Fourth Quarter Normalized FFO Per Share Increases 15.7% to $0.81
Q4 Comparable Property RevPAR Growth of 11.3% for Hotels Not Under
Renovation
NEWTON, Mass.--(BUSINESS WIRE)--
Hospitality Properties Trust (NYSE: HPT) today announced its financial
results for the quarter and year ended December 31, 2014, compared to
the results for the prior year comparable periods:
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Three Months Ended
December 31,
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Year Ended
December 31,
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2014
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2013
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2014
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2013
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($ in thousands, except per share and RevPAR data)
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Net income available for common shareholders
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$
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51,357
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$
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27,586
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$
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176,521
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$
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100,992
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Net income available for common shareholders per share (basic and
diluted)
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$
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0.34
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$
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0.19
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$
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1.18
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$
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0.73
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Adjusted EBITDA (1)
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$
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164,247
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$
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146,908
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$
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661,802
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$
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589,813
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Adjusted EBITDA growth
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11.8%
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—
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12.2%
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—
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Normalized FFO (1)
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$
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121,458
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$
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101,304
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$
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493,363
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$
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410,355
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Normalized FFO per share (basic)
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$
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0.81
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$
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0.70
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$
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3.30
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$
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2.99
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Normalized FFO per share (diluted)
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$
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0.81
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$
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0.70
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$
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3.29
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$
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2.98
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Hotel Portfolio Performance
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Comparable RevPAR
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$
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80.03
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$
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72.52
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$
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84.61
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$
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76.78
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Comparable RevPAR growth
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10.4%
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—
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10.2%
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—
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Comparable RevPAR (excluding hotels under renovation)
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$
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81.07
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$
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72.85
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$
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85.57
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$
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76.79
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Comparable RevPAR growth (excluding hotels under renovation)
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11.3%
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—
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11.4%
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—
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RevPAR (all hotels)
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$
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80.24
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$
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72.70
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$
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84.61
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$
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76.84
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RevPAR growth (all hotels)
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10.4%
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—
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10.1%
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—
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Coverage of HPT's minimum returns and rents (all hotels)
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0.82x
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0.75x
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0.93x
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0.85x
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(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 and reconciliations of net income to earnings before interest,
taxes, depreciation and amortization, or EBITDA, and Adjusted EBITDA
appear later in this press release.
John Murray, President and Chief Operating Officer of Hospitality
Properties Trust, made the following statement regarding today's
announcement:
"Our operating performance continues to improve as we realize the
benefits of our property renovation program. Our Normalized FFO per
share increased 15.7% and our RevPAR growth exceeded the hotel
industry's strong performance for the ninth consecutive quarter."
Results for the Three Months and Year Ended December 31, 2014 and
Recent Activities:
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Net Income Available for Common Shareholders: Net income
available for common shareholders for the quarter ended December 31,
2014 was $51.4 million, or $0.34 per basic and diluted share, compared
to $27.6 million, or $0.19 per basic and diluted share, for the
quarter ended December 31, 2013. The weighted average number of basic
and diluted common shares outstanding was 149.8 million for the
quarter ended December 31, 2014 and 144.9 million and 145.0 million,
respectively, for the quarter ended December 31, 2013.
Net income available for common shareholders for the year ended December
31, 2014 was $176.5 million, or $1.18 per basic and diluted share,
compared to $101.0 million, or $0.73 per basic and diluted share, for
the year ended December 31, 2013. The weighted average number of basic
and diluted common shares outstanding was 149.7 million and 149.8
million, respectively, for the year ended December 31, 2014 and 137.4
million and 137.5 million, respectively, for the year ended December 31,
2013.
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Adjusted EBITDA: Adjusted EBITDA for the quarter ended December
31, 2014 compared to the same period in 2013 increased 11.8% to $164.2
million.
Adjusted EBITDA for the year ended December 31, 2014 compared to the
same period in 2013 increased 12.2% to $661.8 million.
