Second Quarter Net Income of $0.34 per share
Normalized FFO of $1.09 per share for the Second Quarter
Comparable Hotel RevPAR for the Second Quarter Grows 4.9% Year
Over Year
NEWTON, Mass.--(BUSINESS WIRE)--
Hospitality Properties Trust (Nasdaq: HPT) today announced its financial
results for the quarter and six months ended June 30, 2016.
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Three Months Ended June 30,
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Six Months Ended June 30,
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2016
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2015
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2016
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2015
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($ 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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50,895
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$
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77,980
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$
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97,780
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$
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114,395
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Net income available for common shareholders per share
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$
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0.34
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$
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0.52
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$
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0.65
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$
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0.76
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Adjusted EBITDA (1)
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$
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215,608
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$
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191,059
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$
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403,311
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$
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358,454
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Normalized FFO available for common shareholders (1)
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$
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165,714
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$
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148,139
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$
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305,868
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$
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272,888
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Normalized FFO available for common shareholders per share (1)
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$
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1.09
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$
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0.99
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$
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2.02
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$
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1.81
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Portfolio Performance
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Comparable hotel RevPAR
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$
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103.34
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$
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98.52
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$
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96.72
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$
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92.42
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Comparable hotel RevPAR growth
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4.9%
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-
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4.7%
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—
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RevPAR (all hotels)
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$
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102.30
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$
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98.67
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$
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95.42
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$
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92.51
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RevPAR growth (all hotels)
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3.7%
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-
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3.1%
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—
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Coverage of HPT’s minimum returns and rents for hotels
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1.34x
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1.28x
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1.14x
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1.11x
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Coverage of HPT's minimum rents for travel centers
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1.64x
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1.73x
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1.51x
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1.82x
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(1) Reconciliations of net income determined in accordance with U.S.
generally accepted accounting principles, or GAAP, to earnings before
interest, taxes, depreciation and amortization, or EBITDA, and EBITDA as
adjusted, or Adjusted EBITDA, and net income available for common
shareholders determined in accordance with GAAP to funds from
operations, or FFO, and Normalized FFO available for common
shareholders, for the quarters and six months ended June 30, 2016 and
2015 appear later in this press release.
Results for the Three and Six Months Ended June 30, 2016 and
Recent Activities:
-
Net Income Available for Common Shareholders: Net income
available for common shareholders for the quarter ended June 30, 2016
was $50.9 million, or $0.34 per diluted share, compared to net income
available for common shareholders of $78.0 million, or $0.52 per
diluted share, for the quarter ended June 30, 2015. Net income
available for common shareholders for the quarter ended June 30, 2016
includes $25.9 million, or $0.17 per diluted share, of estimated
business management incentive fee expense. Net income available for
common shareholders for the quarter ended June 30, 2015 includes an
$11.0 million, or $0.07 per diluted share, gain on the sale of real
estate. The weighted average number of diluted common shares
outstanding was 151.4 million and 150.3 million for the quarters ended
June 30, 2016 and 2015, respectively.
Net income available
for common shareholders for the six months ended June 30, 2016 was
$97.8 million, or $0.64 per diluted share, compared to net income
available for common shareholders of $114.4 million, or $0.76 per
diluted share, for the six months ended June 30, 2015. Net income
available for common shareholders for the six months ended June 30,
2016 includes $31.2 million, or $0.21 per diluted share, of estimated
business management incentive fee expense. Net income available for
common shareholders for the six months ended June 30, 2015 includes
$8.8 million, or $0.06 per diluted share, of estimated business
management incentive fee expense and an $11.0 million, or $0.07 per
diluted share, gain on the sale of real estate. The weighted average
number of diluted common shares outstanding was 151.4 million and
150.6 million for the six months ended June 30, 2016 and 2015,
respectively.
-
Adjusted EBITDA: Adjusted EBITDA for the quarter ended June 30,
2016 compared to the same period in 2015 increased 12.8% to $215.6
million.
Adjusted EBITDA for the six months ended June 30,
2016 compared to the same period in 2015 increased 12.5% to $403.3
million.
-
Normalized FFO Available for Common Shareholders: Normalized
FFO available for common shareholders for the quarter ended June 30,
2016 were $165.7 million, or $1.09 per diluted share, compared to
Normalized FFO available for common shareholders of $148.1 million, or
$0.99 per diluted share, for the quarter ended June 30, 2015.
Normalized
FFO available for common shareholders for the six months ended June
30, 2016 were $305.9 million, or $2.02 per diluted share, compared to
Normalized FFO available for common shareholders of $272.9 million, or
$1.81 per diluted share, for the six months ended June 30, 2015.
-
Hotel RevPAR (comparable hotels): For the quarter ended June
30, 2016 compared to the same period in 2015 for HPT’s 292 hotels that
it owned continuously since April 1, 2015: average daily rate, or ADR,
increased 3.0% to $126.64; occupancy increased 1.5 percentage points
to 81.6%; and revenue per available room, or RevPAR, increased 4.9% to
$103.34.
