110,626   102,488
     Depreciation and
      amortization               60,449    57,647   178,277   160,470
  General and administrative      7,881    10,848    28,920    27,801
  TA spin off costs (4)              --        --        --     2,711
  Reserve for straight line
   rent receivable (5)               --        --    19,613        --
  Loss on asset impairment (6)       --        --    53,225        --
                               --------- --------- --------- ---------
    Total expenses              271,755   281,066   891,404   812,712
                               --------- --------- --------- ---------

Income before gain on sale of
 real estate and income taxes    40,828    53,244    79,133   146,007
     Gain on sale of real
      estate (7)                     --        --     1,274        --
                               --------- --------- --------- ---------
Income before income taxes       40,828    53,244    80,407   146,007
     Income tax expense            (443)     (422)   (1,345)   (1,644)
                               --------- --------- --------- ---------

Income from continuing
 operations                      40,385    52,822    79,062   144,363
Discontinued operations: (8)
     Income from discontinued
      operations                     --     1,327        --     7,440
     Gain on sale of real
      estate used by
      discontinued operations        --    95,711        --    95,711
                               --------- --------- --------- ---------
                                     --    97,038        --   103,151
                               --------- --------- --------- ---------

Net income                       40,385   149,860    79,062   247,514
Preferred distributions          (7,470)   (7,470)  (22,410)  (19,299)
                               --------- --------- --------- ---------
Net income available for common
 shareholders                  $ 32,915  $142,390  $ 56,652  $228,215
                               ========= ========= ========= =========

----------------------------------------------------------------------

Calculation of FFO (9):
Net income available for common
 shareholders                  $ 32,915  $142,390  $ 56,652  $228,215
Add: FF&E deposits not in net
 income (discontinued
 operations) (3)                     --        --        --       990
  Depreciation and amortization
   (continuing operations)       60,449    57,647   178,277   160,470
  Depreciation and amortization
   (discontinued operations)
   (8)                               --       129        --     1,636
     Deferred percentage rent
      (continuing operations)
      (10)                        1,283     1,651     4,385     4,748
     Deferred additional
      returns (continuing
      operations) (11)            5,111     7,723    16,888    20,516
     Loss on asset impairment
      (continuing operations)
      (6)                            --        --    53,225        --
  TA spin off costs (continuing
   operations) (4)                   --        --        --     2,711
Less: Gain on sale of real
 estate (continuing operations)
 (7)                                 --        --    (1,274)       --
     Gain on sale of real
      estate (discontinued
      operations) (8)                --   (95,711)       --   (95,711)
     Deferred percentage rent
      (discontinued operations)
      (8)                            --      (257)       --        --
                               --------- --------- --------- ---------
Funds from operations ("FFO")  $ 99,758  $113,572  $308,153  $323,575
                               ========= ========= ========= =========


Weighted average common shares
 outstanding                     93,954    93,872    93,930    92,845
                               ========= ========= ========= =========

Per common share amounts:
  Income from continuing
   operations available for
   common shareholders         $   0.35  $   0.48  $   0.60  $   1.35
  Income from discontinued
   operations available for
   common shareholders         $   0.00  $   1.03  $   0.00  $   1.11
  Net income available for
   common shareholders         $   0.35  $   1.52  $   0.60  $   2.46
  FFO (9)                      $   1.06  $   1.21  $   3.28  $   3.49
  Common distributions declared$   0.77  $   0.77  $   2.31  $   2.29

(1) At September 30, 2008, each of our 290 hotels are included in one of eleven operating agreements of which 198 are leased to our taxable REIT subsidiaries and managed by independent hotel operating companies and 92 are leased to third parties. Our 185 travel centers are leased under two agreements. Our consolidated statement of income includes hotel operating revenues and expenses of managed hotels and rental income from our leased hotels and travel centers.

(2) During the third quarter of 2008, TravelCenters of America LLC, or TA, elected to defer $15,000, or $0.16 per share, of rent in accordance with the previously announced rent deferral agreement. We have not recognized the deferred rent as revenue due to uncertainties regarding its payment by TA.

(3) Various percentages of total sales at most of our hotels are escrowed as reserves for future renovations or refurbishment, or FF&E Reserve escrows. At September 30, 2008, we own all the FF&E escrows for our hotels. Through July 26, 2007, we had a security and remainder interest in the FF&E Reserve escrows for our former Homestead Studio Suites hotels (see Note 7). When we own the FF&E Reserve escrows at hotels leased to third parties we report payments into the escrow as additional rent. When we had a security and remainder interest in the FF&E Reserve escrows of our Homestead Studio Suites hotels, deposits were not included in revenue. We do not report the amounts which are escrowed as FF&E reserves for our managed hotels as FF&E reserve income in our consolidated statement of income.

(4) During the first quarter of 2007, we expensed $2,711 of costs in connection with the spin off of our former subsidiary, TA, to our shareholders on January 31, 2007.

(5) During the second quarter of 2008, we recorded a $19,613, or $0.21 per share, non-cash reserve for the straight line rent receivable relating to our lease with TA for 145 travel centers.

(6) During the second quarter of 2008, we recorded a $53,225, or $0.57 per share, non-cash loss on asset impairment related to the write down of certain intangible assets arising from our January 2007 TA acquisition to their estimated fair value.