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Normalized FFO: Normalized FFO for the quarter ended December
31, 2014 were $121.5 million, or $0.81 per basic and diluted share,
compared to Normalized FFO for the quarter ended December 31, 2013 of
$101.3 million, or $0.70 per basic and diluted share. The $0.11, or
15.7%, increase in Normalized FFO per basic and diluted share is due
primarily to: (i) increases in annual minimum returns and rents that
resulted from HPT's funding of improvements to its hotels and travel
centers; (ii) increases in FF&E reserve income and deposits under
HPT's hotel agreements; and (iii) lower interest expense as a result
of HPT's debt refinancings in 2014.
Normalized FFO for the year ended December 31, 2014 were $493.4 million,
or $3.30 and $3.29 per share, basic and diluted, respectively, compared
to Normalized FFO for the year ended December 31, 2013 of $410.4
million, or $2.99 and $2.98 per share, basic and diluted, respectively.
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Comparable Hotel RevPAR: For the quarter ended December 31,
2014 compared to the same period in 2013 for HPT's 290 hotels that
were owned continuously since October 1, 2013: average daily rate, or
ADR, increased 7.4% to $113.20; occupancy increased 1.9 percentage
points to 70.7%; and revenue per available room, or RevPAR, increased
10.4% to $80.03.
For the year ended December 31, 2014 compared to year ended December 31,
2013 for HPT's 288 comparable hotels that were owned continuously since
January 1, 2013: ADR increased 6.1% to $112.97; occupancy increased 2.8
percentage points to 74.9%; and RevPAR increased 10.2% to $84.61.
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Comparable RevPAR for Hotels Not Under Renovation: During the
quarter ended December 31, 2014, HPT had 16 comparable hotels under
renovation for all or part of the quarter. For the quarter ended
December 31, 2014 compared to the same period in 2013 for HPT's 274
comparable hotels not under renovation that were owned continuously
since October 1, 2013: ADR increased 7.2% to $113.38; occupancy
increased 2.6 percentage points to 71.5%; and RevPAR increased 11.3%
to $81.07.
During the year ended December 31, 2014, HPT had 34 comparable hotels
under renovation for all or part of the year. For the year ended
December 31, 2014 compared to the year ended December 31, 2013 for HPT's
254 comparable hotels not under renovation that were owned continuously
since January 1, 2013: ADR increased 5.5% to $111.57; occupancy
increased 4.1 percentage points to 76.7%; and RevPAR increased 11.4% to
$85.57.
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RevPAR (all hotels): For the quarter ended December 31, 2014
compared to the same period in 2013 for HPT's 291 hotels: ADR
increased 7.4% to $113.50; occupancy increased 1.9 percentage points
to 70.7%; and RevPAR increased 10.4% to $80.24.
For the year ended December 31, 2014 compared to the year ended December
31, 2013 for HPT's 291 hotels: ADR increased 6.0% to $113.27; occupancy
increased 2.8 percentage points to 74.7%; and RevPAR increased 10.1% to
$84.61.
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Hotel Coverage of Minimum Returns and Rents: For the three
months ended December 31, 2014, 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 0.82x from 0.75x for the three
months ended December 31, 2013.
For the year ended December 31, 2014, 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 0.93x from 0.85x for the year
ended December 31, 2013.
As of December 31, 2014, approximately 68% 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.
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Recent Investment and Sales Activity: During the three months
ended December 31, 2014, HPT began marketing for sale its Courtyard by
Marriott hotel in Norcross, GA with a net book value of $4.1 million
at December 31, 2014.
In January 2015, HPT entered an agreement to acquire a 300 room full
service hotel located in Rosemont, IL for $35.5 million, excluding
closing costs. HPT plans to add this "Holiday Inn & Suites" branded
hotel to its management agreement with a subsidiary of InterContinental
Hotels Group, plc (LON: IHG; NYSE: IHG (ADRs)), or InterContinental.