For the six months ended June 30, 2016 compared to
the same period in 2015 for HPT’s 291 hotels that it owned
continuously since January 1, 2015: ADR increased 3.4% to $125.78;
occupancy increased 0.9 percentage points to 76.9%; and RevPAR
increased 4.7% to $96.72.
-
Hotel RevPAR (all hotels): For the quarter ended June 30, 2016
compared to the same period in 2015 for HPT’s 305 hotels: ADR
increased 2.8% to $126.77; occupancy increased 0.7 percentage points
to 80.7%; and RevPAR increased 3.7% to $102.30.
For the six
months ended June 30, 2016 compared to the same period in 2015 for
HPT’s 305 hotels: ADR increased 3.1% to $125.55; occupancy remained
the same at 76.0%; and RevPAR increased 3.1% to $95.42.
-
Coverage of Minimum Returns and Rents: For the quarter ended
June 30, 2016, the aggregate coverage ratio of (x) total hotel
revenues minus all hotel expenses and FF&E reserve escrows which are
not subordinated to minimum returns and minimum rent payments to HPT
to (y) HPT’s minimum returns and rents due from hotels increased to
1.34x from 1.28x for the quarter ended June 30, 2015.
For
the six months ended June 30, 2016, the aggregate coverage ratio of
(x) total hotel revenues minus all hotel expenses and FF&E reserve
escrows which are not subordinated to minimum returns and minimum rent
payments to HPT to (y) HPT’s minimum returns and rents due from hotels
increased to 1.14x from 1.11x for the six months ended June 30, 2015.
For
the quarter ended June 30, 2016, the aggregate coverage ratio of (x)
total travel center revenues less travel center expenses to (y) HPT’s
minimum rent due from leased travel centers decreased to 1.64x from
1.73x for the quarter ended June 30, 2015.
For the six
months ended June 30, 2016, the aggregate coverage ratio of (x) total
travel center revenues less travel center expenses to (y) HPT’s
minimum rent due from leased travel centers decreased to 1.51x from
1.82x for the quarter ended June 30, 2015.
As of June 30,
2016, approximately 79% of HPT’s aggregate annual minimum returns and
rents were secured by guarantees or security deposits from HPT’s
managers and tenants pursuant to the terms of HPT’s operating
agreements.
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Recent Property Acquisition Activities: On June 22, 2016, HPT
acquired from TravelCenters of America LLC (Nasdaq: TA), or TA, two
travel centers located in Remington, IN and Brazil, IN for an
aggregate purchase price of $23.9 million, excluding acquisition
related costs. HPT added these Petro branded travel centers to its TA
No. 1 and No. 3 leases, respectively.
On June 30, 2016, HPT
acquired from TA a newly developed travel center located in
Wilmington, IL for $22.3 million, excluding acquisition related costs.
HPT added this Petro branded travel center to its TA No. 2 lease.
On
July 29, 2016, HPT entered into an agreement to acquire a full service
hotel with 236 rooms located in the Silicon Valley region of Milpitas,
CA for a purchase price of $52 million, excluding acquisition related
costs. HPT currently expects to complete this acquisition during the
fourth quarter of 2016. HPT plans to add this hotel to its management
agreement with Sonesta International Hotels Corporation, or Sonesta.
Tenants and Managers: As of June 30, 2016, HPT had nine
operating agreements with seven hotel operating companies for 305 hotels
with 46,347 rooms, which represented 65% of HPT’s total annual minimum
returns and rents, and five lease agreements with one travel center
operating company for 197 travel centers, which represented 35% of HPT’s
total annual minimum returns and rents.
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Marriott Agreements: As of June 30, 2016, 122 of HPT’s hotels
were operated by subsidiaries of Marriott International, Inc. (Nasdaq:
MAR), or Marriott, under three agreements. HPT’s Marriott No. 1
agreement includes 53 hotels, and provides for annual minimum return
payments to HPT of $68.5 million as of June 30, 2016 (approximately
$17.1 million per quarter). Because there is no guarantee or security
deposit for this agreement, the minimum returns HPT receives under
this agreement may be 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, 2016, HPT realized returns under its
Marriott No. 1 agreement of $22.5 million. HPT’s Marriott No. 234
agreement includes 68 hotels and requires annual minimum returns to
HPT of $106.2 million as of June 30, 2016 (approximately $26.6 million
per quarter). During the three months ended June 30, 2016, HPT
realized returns under its Marriott No. 234 agreement of $26.6
million. HPT’s Marriott No. 234 agreement is partially secured by a
security deposit and a limited guarantee from Marriott; during the
three months ended June 30, 2016, the available security deposit was
replenished by $6.2 million from a share of hotel cash flows in excess
of the minimum returns due to HPT for the period. At June 30, 2016,
the available security deposit from Marriott for the Marriott No. 234
agreement was $13.2 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, 2016 of $2.5 million was paid to HPT.
