Feb 27, 2019
Fourth Quarter Net Loss Available for Common Shareholders of
Fourth Quarter Normalized FFO Available for Common Shareholders of
| Three Months Ended | Year Ended | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| ($ in thousands, except per share and RevPAR data) | ||||||||||||||||||||
| Net income (loss) available for common shareholders | $ | (108,860 | ) | $ | 31,545 | $ | 185,734 | $ | 203,815 | |||||||||||
| Net income (loss) available for common shareholders per share | $ | (0.66 | ) | $ | 0.19 | $ | 1.13 | $ | 1.24 | |||||||||||
| Adjusted EBITDA (1) | $ | 149,773 | $ | 135,312 | $ | 805,303 | $ | 773,654 | ||||||||||||
| Normalized FFO available for common shareholders (1) | $ | 99,994 | $ | 87,865 | $ | 605,708 | $ | 585,734 | ||||||||||||
| Normalized FFO available for common shareholders per share (1) | $ | 0.61 | $ | 0.54 | $ | 3.69 | $ | 3.57 | ||||||||||||
Portfolio Performance | ||||||||||||||||||||
| Comparable hotel RevPAR | $ | 86.24 | $ | 87.70 | $ | 96.22 | $ | 95.74 | ||||||||||||
| Change in comparable hotel RevPAR | (1.7 | %) | — | 0.5 | % | — | ||||||||||||||
| RevPAR (all hotels) | $ | 86.53 | $ | 87.85 | $ | 95.14 | $ | 95.87 | ||||||||||||
| Change in RevPAR (all hotels) | (1.5 | %) | — | (0.8 | %) | — | ||||||||||||||
| Coverage of HPT’s minimum returns and rents for hotels | 0.77x | 0.90x | 0.97x | 1.06x | ||||||||||||||||
| Coverage of HPT's minimum rents for travel centers | 1.59x | 1.46x | 1.63x | 1.50x | ||||||||||||||||
| (1) |
Reconciliations of net income (loss) determined in accordance with
|
“HPT’s fourth quarter 2018 comparable hotel RevPAR declined 1.7%
compared to the prior year period due to occupancy decreases associated
with thirty-seven hotel renovations, non-recurring business related to
the hurricanes in
Our TA properties' total gross margin increased by
In
Results for the Quarter and Year Ended
- Net Income (Loss) Available for Common Shareholders: Net loss
available for common shareholders for the quarter ended
December 31, 2018 was$108.9 million , or$0.66 per diluted share, compared to net income available for common shareholders of$31.5 million , or$0.19 per diluted share, for the quarter endedDecember 31, 2017 . Net loss available for common shareholders for the quarter endedDecember 31, 2018 includes$106.1 million , or$0.65 per diluted share, of unrealized losses on equity securities and$53.6 million , or$0.33 per diluted share, of business management incentive fee expense. Net income available for common shareholders for the quarter endedDecember 31, 2017 includes$36.3 million , or$0.22 per diluted share, of business management incentive fee expense and a$5.4 million , or$0.03 per diluted share, tax benefit related to the federal tax legislation referred to as the Tax Cuts and Jobs Act, or the Tax Act. The weighted average number of diluted common shares outstanding was 164.3 million and 164.2 million for the quarters endedDecember 31, 2018 and 2017, respectively.
Net income available for common shareholders for the year endedDecember 31, 2018 was$185.7 million , or$1.13 per diluted share, compared to net income available for common shareholders of$203.8 million , or$1.24 per diluted share, for the year endedDecember 31, 2017 . Net income available for common shareholders for the year endedDecember 31, 2018 includes$53.6 million , or$0.33 per diluted share, of business management incentive fee expense and$16.7 million , or$0.10 per diluted share, of unrealized losses on equity securities. Net income available for common shareholders for the year endedDecember 31, 2017 includes$74.6 million , or$0.45 per diluted share, of business management incentive fee expense, a$9.3 million , or$0.06 per diluted share, gain on sale of real estate, a$5.4 million , or$0.03 per diluted share, tax benefit related to the Tax Act, and was reduced by$9.9 million , or$0.06 per diluted share, for the amount by which the liquidation preference for HPT's 7.125% Series D cumulative redeemable preferred shares that were redeemed during the year exceeded the carrying value of those preferred shares as of the date of the redemption. The weighted average number of diluted common shares outstanding was 164.3 million and 164.2 million for the years endedDecember 31, 2018 and 2017, respectively.
- Adjusted EBITDA: Adjusted EBITDA for the quarter ended
December 31, 2018 compared to the same period in 2017 increased 10.7% to$149.8 million .