Tenants and Managers: As of December 31, 2014, HPT had
nine operating agreements with seven hotel operating companies for 291
hotels with 44,107 rooms, which represented 67% of HPT's total annual
minimum returns and rents.
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Marriott Agreements: During the three months ended December 31,
2014, 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,
including the hotel HPT is currently marketing for sale, and provides
for annual minimum return payments to HPT of up to $68.0 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. During the three months
ended December 31, 2014, 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 $105.9 million
(approximately $26.5 million per quarter). During the three months
ended December 31, 2014, HPT realized returns under its Marriott No.
234 agreement of $23.5 million. Marriott was not required to make any
guaranty payments to HPT during the period because the hotels under
the Marriott No. 234 agreement generated cash flows in excess of the
guaranty threshold amount on a cumulative basis for the year ended
December 31, 2014. At December 31, 2014, there was $30.7 million
remaining under the guaranty for the Marriott No. 234 agreement to
cover future payment shortfalls for up to 90% of the minimum returns
due to HPT. 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 HPT for this hotel for the three months ended
December 31, 2014 of $2.5 million was paid to HPT.
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InterContinental Agreement: During the three months ended
December 31, 2014, HPT realized returns/rents of $34.9 million under
its agreement with subsidiaries of InterContinental, which includes 91
hotels and requires annual minimum returns/rent to HPT of $140.8
million (approximately $35.2 million per quarter). During the three
months ended December 31, 2014, HPT replenished the available security
deposit by $0.1 million for the payments HPT received during the
period in excess of the minimum returns due for the period. In October
2014, InterContinental requested and HPT returned the $4.3 million
additional security deposit InterContinental previously advanced to
HPT in the first quarter of 2014 to maintain the minimum deposit
balance required under this agreement. At December 31, 2014, the
available security deposit which HPT held to pay future payment
shortfalls was $33.0 million.
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Other Hotel Agreements: As of December 31, 2014, HPT's
remaining 78 hotels are operated under five agreements: one management
agreement with Sonesta International Hotels Corporation, or Sonesta
(22 hotels), requiring annual minimum returns of $71.9 million
(approximately $18.0 million per quarter); one management agreement
with a subsidiary of Wyndham Worldwide Corporation (NYSE: WYN), or
Wyndham (22 hotels), requiring annual minimum returns of $27.4 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 December 31, 2014 were paid to HPT.
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Travel Center Agreements: As of December 31, 2014, HPT had two
leases with TravelCenters of America LLC, or TA, for 184 travel
centers located along the U.S. Interstate Highway system requiring
annual minimum rents of $226.9 million ($56.7 million per quarter),
which represent 33% of HPT's total annual minimum returns and rents.
As of December 31, 2014, all payments due to HPT from TA under these
leases were current. For the three months ended September 30, 2014,
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 was 1.79x. Coverage data for the three
months ended December 31, 2014 for TA is currently unavailable.
Conference Call:
On Friday, February 27, 2015, at 1:00 p.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 year ended December 31, 2014. The conference
call telephone number is (800) 230-1074. Participants calling from
outside the United States and Canada should dial (612) 234-9959. 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 beginning on
Friday, February 27, 2015 and will run through Friday, March 6, 2015. To
hear the replay, dial (320) 365-3844. The replay pass code is 352029.
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 fourth
quarter conference call is strictly prohibited without the prior written
consent of HPT.
Supplemental Data:
A copy of HPT's Fourth Quarter 2014 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
44 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, 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:
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THIS PRESS RELEASE QUOTES MR. MURRAY STATING THAT HPT'S OPERATING
PERFORMANCE CONTINUES TO IMPROVE AS HPT REALIZES THE BENEFITS OF ITS
PROPERTY RENOVATION PROGRAM AS WELL AS OTHER POSITIVE STATEMENTS
REGARDING HPT'S STRATEGY AND ITS EXECUTION AND IMPROVED OPERATING
RESULTS AND METRICS. THESE STATEMENTS MAY IMPLY THAT HPT'S OPERATING
PERFORMANCE WILL CONTINUE TO IMPROVE. HOWEVER, HPT'S BUSINESS IS
SUBJECT TO VARIOUS RISKS, INCLUDING, AMONG OTHERS, THE STATUS OF THE
ECONOMY GENERALLY. THERE CAN BE NO ASSURANCE THAT HPT'S PERFORMANCE
WILL CONTINUE TO IMPROVE OR BE SUSTAINED AND ITS FUTURE RESULTS MAY
DECLINE.
