Further Aligning Interests of RMR with HPT Shareholders While
Maintaining Low Cost Structure
Today's Changes Are in Addition to June 2013 Announcement
Recommending Annual Election of All Trustees and Terminating "Poison
Pill"
NEWTON, Mass.--(BUSINESS WIRE)--
Hospitality Properties Trust (NYSE: HPT) today announced the
restructuring of its business management agreement with Reit Management
& Research LLC (RMR) as follows:
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The base business management fees paid by HPT to RMR, which are
included in HPT's "G&A" expenses, are currently calculated at the
annual rate of approximately 0.5% of the gross historical cost of
HPT's real estate assets. Beginning in 2014, these fees will be
calculated on the basis of the lower of: (i) gross historical cost of
HPT's real estate assets or (ii) HPT's total market capitalization.
Market capitalization will include the market value of HPT's common
shares, plus the liquidation preference of preferred shares and the
principal amount of debt. The market value of HPT's common shares will
be calculated based on the average shares outstanding multiplied by
the average closing share price during the period in which the fees
are earned. Accordingly, HPT's fees paid to RMR may decline when the
market value of HPT's common shares declines.
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All of the base business management fees currently paid by HPT to RMR
are paid in cash. Beginning in 2014, 10% of the base business
management fees will be paid in common shares of HPT. The amount of
HPT common shares granted as part of the base business management fee
will be calculated based on the average closing share price during the
period in which the fees are earned. Accordingly, RMR's common share
ownership of HPT is expected to increase over time.
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Annual incentive fees payable by HPT to RMR included in HPT's "G&A"
expenses are currently calculated based upon increases in cash
available for distribution (CAD) per share and are paid in common
shares of HPT which vest immediately. Beginning in 2014, the incentive
fees which may be earned by RMR will be calculated based upon total
returns realized by HPT common shareholders (i.e., share price
appreciation plus dividends) in excess of benchmarks. The benchmarks
will be set by the Compensation Committee of HPT's Board (which is
comprised solely of Independent Trustees) and will be disclosed in
HPT's annual meeting proxy statements. Incentive fees will be paid in
common shares of HPT which will vest over a multiyear period and will
be subject to a "claw back" in the event of certain material
restatements of financial results. Accordingly, the incentive fees
payable to RMR are expected to have a direct relationship to total
returns realized by HPT common shareholders.
In June 2013, HPT announced that its Board of Trustees was recommending
to shareholders that HPT's Declaration of Trust be amended to allow for
the annual election of all Trustees at the next annual shareholders'
meeting in the spring of 2014 and accelerating the termination of HPT's
shareholders' rights plan (the "poison pill") to December 31, 2013.
HPT's Independent Trustees issued the following joint statement
regarding today's announcement:
"Historically, HPT's Board and management have focused on providing high
quality management services to HPT at or below average costs. The
combined governance and management changes announced earlier this year
and today are intended to further align RMR's financial incentives with
the returns realized by shareholders and enhance the Company's
governance, while allowing HPT to continue receiving high quality
management services at or below average costs. The HPT Board is also
currently considering additional governance enhancements which may be
announced during the next several months."
Hospitality Properties Trust is a real estate investment trust (REIT)
that owns hotel and travel center properties located throughout the
United States. HPT is headquartered in Newton, MA.
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 AND 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:
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THIS PRESS RELEASE STATES THAT FUTURE INCENTIVE FEES PAYABLE TO RMR
ARE EXPECTED TO HAVE A DIRECT RELATIONSHIP TO TOTAL RETURNS REALIZED
BY HPT COMMON SHAREHOLDERS. AN IMPLICATION OF THIS STATEMENT MAY BE
THAT SHAREHOLDERS WILL RECEIVE INCREASED TOTAL RETURNS. IN FACT,
FUTURE TOTAL RETURNS REALIZED BY SHAREHOLDERS WILL BE IMPACTED BY MANY
FACTORS, INCLUDING SOME BEYOND HPT'S AND RMR'S CONTROL. FOR EXAMPLE,
THE TOTAL RETURNS REALIZED BY SHAREHOLDERS ARE DEPENDENT UPON THE
CHANGES IN THE TRADING PRICE OF HPT SHARES WHICH MAY REFLECT CHANGES
IN INTEREST RATES, THE EXPECTATION OF FUTURE INTEREST RATE CHANGES OR
OTHER GENERAL MARKET CONDITIONS. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE CHANGES IN THE METHOD OF CALCULATING THE INCENTIVE
FEES PAID BY HPT TO RMR WILL INCREASE THE TOTAL RETURNS REALIZED BY
HPT COMMON SHAREHOLDERS.