Adjusted EBITDA for the year endedDecember 31, 2018 compared to the same period in 2017 increased 4.1% to$805.3 million .
- Normalized FFO Available for Common Shareholders: Normalized
FFO available for common shareholders for the quarter ended
December 31, 2018 were$100.0 million , or$0.61 per diluted share, compared to Normalized FFO available for common shareholders of$87.9 million , or$0.54 per diluted share, for the quarter endedDecember 31, 2017 . Normalized FFO available for common shareholders includes$53.6 million , or$0.33 per diluted share, and$74.6 million , or$0.45 per diluted share, of business management incentive fee expense for the quarters endedDecember 31, 2018 and 2017, respectively.
Normalized FFO available for common shareholders for the year endedDecember 31, 2018 were$605.7 million , or$3.69 per diluted share, compared to Normalized FFO available for common shareholders of$585.7 million , or$3.57 per diluted share, for the year endedDecember 31, 2017 . Normalized FFO available for common shareholders includes$53.6 million , or$0.33 per diluted share, and$74.6 million , or$0.45 per diluted share, of business management incentive fee expense for the years endedDecember 31, 2018 and 2017, respectively.
Hotel RevPAR (comparable hotels): For the quarter endedDecember 31, 2018 compared to the same period in 2017 for HPT’s 323 hotels that were owned continuously sinceOctober 1, 2017 : average daily rate, or ADR, increased 0.8% to$126.45 ; occupancy decreased 1.7 percentage points to 68.2%; and revenue per available room, or RevPAR, decreased 1.7% to$86.24 .
For the year endedDecember 31, 2018 compared to the same period in 2017 for HPT’s 303 hotels that were owned continuously sinceJanuary 1, 2017 : ADR increased 1.7% to$128.64 ; occupancy decreased 0.9 percentage points to 74.8%; and RevPAR increased 0.5% to$96.22 .
Hotel RevPAR (all hotels): For the quarter endedDecember 31, 2018 compared to the same period in 2017 for HPT’s 326 hotels that were owned as ofDecember 31, 2018 : ADR increased 0.8% to$126.87 ; occupancy decreased 1.6 percentage points to 68.2%; and RevPAR decreased 1.5% to$86.53 .
For the year endedDecember 31, 2018 compared to the same period in 2017 for HPT’s 326 hotels that were owned as ofDecember 31, 2018 : ADR increased 1.7% to$129.80 ; occupancy decreased 1.8 percentage points to 73.3%; and RevPAR decreased 0.8% to$95.14 .
- Coverage of Minimum Returns and Rents: For the quarter ended
December 31, 2018 , 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 or rents due to HPT to (y) HPT’s minimum returns or rents due from hotels decreased to 0.77x from 0.90x for the quarter endedDecember 31, 2017 .
For the year endedDecember 31, 2018 , 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 or rents due to HPT to (y) HPT’s minimum returns or rents due from hotels decreased to 0.97x from 1.06x for the year endedDecember 31, 2017 .
For the quarter endedDecember 31, 2018 , 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 increased to 1.59x from 1.46x for the quarter endedDecember 31, 2017 .
For the year endedDecember 31, 2018 , 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 increased to 1.63x from 1.50x for the year endedDecember 31, 2017 .
As ofDecember 31, 2018 , approximately 74% 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.
- Recent Property Acquisition Activities: In
October 2018 , HPT acquired a hotel with 164 suites located inScottsdale, AZ for a purchase price of$35.9 million , excluding acquisition related costs. HPT rebranded this hotel to the Sonesta Suites® brand and added it to its management agreement withSonesta International Hotels Corporation , or Sonesta.
InFebruary 2019 , HPT acquired the 335 roomHotel Palomar located inWashington, D.C. for a purchase price of$141.5 million , excluding acquisition related costs. HPT added this Kimpton® branded hotel to its management agreement withInterContinental Hotels Group, plc (LON: IHG; NYSE: IHG (ADRs)), or IHG.
- Transaction with
TravelCenters of America : As previously announced, onJanuary 16, 2019 , HPT entered agreements withTravelCenters of America LLC (Nasdaq: TA), or TA, to sell 20 travel centers to TA that HPT owned and leased to TA, and to amend their leases.
HPT completed the sale of 20 travel centers in 15 states to TA for$308.2 million inJanuary 2019 . HPT expects to realize a gain of approximately$160.0 million from these sales in the first quarter of 2019. HPT used the proceeds from these sales to repay borrowings under its revolving credit facility and for general business purposes, including hotel acquisitions. The aggregate annual minimum rents due from TA for the remaining 179 travel centers HPT leases to TA was$246.1 million upon completion of the sales.