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HPT EXPECTS THAT, WHILE THE SECURITY DEPOSIT FOR ITS MARRIOTT NO. 234
AGREEMENT IS EXHAUSTED, MARRIOTT WILL PAY HPT UP TO 90% OF ITS MINIMUM
RETURNS UNDER A LIMITED GUARANTY. THIS STATEMENT IMPLIES THAT MARRIOTT
WILL FULFILL ITS OBLIGATION UNDER THIS GUARANTY OR THAT FUTURE
SHORTFALLS WILL NOT EXHAUST THE GUARANTY. 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.
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HPT EXPECTS THAT INTERCONTINENTAL WILL CONTINUE TO PAY IT 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 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.
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AS OF DECEMBER 31, 2014, APPROXIMATELY 68% 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.
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HPT HAS ENTERED AN AGREEMENT TO ACQUIRE A HOTEL IN ROSEMONT, IL FOR
$35.5 MILLION AND HPT EXPECTS THAT IT WILL ADD THIS HOTEL TO ITS
EXISTING MANAGEMENT AGREEMENT WITH INTERCONTINENTAL. THIS TRANSACTION
IS SUBJECT TO VARIOUS TERMS AND CONDITIONS. THESE TERMS AND CONDITIONS
MAY NOT BE MET. AS A RESULT, THIS TRANSACTION AND THE EXPECTED
MANAGEMENT ARRANGEMENT MAY BE DELAYED OR MAY NOT OCCUR OR ITS TERMS
MAY CHANGE.
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HPT IS MARKETING ONE HOTEL IN NORCROSS, GA WITH A CARRYING VALUE OF
$4.1 MILLION FOR SALE. THERE CAN BE NO ASSURANCE THAT HPT WILL
COMPLETE A SALE OF THIS HOTEL OR THAT ANY SUCH SALE WOULD REALIZE NET
PROCEEDS IN AN AMOUNT AT LEAST EQUAL TO ITS CARRYING VALUE.
THE INFORMATION CONTAINED IN HPT'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER THE CAPTION "RISK FACTORS"
IN HPT'S PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER
IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM HPT'S FORWARD
LOOKING STATEMENTS. HPT'S FILINGS WITH THE SEC ARE AVAILABLE ON THE
SEC'S WEBSITE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON HPT'S FORWARD LOOKING
STATEMENTS.
EXCEPT AS REQUIRED BY LAW, HPT DOES NOT INTEND TO UPDATE OR CHANGE ANY
FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS
OR OTHERWISE.