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InterContinental Agreement: As of June 30, 2016, 94 of HPT’s
hotels were operated by subsidiaries of InterContinental under one
agreement requiring annual minimum returns and rents to HPT of $160.3
million (approximately $40.1 million per quarter). During the three
months ended June 30, 2016, HPT realized returns and rents under its
InterContinental agreement of $43.7 million. HPT’s InterContinental
agreement is partially secured by a security deposit. During the three
months ended June 30, 2016, the available security deposit was
replenished by $7.2 million from a share of hotel cash flows in excess
of the returns and rents due to HPT for the period. At June 30, 2016,
the available InterContinental security deposit which HPT held to pay
future payment shortfalls was $63.9 million.
-
Wyndham Agreement: As of June 30, 2016, 22 of HPT’s
hotels were operated under a management agreement with a subsidiary of
Wyndham Worldwide Corporation (NYSE: WYN), or Wyndham, requiring
annual minimum returns of $26.7 million (approximately $6.7 million
per quarter). During the three months ended June 30, 2016, HPT
realized returns under its Wyndham management agreement of $6.7
million. The guarantee provided by Wyndham with respect to the
management agreement is limited and as of June 30, 2016, $2.2 million
was available to cover payment shortfalls of HPT’s minimum returns.
During the three months ended June 30, 2016, the guarantee was
replenished by $2.2 million from a share of hotel cash flows that were
in excess of the minimum returns due to HPT. HPT also leases 48
vacation units in one of the hotels to Wyndham Vacation Resorts, Inc.,
a subsidiary of Wyndham, which requires annual minimum rent of $1.4
million (approximately $0.4 million per quarter). The guarantee
provided by Wyndham with respect to the lease is unlimited.
-
Other Hotel Agreements: As of June 30, 2016, HPT’s remaining 67
hotels are operated under four agreements: one management agreement
with Sonesta (33 hotels), requiring annual minimum returns of $85.2
million as of June 30, 2016 (approximately $21.3 million per quarter);
one management agreement with a subsidiary of Hyatt Hotels Corporation
(NYSE: H), or Hyatt (22 hotels), requiring annual minimum returns of
$22.0 million as of June 30, 2016 (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 as of June 30, 2016 (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
as of June 30, 2016 (approximately $1.9 million per quarter). Minimum
returns and rents due to HPT are partially guaranteed under the Hyatt
and Carlson agreements. There is no guarantee or security deposit for
the Sonesta agreement and the minimum returns HPT receives under that
agreement are limited to available hotel cash flow after payment of
operating expenses. The payments due to HPT under these agreements for
the three months ended June 30, 2016 were paid to HPT.
-
Travel Center Agreements: As of June 30, 2016, HPT’s 197 travel
centers located along the U.S. Interstate Highway system were leased
to TA under five lease agreements, which required aggregate annual
minimum rents of $268.0 million (approximately $67.0 million per
quarter). As of June 30, 2016, all payments due to HPT from TA under
these leases were current.
Conference Call:
On Tuesday, August 9, 2016, at 10:00 a.m. Eastern Time, John Murray,
President and Chief Operating Officer, and Mark Kleifges, Chief
Financial Officer and Treasurer, will host a conference call to discuss
the results for the quarter ended June 30, 2016. 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 Tuesday, August
16, 2016. To hear the replay, dial (412) 317-0088. The replay pass code
is 10088732.
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 2016 Supplemental Operating and Financial
Data is available for download at HPT’s website, www.hptreit.com. HPT’s
website is not incorporated as part of this press release.
Hospitality Properties Trust is a real estate investment trust, or REIT,
which owns a diverse portfolio of hotels and travel centers located in
45 states, Puerto Rico and Canada. HPT’s properties are operated under
long term management or lease agreements. HPT is managed by the
operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), an alternative
asset management company that is headquartered in Newton, Massachusetts.
Please see the following pages for a more detailed statement of HPT’s
operating results and financial condition and for an explanation of
HPT’s calculation of FFO available for common shareholders and
Normalized FFO available for common shareholders, EBITDA and Adjusted
EBITDA.