Under the terms of the amended leases, HPT will receive an aggregate of$70.5 million of previously deferred rents in 16 equal quarterly installments beginning onApril 1, 2019 . Timing of the repayment was accelerated from the previously staggered due dates betweenJune 2024 andDecember 2030 in exchange for the deferred rent amounts being discounted, HPT will receive additional potential percentage rent beginning in 2020 equal to 0.5% of the excess of nonfuel revenues over nonfuel revenues in 2019 at the leased travel centers. This percentage rent is in addition to any percentage rent amounts HPT is already receiving from TA. In addition, the lease term under each of the five TA leases was extended three years.
Tenants and Managers: As of
Marriott Agreements : As ofDecember 31, 2018 , 122 of HPT’s hotels were operated by subsidiaries ofMarriott International, Inc. (Nasdaq: MAR), or Marriott, under three agreements. HPT’sMarriott No . 1 agreement includes 53 hotels, and provides for annual minimum return payments to HPT of$70.1 million as ofDecember 31, 2018 (approximately$17.5 million per quarter). During the three months endedDecember 31, 2018 , HPT realized returns under itsMarriott No . 1 agreement of$16.7 million . 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 flows after payment of operating expenses and funding of a FF&E reserve. HPT’sMarriott No . 234 agreement includes 68 hotels and requires annual minimum returns to HPT of$107.4 million as ofDecember 31, 2018 (approximately$26.8 million per quarter). During the three months endedDecember 31, 2018 , HPT realized returns under itsMarriott No . 234 agreement of$26.8 million . HPT’sMarriott No . 234 agreement is partially secured by a security deposit and a limited guaranty from Marriott; during the three months endedDecember 31, 2018 , HPT reduced the available security deposit by$0.9 million to cover shortfalls in hotel cash flows available to pay the minimum returns due to HPT during the period. As ofDecember 31, 2018 , the available security deposit from Marriott for theMarriott No . 234 agreement was$32.7 million and there was$30.7 million available under Marriott’s guaranty for up to 90% of the minimum returns due to HPT to cover future payment shortfalls if and after the available security deposit is depleted.HPT's Marriott No . 5 agreement includes one resort hotel inKauai, HI which is leased to Marriott on a full recourse basis. The contractual rent due to HPT for this hotel for the three months endedDecember 31, 2018 of$2.6 million was paid to HPT.- IHG Agreement: As of
December 31, 2018 , 100 of HPT’s hotels were operated by subsidiaries of IHG, under one agreement requiring annual minimum returns and rents to HPT of$193.7 million as ofDecember 31, 2018 (approximately$48.4 million per quarter). During the three months endedDecember 31, 2018 , HPT realized returns and rents under its IHG agreement of$39.3 million . HPT's IHG agreement is partially secured by a security deposit. As ofDecember 31, 2018 , the available IHG security deposit which HPT held to pay future payment shortfalls remained at the contractually capped amount of$100.0 million . In connection with the February acquisition of theHotel Palomar described above, IHG will provide HPT$5.0 million to supplement the existing security deposit. - Sonesta Agreement: As of
December 31, 2018 , 51 of HPT’s hotels were operated under a management agreement with Sonesta, requiring annual minimum returns of$127.1 million as ofDecember 31, 2018 (approximately$31.8 million per quarter). During the three months endedDecember 31, 2018 , HPT realized returns under its Sonesta agreement of$16.5 million . 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 flows after payment of operating expenses including management and related fees. - Wyndham Agreement: As of
December 31, 2018 , 22 of HPT’s hotels were operated under a management agreement with a subsidiary ofWyndham Hotels & Resorts, Inc. (NYSE: WH), or Wyndham, requiring annual minimum returns of$27.8 million as ofDecember 31, 2018 (approximately$6.9 million per quarter). The guaranty provided by Wyndham with respect to the management agreement was limited to$35.7 million and has been depleted since 2017. HPT's agreement with the Wyndham subsidiary provides that if the hotels' cash flows available after payment of hotel operating expenses are less than the minimum returns due to HPT and if the guaranty is depleted, to avoid default Wyndham is required to pay HPT the greater of the available hotel cash flows after payment of hotel operating expenses