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HOSPITALITY PROPERTIES TRUST
CONSOLIDATED
STATEMENTS OF INCOME
(amounts in thousands, except per
share data)
(Unaudited)
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Three Months Ended December 31,
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Year Ended December 31,
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2014
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2013
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2014
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2013
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Revenues:
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Hotel operating revenues (1)
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$
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362,600
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$
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320,533
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$
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1,474,757
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$
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1,310,969
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Minimum rent (1)
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64,207
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62,965
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|
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255,166
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|
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249,764
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Percentage rent (2)
|
|
|
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2,896
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|
2,102
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|
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2,896
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|
|
2,102
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FF&E reserve income (3)
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|
|
|
830
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(808)
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|
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3,503
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|
|
1,020
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Total revenues
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|
|
|
430,533
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|
|
384,792
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|
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1,736,322
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1,563,855
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Expenses:
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Hotel operating expenses (1)
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254,183
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224,527
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1,035,138
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929,581
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Depreciation and amortization
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|
|
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79,179
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77,397
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315,878
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299,323
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General and administrative (4)
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4,468
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12,931
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45,897
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50,087
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Acquisition related costs (5)
|
|
|
|
2
|
|
|
93
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|
|
|
239
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|
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3,273
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Loss on asset impairment (6)
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|
|
-
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|
|
-
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|
|
|
-
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|
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8,008
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Total expenses
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|
|
|
337,832
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|
|
314,948
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|
|
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1,397,152
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1,290,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
92,701
|
|
|
69,844
|
|
|
|
339,170
|
|
|
273,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
14
|
|
|
24
|
|
|
|
77
|
|
|
121
|
|
Interest expense (including amortization of deferred financing costs
and debt discounts of $1,458, $1,584, $5,491 and $6,204,
respectively)
|
|
|
|
(35,385)
|
|
|
(37,766)
|
|
|
|
(139,486)
|
|
|
(145,954)
|
|
Loss on early extinguishment of debt (7)
|
|
|
|
-
|
|
|
-
|
|
|
|
(855)
|
|
|
-
|
|
Income before income taxes and equity in earnings of an investee
|
|
|
|
57,330
|
|
|
32,102
|
|
|
|
198,906
|
|
|
127,750
|
|
Income tax benefit (expense) (8)
|
|
|
|
(835)
|
|
|
535
|
|
|
|
(1,945)
|
|
|
5,094
|
|
Equity in earnings of an investee
|
|
|
|
28
|
|
|
115
|
|
|
|
94
|
|
|
334
|
|