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”, “MAY” OR SIMILAR EXPRESSIONS, HPT IS MAKING FORWARD LOOKING
STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON HPT’S
PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS
ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY HPT’S FORWARD LOOKING
STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:
-
AS OF JUNE 30, 2016, APPROXIMATELY 79% OF HPT’S AGGREGATE ANNUAL
MINIMUM RETURNS AND RENTS WERE SECURED BY GUARANTEES OR SECURITY
DEPOSITS FROM HPT’S MANAGERS AND TENANTS. THIS MAY IMPLY THAT THESE
MINIMUM RETURNS AND RENTS WILL BE PAID. IN FACT, THESE GUARANTEES AND
SECURITY DEPOSITS ARE LIMITED IN AMOUNT AND DURATION AND THE
GUARANTEES ARE SUBJECT TO THE GUARANTORS’ ABILITY AND WILLINGNESS TO
PAY. THE BALANCE OF HPT’S ANNUAL MINIMUM RETURNS AND RENTS AS OF JUNE
30, 2016 WAS NOT GUARANTEED NOR DOES HPT HOLD A SECURITY DEPOSIT WITH
RESPECT TO THOSE AMOUNTS. HPT CAN PROVIDE NO ASSURANCE WITH REGARD TO
THE FUTURE PERFORMANCE OF HPT’S PROPERTIES, WHETHER THAT PERFORMANCE
WILL COVER HPT’S MINIMUM RETURNS AND RENTS, WHETHER THE GUARANTEES OR
SECURITY DEPOSITS WILL BE ADEQUATE TO COVER FUTURE SHORTFALLS IN THE
MINIMUM RETURNS OR RENTS DUE TO HPT, REGARDING HPT’S MANAGERS’,
TENANTS’ OR GUARANTORS’ FUTURE ACTIONS IF AND WHEN THE GUARANTEES AND
SECURITY DEPOSITS EXPIRE OR ARE DEPLETED OR THEIR ABILITY OR REGARDING
WILLINGNESS TO PAY MINIMUM RETURNS AND RENTS OWED TO HPT. MOREOVER,
THE SECURITY DEPOSITS HELD BY HPT ARE NOT SEGREGATED FROM HPT’S OTHER
ASSETS AND THE APPLICATION OF SECURITY DEPOSITS TO COVER SHORTFALLS
WILL RESULT IN HPT RECORDING INCOME, BUT WILL NOT RESULT IN HPT
RECEIVING ADDITIONAL CASH,
-
HPT HAS ENTERED INTO AN AGREEMENT TO ACQUIRE ONE HOTEL FOR A PURCHASE
PRICE OF $52 MILLION, AND HPT EXPECTS TO COMPLETE THIS TRANSACTION
DURING THE FOURTH QUARTER OF 2016 AND THAT IT WILL ADD THIS HOTEL TO
ITS EXISTING SONESTA MANAGEMENT AGREEMENT. THIS TRANSACTION IS SUBJECT
TO COMPLETION OF DILIGENCE AND OTHER CLOSING CONDITIONS. THESE TERMS
AND CONDITIONS MAY NOT BE SATISFIED. AS A RESULT, THIS ACQUISITION AND
THE EXPECTED MANAGEMENT ARRANGEMENT MAY NOT OCCUR, MAY BE DELAYED OR
THE PURCHASE OR MANAGEMENT TERMS MAY CHANGE.
THE INFORMATION CONTAINED IN HPT’S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER THE CAPTION “RISK FACTORS”
IN HPT’S PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER
IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM HPT’S FORWARD
LOOKING STATEMENTS. HPT’S FILINGS WITH THE SEC ARE AVAILABLE ON THE
SEC’S WEBSITE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.
EXCEPT AS REQUIRED BY LAW, HPT DOES NOT INTEND TO UPDATE OR CHANGE ANY
FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS
OR OTHERWISE.
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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,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel operating revenues (1)
|
|
$
|
471,910
|
|
|
$
|
436,977
|
|
|
$
|
868,413
|
|
|
$
|
806,573
|
|
Rental income (2)
|
|
|
77,293
|
|
|
|
69,063
|
|
|
|
153,552
|
|
|
|
133,814
|
|
FF&E reserve income (3)
|
|
|
1,096
|
|
|
|
1,026
|
|
|
|
2,452
|
|
|
|
2,191
|
|
Total revenues
|
|
|
550,299
|
|
|
|
507,066
|
|
|
|
1,024,417
|
|
|
|
942,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel operating expenses (1)
|
|
|
324,922
|
|
|
|
304,428
|
|
|
|
601,227
|
|
|
|
562,086
|
|
Depreciation and amortization
|
|
|
88,782
|
|
|
|
80,582
|
|
|
|
176,053
|
|
|
|
159,551
|
|
General and administrative (4)
|
|
|
37,365
|
|
|
|
12,685
|
|
|
|
53,388
|
|
|
|
33,989
|
|
Acquisition related costs (5)
|
|
|
117
|
|
|
|
797
|
|
|
|
729
|
|
|
|
1,135
|
|
Total expenses
|
|
|
451,186
|
|
|
|
398,492
|
|
|
|
831,397
|
|
|
|
756,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
99,113
|
|
|
|
108,574
|
|
|
|
193,020
|
|
|
|
185,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend income
|
|
|
749
|
|
|
|
-
|
|
|
|
749
|
|
|
|
-
|
|
Interest income
|
|
|
40
|
|
|
|
10
|
|
|
|
138
|
|
|
|
21
|
|
Interest expense (including amortization of debt issuance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
and debt discounts of $2,127 and $1,458 and $3,993 and
|
|
|
|
|
|
|
|
|
|
|
|
|
$2,916, respectively)