(7) On February 5, 2008, we sold our Park Plaza hotel in North Phoenix, Arizona for $8,000 and recognized a gain on sale of $645. On June 18, 2008, we sold our AmeriSuites hotel in Atlantic Beach, North Carolina for $6,350 and recognized a gain on sale of $629.

(8) Income from discontinued operations relates to the 18 Homestead Studio Suites hotels that we sold in July 2007. We have reclassified our consolidated statement of income for all periods presented to show the results of operations of these hotels which have been sold as discontinued.

(9) We compute FFO as shown. Our calculation of FFO differs from the National Association of Real Estate Investment Trusts, or NAREIT, definition because we include FF&E deposits not included in net income (loss) (see Note 3), deferred percentage rent (see Note 10) and deferred additional returns (see Note 11) and exclude loss on asset impairment (see Note 6) and TA spin off costs (see Note 4). We consider FFO to be an appropriate measure of performance for a REIT, along with net income and cash flows from operating, investing and financing activities. We believe that FFO provides useful information to investors because by excluding the effects of certain historical costs, such as depreciation expense, it may facilitate comparison of operating performance among REITs. FFO does not represent cash generated by operating activities in accordance with generally accepted accounting principles, or GAAP, and should not be considered an alternative to net income or cash flow from operating activities as a measure of financial performance or liquidity. FFO is among the important factors considered by our board of trustees when determining the amount of distributions to shareholders. Other important factors include, but are not limited to, requirements to maintain our status as a REIT, limitations in our revolving credit facility and public debt covenants, the availability of debt and equity capital to us and our expectation of our future capital needs and operating performance.

(10) In calculating net income (loss) we recognize percentage rental income received for the first, second and third quarters in the fourth quarter, which is when all contingencies are met and the income is earned. Although we defer recognition of this revenue until the fourth quarter for purposes of calculating net income, we include these amounts in the calculation of FFO for each quarter of the year. The fourth quarter FFO calculation excludes the amounts recognized during the first three quarters.

(11) Our share of the operating results of our managed hotels in excess of the minimum returns due to us, or additional returns, are generally determined based upon annual calculations. In calculating net income (loss), we recognize additional returns in the fourth quarter, which is when all contingencies are met and the income is earned. Although we defer recognition of this income until the fourth quarter for purposes of calculating net income (loss), we include these amounts in the calculation of FFO for each quarter of the year. The fourth quarter FFO calculation excludes the amounts recognized during the first three quarters.

                     Hospitality Properties Trust
                      CONSOLIDATED BALANCE SHEET
              (dollars in thousands, except share data)

                                              September   December 31,
                                                  30,
                                                 2008         2007
                                             ------------ ------------
                                             (Unaudited)
ASSETS
---------------------------------------------

Real estate properties, at cost:
  Land                                       $ 1,392,605  $ 1,377,520
  Buildings, improvements and equipment        4,973,679    4,818,711
                                             ------------ ------------
                                               6,366,284    6,196,231
Accumulated depreciation                      (1,004,065)    (849,470)
                                             ------------ ------------
                                               5,362,219    5,346,761

Cash and cash equivalents                          9,301       23,401
Restricted cash (FF&E reserve escrow)             37,485       28,134
Other assets, net                                186,570      281,011
                                             ------------ ------------
                                             $ 5,595,575  $ 5,679,307
                                             ============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------------

Revolving credit facility                    $   407,000  $   158,000
Senior notes, net of discounts                 1,693,487    1,842,756
Convertible senior notes                         575,000      575,000
Mortgage payable                                   3,578        3,635
Security deposits                                169,414      169,406
Accounts payable and other liabilities           102,322      134,705
Due to affiliate                                  11,806        4,617
Dividends payable                                  4,754        4,754
                                             ------------ ------------
  Total liabilities                            2,967,361    2,892,873
                                             ------------ ------------

Commitments and contingencies

Shareholders' equity:
  Preferred shares of beneficial interest; no
   par value; 100,000,000 shares authorized:
     Series B preferred shares; 8 7/8%
      cumulative redeemable; 3,450,000 shares
      issued and outstanding, aggregate
      liquidation preference $86,250              83,306       83,306
     Series C preferred shares; 7% cumulative
      redeemable; 12,700,000 shares issued
      and outstanding, aggregate liquidation
      preference $317,500                        306,833      306,833
  Common shares of beneficial interest, $0.01
   par value; 150,000,000 shares authorized;
   93,982,385 and 93,892,719 shares issued
   and outstanding, respectively                     940          939
  Additional paid-in capital                   3,050,987    3,048,881
     Accumulated other comprehensive loss            (40)          --
  Cumulative net income                        1,790,140    1,711,079
  Cumulative preferred distributions            (116,171)     (93,761)
  Cumulative common distributions             (2,487,781)  (2,270,843)
                                             ------------ ------------
     Total shareholders' equity                2,628,214    2,786,434
                                             ------------ ------------
                                             $ 5,595,575  $ 5,679,307
                                             ============ ============

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.

Hospitality Properties Trust
Timothy A. Bonang
617-796-8232
Director of Investor Relations
or
Carlynn Finn
617-796-8232
Manager of Investor Relations
www.hptreit.com

© Business Wire , 2009  -  11/10/2008 04:33 PM

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