Income before gain on sale of real estate
|
|
|
|
56,523
|
|
|
32,752
|
|
|
|
197,055
|
|
|
133,178
|
|
Gain on sale of real estate (9)
|
|
|
|
-
|
|
|
-
|
|
|
|
130
|
|
|
-
|
|
Net income
|
|
|
|
56,523
|
|
|
32,752
|
|
|
|
197,185
|
|
|
133,178
|
|
Excess of liquidation preference over carrying value of preferred
shares redeemed (10)
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
(5,627)
|
|
Preferred distributions
|
|
|
|
(5,166)
|
|
|
(5,166)
|
|
|
|
(20,664)
|
|
|
(26,559)
|
|
Net income available for common shareholders
|
|
|
$
|
51,357
|
|
$
|
27,586
|
|
|
$
|
176,521
|
|
$
|
100,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
|
149,758
|
|
|
144,893
|
|
|
|
149,652
|
|
|
137,421
|
|
Weighted average common shares outstanding (diluted)
|
|
|
|
149,769
|
|
|
145,004
|
|
|
|
149,817
|
|
|
137,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common shareholders per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
$
|
0.34
|
|
$
|
0.19
|
|
|
$
|
1.18
|
|
$
|
0.73
|
|
HOSPITALITY PROPERTIES TRUST
RECONCILIATIONS OF
FUNDS FROM OPERATIONS,
NORMALIZED FUNDS FROM
OPERATIONS, EBITDA AND ADJUSTED EBITDA
(amounts in
thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
Calculation of Funds from Operations (FFO) and Normalized FFO: (11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common shareholders
|
|
|
$
|
51,357
|
|
$
|
27,586
|
|
|
$
|
176,521
|
|
$
|
100,992
|
|
Add (Less):
|
|
Depreciation and amortization
|
|
|
|
79,179
|
|
|
77,397
|
|
|
|
315,878
|
|
|
299,323
|
|
|
Loss on asset impairment (6)
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
8,008
|
|
|
Gain on sale of real estate (9)
|
|
|
|
-
|
|
|
-
|
|
|
|
(130)
|
|
|
-
|
|
FFO
|
|
|
|
130,536
|
|
|
104,983
|
|
|
|
492,269
|
|
|
408,323
|
|
Add (Less):
|
|
Acquisition related costs (5)
|
|
|
|
2
|
|
|
93
|
|
|
|
239
|
|
|
3,273
|
|
|
Business management incentive fees (12)
|
|
|
|
(6,951)
|
|
|
(2,026)
|
|
|
|
-
|
|
|
-
|
|
|
Excess of liquidation preference over carrying value of preferred
shares redeemed (10)
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
5,627
|
|
|
Loss on early extinguishment of debt (7)
|
|
|
|
-
|
|
|
-
|
|
|
|
855
|
|
|
-
|
|
|
Deferred income tax benefit (8)
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
(6,868)
|
|
|
Deferred percentage rent previously recognized in Normalized FFO (2)
|
|
|
|
(2,129)
|
|
|
(1,746)
|
|
|
|
-
|
|
|
-
|
|
Normalized FFO
|
|
|
$
|
121,458
|
|
$
|
101,304
|
|
|
$
|
493,363
|
|
$
|
410,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
|
149,758
|
|
|
144,893
|
|
|
|
149,652
|
|
|
137,421
|
|
Weighted average common shares outstanding (diluted)
|
|
|
|
149,769
|
|
|
145,004
|
|
|
|
149,817
|
|
|
137,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted per common share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO (basic and diluted)
|
|
|
$
|
0.87
|
|
$
|
0.72
|
|
|
$
|
3.29
|
|
$
|
2.97
|
|
|
Normalized FFO (basic)
|
|
|
$
|
0.81
|
|
$
|
0.70
|
|
|
$
|
3.30
|
|
$
|
2.99
|
|
|
Normalized FFO (diluted)
|
|
|
$
|
0.81
|
|
$
|
0.70
|
|
|
$
|
3.29
|
|
$
|
2.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
Calculation of EBITDA and Adjusted EBITDA: (13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
56,523
|
|
$
|
32,752
|
|
|
$
|
197,185
|
|
$
|
133,178
|
|
Add (Less):
|
|
Interest expense
|
|
|
|
35,385
|
|
|
37,766
|
|
|
|
139,486
|
|
|
145,954
|
|
|
Income tax expense
|
|
|
|
835
|
|
|
(535)
|
|
|
|
1,945
|
|
|
1,774
|
|
|
Depreciation and amortization
|
|
|
|
79,179
|
|
|
77,397
|
|
|
|
315,878
|
|
|
299,323
|
|
|
Deferred income tax benefit (8)
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
(6,868)
|
|
EBITDA
|
|
|
|
171,922
|
|
|
147,380
|
|
|
|
654,494
|
|
|
573,361
|
|
Add (Less):
|
|
Acquisition related costs (5)
|
|
|
|
2
|
|
|
93
|
|
|
|
239
|
|
|
3,273
|
|
|
General and administrative expense paid in common shares (14)
|
|
|
|
(5,548)
|
|
|
1,181
|
|
|
|
6,344
|
|
|
5,171
|
|
|
Loss on asset impairment (6)
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
8,008
|
|
|
Loss on early extinguishment of debt (7)
|
|
|
|
-
|
|
|
-
|
|
|
|
855
|
|
|
-
|
|
|
Gain on sale of real estate (9)
|
|
|
|
-
|
|
|
-
|
|
|
|
(130)
|
|
|
-
|
|
|
Deferred percentage rent previously recognized in EBITDA (2)
|
|
|
|
(2,129)
|
|
|
(1,746)
|
|
|
|
-
|
|
|
-
|
|
Adjusted EBITDA
|
|
|
$
|
164,247
|
|
$
|
146,908
|
|
|
$
|
661,802
|
|
$
|
589,813
|
(1) At December 31, 2014 HPT owned 291 hotels; 288 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 December 31, 2014, HPT also owned 184 travel centers; all
184 of these travel centers are leased to a travel center operating
company under two lease agreements. HPT's 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, $18,233 and $24,748, less than the minimum returns due to HPT
in the three months ended December 31, 2014 and 2013, respectively, and
$47,026 and $65,623 less than the minimum returns due to HPT in the year
ended December 31, 2014 and 2013, 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 consolidated statements of income
and comprehensive income as a reduction of hotel operating expenses. The
reduction to hotel operating expenses was $5,185 and $10,313 in the
three months ended December 31, 2014 and 2013, respectively, and $9,499
and $19,311 in the years ended December 31, 2014 and 2013, 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 $13,048 and $14,435 in the three months ended December 31,
2014 and 2013, respectively, and $37,527 and $46,312 in the year ended
December 31, 2014 and 2013, respectively, which represent the
unguaranteed portions of HPT's minimum returns from Marriott and from
Sonesta.