|
|
|
(41,698
|
)
|
|
|
(35,836
|
)
|
|
|
(83,284
|
)
|
|
|
(71,290
|
)
|
Loss on early extinguishment of debt (6)
|
|
|
-
|
|
|
|
-
|
|
|
|
(70
|
)
|
|
|
-
|
|
Income before income taxes, equity in earnings of an investee and
gain on sale of real estate
|
|
|
58,204
|
|
|
|
72,748
|
|
|
|
110,553
|
|
|
|
114,548
|
|
Income tax expense
|
|
|
(2,160
|
)
|
|
|
(640
|
)
|
|
|
(2,535
|
)
|
|
|
(931
|
)
|
Equity in earnings of an investee
|
|
|
17
|
|
|
|
23
|
|
|
|
94
|
|
|
|
95
|
|
Income before gain on sale of real estate
|
|
|
56,061
|
|
|
|
72,131
|
|
|
|
108,112
|
|
|
|
113,712
|
|
Gain on sale of real estate (7)
|
|
|
-
|
|
|
|
11,015
|
|
|
|
-
|
|
|
|
11,015
|
|
Net income
|
|
|
56,061
|
|
|
|
83,146
|
|
|
|
108,112
|
|
|
|
124,727
|
|
Preferred distributions
|
|
|
(5,166
|
)
|
|
|
(5,166
|
)
|
|
|
(10,332
|
)
|
|
|
(10,332
|
)
|
Net income available for common shareholders
|
|
$
|
50,895
|
|
|
$
|
77,980
|
|
|
$
|
97,780
|
|
|
$
|
114,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
151,408
|
|
|
|
150,260
|
|
|
|
151,405
|
|
|
|
150,028
|
|
Weighted average common shares outstanding (diluted)
|
|
|
151,442
|
|
|
|
150,292
|
|
|
|
151,428
|
|
|
|
150,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common shareholders per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.34
|
|
|
$
|
0.52
|
|
|
$
|
0.65
|
|
|
$
|
0.76
|
|
See Notes on pages 9 and 10
|
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 June 30,
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Calculation of Funds from Operations (FFO) and Normalized FFO
|
|
|
|
|
|
|
|
|
|
|
|
|
available for common shareholders: (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common shareholders
|
|
$
|
50,895
|
|
$
|
77,980
|
|
|
$
|
97,780
|
|
$
|
114,395
|
|
Add (Less):
|
Depreciation and amortization
|
|
|
88,782
|
|
|
80,582
|
|
|
|
176,053
|
|
|
159,551
|
|
|
Gain on sale of real estate (7)
|
|
|
-
|
|
|
(11,015
|
)
|
|
|
-
|
|
|
(11,015
|
)
|
FFO available for common shareholders
|
|
|
139,677
|
|
|
147,547
|
|
|
|
273,833
|
|
|
262,931
|
|
Add (Less):
|
Acquisition related costs (5)
|
|
|
117
|
|
|
797
|
|
|
|
729
|
|
|
1,135
|
|
|
Estimated business management incentive fees (4)
|
|
|
25,920
|
|
|
(205
|
)
|
|
|
31,236
|
|
|
8,822
|
|
|
Loss on early extinguishment of debt (6)
|
|
|
-
|
|
|
-
|
|
|
|
70
|
|
|
-
|
|
Normalized FFO available for common shareholders
|
|
$
|
165,714
|
|
$
|
148,139
|
|
|
$
|
305,868
|
|
$
|
272,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
151,408
|
|
|
150,260
|
|
|
|
151,405
|
|
|
150,028
|
|
Weighted average common shares outstanding (diluted)
|
|
|
151,442
|
|
|
150,292
|
|
|
|
151,428
|
|
|
150,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted per common share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO available for common shareholders (basic and diluted)
|
|
$
|
0.92
|
|
$
|
0.98
|
|
|
$
|
1.81
|
|
$
|
1.75
|
|
|
Normalized FFO available for common shareholders (basic)
|
|
$
|
1.09
|
|
$
|
0.99
|
|
|
$
|
2.02
|
|
$
|
1.82
|
|
|
Normalized FFO available for common shareholders (diluted)
|
|
$
|
1.09
|
|
$
|
0.99
|
|
|
$
|
2.02
|
|
$
|
1.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Calculation of EBITDA and Adjusted EBITDA: (9)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
56,061
|
|
$
|
83,146
|
|
|
$
|
108,112
|
|
$
|
124,727
|
|
Add:
|
Interest expense
|
|
|
41,698
|
|
|
35,836
|
|
|
|
83,284
|
|
|
71,290
|
|
|
Income tax expense
|
|
|
2,160
|
|
|
640
|
|
|
|
2,535
|
|
|
931
|
|
|
Depreciation and amortization
|
|
|
88,782
|
|
|
80,582
|
|
|
|
176,053
|
|
|
159,551
|
|
EBITDA
|
|
|
188,701
|
|
|
200,204
|
|
|
|
369,984
|
|
|
356,499
|
|
Add (less):
|
Acquisition related costs (5)
|
|
|
117
|
|
|
797
|
|
|
|
729
|
|
|
1,135
|
|
|
General and administrative expense paid in common shares (10)
|
|
|
870
|
|
|
1,278
|
|
|
|
1,292
|
|
|
3,013
|
|
|
Estimated business management incentive fees (4)
|
|
|
25,920
|
|
|
(205
|
)
|
|
|
31,236
|
|
|
8,822
|
|
|
Loss on early extinguishment of debt (6)
|
|
|
-
|
|
|
-
|
|
|
|
70
|
|
|
-
|
|
|
Gain on sale of real estate (7)
|
|
|
-
|
|
|
(11,015
|
)
|
|
|
-
|
|
|
(11,015
|
)
|
Adjusted EBITDA
|
|
$
|
215,608
|
|
$
|
191,059
|
|
|
$
|
403,311