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THIS PRESS RELEASE IMPLIES THAT HPT'S HISTORICAL AND FUTURE G&A COSTS
HAVE BEEN, AND WILL BE, AT OR BELOW THE AVERAGE OF SUCH COSTS AMONG
ITS PEER GROUP. CALCULATING THE RELATIVE COSTS OF G&A SERVICES CAN BE
DONE IN MANY DIFFERENT WAYS; FOR EXAMPLE, IN ACTUAL DOLLAR AMOUNTS, AS
A PERCENTAGE OF ASSETS VALUED AT COST OR BOOK VALUES, AS A PERCENTAGE
OF BOOK OR MARKET EQUITY VALUES, AS A PERCENTAGE OF REVENUES, OR
OTHERWISE. HPT BELIEVES THAT ITS STATEMENTS ARE BASED UPON CUSTOMARY
CALCULATIONS USED IN THE REIT INDUSTRY TO COMPARE G&A COSTS BASED ON
FINANCIAL STATEMENT METRICS. HOWEVER, DEPENDING UPON HOW RELATIVE G&A
COSTS ARE CALCULATED, IT MAY BE POSSIBLE TO ARGUE THAT HPT'S
HISTORICAL AND FUTURE G&A COSTS ARE NOT, AND WILL NOT BE, AT OR BELOW
AVERAGE.
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THE PRESS RELEASE STATES THAT HPT'S BOARD HAD PREVIOUSLY DETERMINED TO
RECOMMEND TO SHAREHOLDERS THAT HPT'S DECLARATION OF TRUST BE AMENDED
TO PROVIDE THAT ALLTRUSTEES BE ELECTED TO SERVE FOR ONE YEAR TERMS AT
THE NEXT ANNUAL SHAREHOLDERS' MEETING IN THE SPRING OF 2014. THIS
AMENDMENT MAY NOT BE APPROVED BY HPT'S SHAREHOLDERS. ALSO, ALTHOUGH
HPT'S BOARD HAS NO CURRENT INTENTION TO DO SO, HPT'S BOARD MAY
DETERMINE IN THE FUTURE NOT TO PROCEED WITH A PROPOSAL TO SHAREHOLDERS
TO PROVIDE THAT ALL TRUSTEES BE ELECTED TO SERVE FOR ONE YEAR TERMS.
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THIS PRESS RELEASE STATES THAT HPT'S BOARD HAD PREVIOUSLY DETERMINED
TO ACCELERATE THE EXPIRATION OF HPT'S SHAREHOLDER'S RIGHTS PLAN (THE
"POISON PILL") TO DECEMBER 31, 2013. UNDER APPLICABLE LAW, THE HPT
BOARD HAS THE POWER TO CREATE, AMEND, EXTEND OR TERMINATE A
SHAREHOLDERS' RIGHTS PLAN. ALTHOUGH HPT'S BOARD HAS NO CURRENT
INTENTION TO DO SO, HPT'S BOARD MAY DETERMINE IN THE FUTURE NOT TO
ACCELERATE THE EXPIRATION OF THE PLAN OR TO ADOPT A NEW SHAREHOLDERS'
RIGHTS PLAN AFTER THE CURRENT PLAN EXPIRES.
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THIS PRESS RELEASE STATES THAT HPT IS CURRENTLY CONSIDERING OTHER
ENHANCEMENTS TO GOVERNANCE THAT MAY BE ANNOUNCED IN THE NEXT SEVERAL
MONTHS. THE HPT BOARD MAY DECIDE TO MAKE NO FURTHER GOVERNANCE
ENHANCEMENTS OR ANY ADDITIONAL ENHANCEMENTS MAY BE DELAYED UNTIL
BEYOND THE NEXT SEVERAL MONTHS.
FOR THESE REASONS, AMONG OTHERS, INVESTORS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE UPON ANY FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE.
EXCEPT AS REQUIRED BY LAW, HPT DOES NOT INTEND TO UNDERTAKE ANY
OBLIGATION TO UPDATE ANY FORWARD LOOKING STATEMENT IN THIS PRESS RELEASE
AS A RESULT OF FUTURE EVENTS, NEW INFORMATION WHICH MAY COME TO HPT'S
ATTENTION OR OTHERWISE.
A Maryland Real Estate 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
Vice
President, Investor Relations
www.hptreit.com