(2) In calculating net income in accordance with GAAP, HPT 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. Although HPT defers recognition of
this revenue until the fourth quarter for purposes of calculating net
income, HPT includes these estimated amounts in the calculation of
Normalized FFO and Adjusted EBITDA for each quarter of the year. The
fourth quarter Normalized FFO and Adjusted EBITDA calculations exclude
the amounts recognized during the first three quarters. Percentage
rental income included in Normalized FFO and Adjusted EBITDA was $767
and $356 in the fourth quarter of 2014 and 2013, respectively.
(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.
We reversed $1,339, or $0.01 per share, of FF&E reserve income in the
fourth quarter of 2013 in connection with an amendment to our Marriott
No. 5 agreement.
(4) During the fourth quarter of 2014, HPT reversed $6,951 of estimated
business management incentive fees accrued during the first three
quarters of the year.
(5) Represents costs associated with HPT's hotel acquisition activities.
(6) HPT recorded a $2,171, or $0.02 per share, loss on asset impairment
in the second quarter of 2013 in connection with its plan to sell one
hotel. HPT recorded a $5,837, or $0.04 per share, loss on asset
impairment in the third quarter of 2013 in connection with an eminent
domain taking of its travel center in Roanoke, VA by the Virginia
Department of Transportation.
(7) HPT recorded a $726 loss on early extinguishment of debt in the
first quarter of 2014 in connection with amending the terms of its
revolving credit facility and unsecured term loan and the redemption of
its 7.875% senior notes due 2014. HPT recorded a $129 loss on early
extinguishment of debt in the third quarter of 2014 in connection with
its redemption of its 5⅛% senior notes due 2015.
(8) HPT recorded a $6,868, or $0.05 per share, income tax benefit in the
second quarter of 2013 in connection with the restructuring of certain
of its TRSs.
(9) HPT recorded a $130 gain on sale of real estate in the second
quarter of 2014 in connection with the sale of one hotel.
(10) On July 1, 2013, HPT redeemed all of its outstanding 7.0% Series C
Preferred Shares at their liquidation preference of $25 per share, plus
accumulated and unpaid distributions. The liquidation preference of the
redeemed shares exceeded the carrying amount for the redeemed shares as
of the date of redemption by $5,627, or $0.04 per share, and HPT reduced
net income available to common shareholders in the third quarter of 2013
by that excess amount.
(11) HPT calculates FFO and Normalized FFO 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 differs from NAREIT's definition of FFO
because it includes estimated percentage rent in the period to which it
estimates that it relates rather than when it is recognized as income in
accordance with GAAP and includes business management incentive fees, if
any, only in the fourth quarter versus the quarter they are recognized
as expense in accordance with GAAP and excludes acquisition related
costs, excess liquidation preference over carrying value of preferred
shares redeemed, loss on early extinguishment of debt and the deferred
income tax benefit described above. HPT considers FFO and Normalized FFO
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 provide useful information to investors because by
excluding the effects of certain historical amounts, such as
depreciation expense, FFO and Normalized FFO may facilitate a comparison
of HPT's operating performance between periods and with other REITs. FFO
and Normalized FFO 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 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
consolidated statements of income and comprehensive income and
consolidated statements of cash flows. Other REITs and real estate
companies may calculate FFO and Normalized FFO differently than HPT does.