|
|
$
|
358,454
|
|
See Notes on pages 9 and 10
(1) At June 30, 2016, HPT owned 305 hotels; 302 of these hotels are
managed by hotel operating companies and three hotels are leased to
hotel operating companies. At June 30, 2016, HPT also owned 197 travel
centers; all 197 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 both the three months ended
June 30, 2016 and 2015. Certain of HPT’s managed hotel portfolios had
net operating results that were, in the aggregate, $11,544 and $11,443
less than the minimum returns due to HPT in the six months ended June
30, 2016 and 2015, 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 in the three months ended June 30, 2016 or 2015 and
reductions of $1,766 and $1,903 in the six months ended June 30, 2016
and 2015, respectively, as a result of such fundings. HPT had shortfalls
at certain of its managed hotel portfolios not funded by the managers of
these hotels under the terms of its operating agreements of $9,778 and
$9,540 in the six months ended June 30, 2016 and 2015, respectively,
which represent the unguaranteed portions of HPT’s minimum returns from
Sonesta. Certain of HPT’s managed hotel portfolios had net operating
results that were, in the aggregate, $43,440 and $35,902 more than the
minimum returns due to HPT in the three months ended June 30, 2016 and
2015, respectively, and $46,918 and $37,611 more than the minimum
returns due to HPT in the six months ended June 30, 2016 and 2015,
respectively. Certain of HPT’s guarantees and HPT’s security deposits
may be replenished by future cash flows from the applicable hotel
operations pursuant to the terms of the respective operating agreements.
When HPT’s guarantees and its security deposits are replenished by cash
flows from hotel operations, HPT reflects such replenishments in its
condensed consolidated statements of income as an increase to hotel
operating expenses. Hotel operating expenses were increased by $20,057
and $14,976 in the three months ended June 30, 2016 and 2015,
respectively, and $19,968 and $16,189 in the six months ended June 30,
2016 and 2015, respectively, as a result of such replenishments.
(2) Rental income includes $3,693 and $1,511 in the three months ended
June 30, 2016 and 2015, respectively, and $7,445 and $2,056 in the six
months ended June 30, 2016 and 2015, respectively, of adjustments
necessary to record scheduled rent increases under certain of HPT’s
leases, the deferred rent obligations under HPT’s travel center leases
and the estimated future payments to HPT under its travel center leases
for the cost of removing underground storage tanks on a straight line
basis. 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. Rental income for the second
quarter of 2015 includes $2,048 of percentage rent recorded as a result
of HPT’s lease modifications with TA because the amount was no longer
contingent.
(3) Various percentages of total sales at certain of HPT’s hotels are
escrowed as reserves for future renovations or refurbishment, or FF&E
reserve escrows. HPT owns all the FF&E reserve escrows for its hotels.
HPT reports deposits by its tenants into the escrow accounts under its
three hotel leases as FF&E reserve income. HPT does not report the
amounts which are escrowed as FF&E reserves for its managed hotels as
FF&E reserve income.
(4) Incentive fees under HPT’s business management agreement are payable
after the end of each calendar year, are calculated based on common
share total return, as defined, and are included in general and
administrative expense in HPT’s condensed consolidated statements of
income. In calculating net income in accordance with GAAP, HPT
recognizes estimated business management incentive fee expense, if any,
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 or Adjusted EBITDA until the fourth quarter, which is when
the actual incentive fee expense amount for the year, if any, is
determined. HPT recorded $25,920 and reversed $205 of estimated business
management incentive fees during the three months ended June 30, 2016
and 2015, respectively. HPT recorded $31,236 and $8,822 of estimated
business management incentive fees during the six months ended June 30,
2016 and 2015, respectively.