(12) Amounts represent incentive fees under HPT's business management
agreement payable in common shares after the end of each calendar year
calculated: (i) prior to 2014 based upon increases in annual cash
available for distribution per share, as defined, and (ii) beginning in
2014 based on common share total return. 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 until the fourth quarter, which is when the actual
expense amount for the year is determined. The calculation of net income
for the fourth quarter of 2014 includes the reversal of $6,951 of
estimated business management incentive fees accrued during the first
three quarters of the year. The calculation of fourth quarter 2014
Normalized FFO includes a deduction for this amount. The calculation of
fourth quarter 2013 Normalized FFO includes a deduction of $2,026 for
estimated business management incentive fees accrued during the first
three quarters of the year. Incentive business management fee expense
was zero and $2,772 for the years ended December 31, 2014 and 2013,
respectively. Adjustments were made to prior period amounts to conform
to the current period Normalized FFO calculation.
(13) 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 consolidated statements of income and
comprehensive income and consolidated statements of cash flows. Other
REITs and real estate companies may calculate EBITDA and Adjusted EBITDA
differently than HPT does.
(14) Amounts represent the portion of business management fees that are
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.
Adjustments were made to prior period amounts to conform to the current
period Adjusted EBITDA calculation.
|
HOSPITALITY PROPERTIES TRUST
CONSOLIDATED BALANCE
SHEETS
(amounts in thousands, except share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2014
|
|
|
2013
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate properties, at cost:
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
$
|
1,484,210
|
|
|
$
|
1,470,513
|
|
Buildings, improvements and equipment
|
|
|
|
6,171,983
|
|
|
|
5,946,852
|
|
Total real estate properties, gross
|
|
|
|
7,656,193
|
|
|
|
7,417,365
|
|
Accumulated depreciation
|
|
|
|
(1,982,033)
|
|
|
|
(1,757,151)
|
|
Total real estate properties, net
|
|
|
|
5,674,160
|
|
|
|
5,660,214
|
|
Cash and cash equivalents
|
|
|
|
11,834
|
|
|
|
22,500
|
|
Restricted cash (FF&E reserve escrow)
|
|
|
|
33,982
|
|
|
|
30,873
|
|
Due from related persons
|
|
|
|
40,253
|
|
|
|
38,064
|
|
Other assets, net
|
|
|
|
222,333
|
|
|
|
215,893
|
|
Total assets
|
|
|
$
|
5,982,562
|
|
|
$
|
5,967,544
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
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Unsecured revolving credit facility
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$
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18,000
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$
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-
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Unsecured term loan
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400,000
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400,000
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Senior notes, net of discounts
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2,412,135
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2,295,527
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Convertible senior notes
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8,478
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8,478
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Security deposits
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33,069
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27,876
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Accounts payable and other liabilities
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106,903
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130,448
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Due to related persons
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8,658
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13,194
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Dividends payable
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5,166
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5,166
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Total liabilities
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2,992,409
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2,880,689
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Commitments and contingencies
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Shareholders' equity:
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Preferred shares of beneficial interest, no par value; 100,000,000
shares authorized:
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Series D preferred shares; 7 1/8% cumulative redeemable; 11,600,000
shares issued and outstanding, aggregate liquidation preference of
$290,000
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280,107
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280,107
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Common shares of beneficial interest, $.01 par value; 200,000,000
shares authorized; 149,920,449 and 149,606,024 shares issued and
outstanding, respectively
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1,499
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1,496
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Additional paid in capital
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4,118,551
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4,109,600
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Cumulative net income
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2,715,239
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2,518,054
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Cumulative other comprehensive income
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25,804
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15,952
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Cumulative preferred distributions
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(300,649)
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(279,985)
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Cumulative common distributions
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(3,850,398)
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(3,558,369)
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Total shareholders' equity
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2,990,153
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3,086,855
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Total liabilities and shareholders' equity
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$
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5,982,562
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$
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5,967,544
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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
Katie Strohacker, 617-796-8232
Director,
Investor Relations