HPT recorded a liability for the amount by which the estimated fair
value for accounting purposes exceeded the price HPT paid for its
investment in RMR common stock in June 2015. A portion of this liability
is being amortized on a straight line basis through December 31, 2035,
as a reduction to business management fees, which are included in
general and administrative expense. General and administrative expense
was reduced by $896 and $231 during the three months ended June 30, 2016
and 2015, respectively, and by $1,793 and $231 during the six months
ended June 30, 2016 and 2015, respectively, as a result of this
amortization.
(5) Represents costs associated with HPT’s acquisition activities.
(6) HPT recorded a $70 loss on early extinguishment of debt in the first
quarter of 2016 in connection with the redemption of certain senior
unsecured notes.
(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.
(8) HPT calculates FFO available for common shareholders and Normalized
FFO available for common shareholders as shown above. FFO available for
common shareholders is calculated on the basis defined by The National
Association of Real Estate Investment Trusts, or NAREIT, which is net
income available for common shareholders calculated in accordance with
GAAP, excluding any gain or loss on sale of properties and loss on
impairment of real estate assets, plus real estate depreciation and
amortization, as well as certain other adjustments currently not
applicable to HPT. HPT’s calculation of Normalized FFO available for
common shareholders differs from NAREIT’s definition of FFO available
for common shareholders because HPT includes business management
incentive fees, if any, only in the fourth quarter versus the quarter
when they are recognized as expense in accordance with GAAP due to their
quarterly volatility not necessarily being indicative of HPT’s core
operating performance and the uncertainty as to whether any such
business management incentive fees will ultimately be payable when all
contingencies for determining any such fees are determined at the end of
the calendar year and HPT excludes acquisition related costs and loss on
early extinguishment of debt. HPT considers FFO available for common
shareholders and Normalized FFO available for common shareholders to be
appropriate supplemental measures of operating performance for a REIT,
along with net income, net income available for common shareholders,
operating income and cash flow from operating activities. HPT believes
that FFO available for common shareholders and Normalized FFO available
for common shareholders provide useful information to investors because
by excluding the effects of certain historical amounts, such as
depreciation expense, FFO available for common shareholders and
Normalized FFO available for common shareholders may facilitate a
comparison of HPT’s operating performance between periods and with other
REITs. FFO available for common shareholders and Normalized FFO
available for common shareholders are among the factors considered by
HPT’s Board of Trustees when determining the amount of distributions to
shareholders. Other factors include, but are not limited to,
requirements to maintain HPT’s qualification for taxation as a REIT,
limitations in its unsecured revolving credit facility and unsecured
term loan agreement and public debt covenants, the availability to HPT
of debt and equity capital, HPT’s expectation of its future capital
requirements and operating performance and HPT’s expected needs for and
availability of cash to pay its obligations. FFO available for common
shareholders and Normalized FFO available for common shareholders do not
represent cash generated by operating activities in accordance with GAAP
and should not be considered as alternatives to net income, net income
available for common shareholders or operating income as an indicator of
HPT’s operating performance or as a measure of HPT’s liquidity. These
measures should be considered in conjunction with net income, net income
available for common shareholders, operating income and cash flow from
operating activities as presented in HPT’s condensed consolidated
statements of income and condensed consolidated statements of cash
flows. Other real estate companies and REITs may calculate FFO available
for common shareholders and Normalized FFO available for common
shareholders differently than HPT does. Effective with the quarter ended
June 30, 2016, HPT has changed its calculation of Normalized FFO to no
longer include adjustments for estimated percentage rent. Historically,
when calculating Normalized FFO, HPT estimated an amount of percentage
rental income for each of the first three quarters of the year and then,
in the fourth quarter, excluded the amounts that had been included in
the first three quarters. In calculating net income in accordance with
GAAP, HPT recognizes percentage rental income for the full year in the
fourth quarter, which is when all contingencies are met and the income
is earned. Normalized FFO for historical periods has been restated to be
comparable with the current period calculation.
(9) HPT calculates EBITDA and Adjusted EBITDA as shown above. HPT
considers EBITDA and Adjusted EBITDA to be appropriate supplemental
measures of its operating performance, along with net income, net income
available for common shareholders, 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 HPT’s past operating
performance. In calculating Adjusted EBITDA, HPT includes business
management incentive fees only in the fourth quarter versus the quarter
when they are recognized as expense in accordance with GAAP due to their
quarterly volatility not necessarily being indicative of HPT’s core
operating performance and the uncertainty as to whether any such
business management incentive fees will ultimately be payable when all
contingencies for determining any such fees are determined at the end of
the calendar year. EBITDA and Adjusted EBITDA do not represent cash
generated by operating activities in accordance with GAAP and should not
be considered an alternative to net income, net income available for
common shareholders or operating income as an indicator of operating
performance or as a measure of HPT’s liquidity. These measures should be
considered in conjunction with net income, net income available for
common shareholders, operating income and cash flow from operating
activities as presented in HPT’s condensed consolidated statements of
income and condensed consolidated statements of cash flows. Other real
estate companies and REITs may calculate EBITDA and Adjusted EBITDA
differently than HPT does. Effective with the quarter ended June 30,
2016, HPT has changed its calculation of Adjusted EBITDA to no longer
include adjustments for estimated percentage rent. Historically, when
calculating Adjusted EBITDA, HPT estimated an amount of percentage
rental income for each of the first three quarters of the year and then,
in the fourth quarter, excluded the amounts that had been included in
the first three quarters. In calculating net income in accordance with
GAAP, HPT recognizes percentage rental income for the full year in the
fourth quarter, which is when all contingencies are met and the income
is earned. Adjusted EBITDA for historical periods has been restated to
be comparable with the current period calculation.
(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 other employees of HPT’s
manager. Beginning June 1, 2015, all business management fees are paid
in cash.
|
HOSPITALITY PROPERTIES TRUST
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(amounts in thousands, except share data)
|
(Unaudited)
|
|
|
|
June 30,
|
|
December 31,
|
|
|
2016
|
|
2015
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate properties:
|
|
|
|
|
|
|
Land
|
|
$
|
1,547,774
|
|
|
$
|
1,529,004
|
|
Buildings, improvements and equipment
|
|
|
6,993,371
|
|
|
|
6,740,423
|
|
Total real estate properties, gross
|
|
|
8,541,145
|
|
|
|
8,269,427
|
|
Accumulated depreciation
|
|
|
(2,361,264
|
)
|
|
|
(2,218,499
|
)
|
Total real estate properties, net
|
|
|
6,179,881
|
|
|
|
6,050,928
|
|
Cash and cash equivalents
|
|
|
20,347
|
|
|
|
13,682
|
|
Restricted cash (FF&E reserve escrow)
|
|
|
61,419
|
|
|
|
51,211
|
|
Due from related persons
|
|
|
58,991
|
|
|
|
50,987
|
|
Other assets, net
|
|
|
288,697
|
|
|
|
227,989
|
|
Total assets
|
|
$
|
6,609,335
|
|
|
$
|
6,394,797
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured revolving credit facility
|
|
$
|
232,000
|
|
|
$
|
465,000
|
|
Unsecured term loan, net
|
|
|
398,088
|
|
|
|
397,756
|
|
Senior unsecured notes, net
|
|
|
2,862,800
|
|
|
|
2,403,439
|
|
Convertible senior unsecured notes
|
|
|
8,478
|
|
|
|
8,478
|
|
Security deposits
|
|
|
77,269
|
|
|
|
53,579
|
|
Accounts payable and other liabilities
|
|
|
190,304
|
|
|
|
179,783
|
|
Due to related persons
|
|
|
40,724
|
|
|
|
69,514
|
|
Dividends payable
|
|
|
5,166
|
|
|
|
5,166
|
|
Total liabilities
|
|
|
3,814,829
|
|
|
|
3,582,715
|
|
|
|
|
|
|
|
|
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 and
|
|
|
|
|
|
|
|
|
outstanding, aggregate liquidation preference of $290,000
|
|
|
280,107
|
|
|
|
280,107
|
|
Common shares of beneficial interest, $.01 par value; 200,000,000
shares authorized; 151,559,788
|
|
|
|
|
|
|
|
|
and 151,547,288 shares issued and outstanding, respectively
|
|
|
1,516
|
|
|
|
1,515
|
|
Additional paid in capital
|
|
|
4,166,301
|
|
|
|
4,165,911
|
|
Cumulative net income
|
|
|
2,989,769
|
|
|
|
2,881,657
|
|
Cumulative other comprehensive income (loss)
|
|
|
21,793
|
|
|
|
(15,523
|
)
|
Cumulative preferred distributions
|
|
|
(331,645
|
)
|
|
|
(321,313
|
)
|
Cumulative common distributions
|
|
|
(4,333,335
|
)
|
|
|
(4,180,272
|
)
|
Total shareholders’ equity
|
|
|
2,794,506
|
|
|
|
2,812,082
|
|
Total liabilities and shareholders’ equity
|
|
$
|
6,609,335
|
|
|
$
|
6,394,797
|
|
A Maryland Real Estate Investment Trust with transferable shares of
beneficial interest listed on the Nasdaq.
No shareholder,
Trustee or officer is personally liable for any act or obligation of the
Trust.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160809005502/en/
Source: Hospitality Properties Trust