and 85% of the contractual minimum amount due. During the three months endedDecember 31, 2018 , HPT realized returns under its Wyndham agreement of$5.9 million , which represents 85% of the minimum returns due for the period. HPT also leases 48 vacation units in one of the hotels to a subsidiary ofWyndham Destinations, Inc. (NYSE: WYND), or Destinations, which requires annual minimum rent of$1.5 million (approximately$0.4 million per quarter). The guaranty provided by Destinations with respect to the lease is unlimited. The contractual rent due to HPT under the lease for Destinations' 48 vacation units during the three months endedDecember 31, 2018 was paid to HPT. - Hyatt Agreement: As of
December 31, 2018 , 22 of HPT’s hotels were operated under a management agreement with a subsidiary ofHyatt Hotels Corporation (NYSE: H), or Hyatt, requiring annual minimum returns of$22.0 million as ofDecember 31, 2018 (approximately$5.5 million per quarter). During the three months endedDecember 31, 2018 , HPT realized returns under its Hyatt agreement of$5.5 million . HPT’s Hyatt agreement is partially secured by a limited guaranty from Hyatt. During the three months endedDecember 31, 2018 , the hotels under this agreement generated cash flows that were less than the minimum returns due to HPT, and Hyatt made$1.6 million of guaranty payments to cover the shortfall. As ofDecember 31, 2018 , there was$21.9 million available under Hyatt's guaranty. - Radisson Agreement: As of
December 31, 2018 , nine of HPT’s hotels were operated under a management agreement with a subsidiary ofRadisson Hospitality, Inc. , or Radisson, requiring annual minimum returns of$18.9 million as ofDecember 31, 2018 (approximately$4.7 million per quarter). During the three months endedDecember 31, 2018 , HPT realized returns under its Radisson agreement of$4.7 million . HPT’s Radisson agreement is partially secured by a limited guaranty from Radisson. During the three months endedDecember 31, 2018 , the hotels under this agreement generated cash flows that were less than the minimum returns due to HPT, and Radisson made$1.0 million of guaranty payments to cover the shortfall. As ofDecember 31, 2018 , there was$42.6 million available under Radisson's guaranty. - Travel Center Agreements: As of
December 31, 2018 , HPT’s 199 travel centers located along theU.S. Interstate Highway system were leased to TA under five lease agreements, which require aggregate annual minimum rents of$289.2 million (approximately$72.3 million per quarter). As ofDecember 31, 2018 , all payments due to HPT from TA under these leases were current. See above regarding transactions we completed with TA inJanuary 2019 .
Conference Call:
At
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 2018 Supplemental Operating and Financial Data is available for download at HPT’s website, which is located at www.hptreit.com. HPT’s website is not incorporated as part of this press release.
Please see the pages attached hereto 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 and a reconciliation of those amounts to amounts determined in accordance with GAAP.
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”, "WILL", “MAY” AND NEGATIVES OR DERIVATIVES OF THESE 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:
-
MR.
MURRAY STATES IN THIS PRESS RELEASE THAT HPT'S COMPARABLE HOTEL REVPAR FOR HOTELS NOT IMPACTED BY RENOVATIONS OR HURRICANES GREW DURING THE FOURTH QUARTER OF 2018 COMPARED WITH THE PRIOR YEAR PERIOD, THAT TA PROPERTIES' GROSS MARGIN IMPROVED DURING THE FOURTH QUARTER OF 2018 COMPARED WITH THE PRIOR YEAR PERIOD AND THAT COVERAGE OF HPT'S TRAVEL CENTER MINIMUM RENTS WAS 1.63 TIMES FOR THE YEAR ENDED 2018. MR. MURRAY ALSO STATES IN THIS PRESS RELEASE THAT HPT EXPECTS RENOVATIONS WILL OCCUR AT FEWER OF HPT'S HOTELS IN 2019. THESE STATEMENTS MAY IMPLY HOTEL REVPAR AT HPT'S COMPARABLE HOTELS THAT ARE NOT UNDER RENOVATION OR NOT IMPACTED BY HURRICANES MAY CONTINUE TO GROW, TA PROPERTIES' GROSS MARGIN WILL CONTINUE TO INCREASE OR COVERAGE OF MINIMUM RETURNS AND RENTS WILL REMAIN ABOVE 1.0 TIMES FOR HPT'S TRAVEL CENTERS. IN FACT, COMPARABLE HOTEL REVPAR, EXCLUDING SUCH ITEMS OR OTHERWISE, MAY NOT GROW ANDMAY DECLINE . FURTHER, THE NUMBER OF HOTELS HPT MAY RENOVATE IN 2019 MAY EXCEED ITS EXPECTATIONS DUE TO VARIOUS POSSIBLE REASONS, INCLUDING CHANGED CONDITIONS AND COMPETITIVE DEMANDS. IN ADDITION, TA'S IMPROVED PROPERTY RESULTS MAY NOT CONTINUE AND ITS OPERATING RESULTS MAY DECLINE, AND COVERAGE OF HPT'S MINIMUM RETURNS AND RENTS MAY DECLINE IN FUTURE PERIODS. IN ADDITION, RENOVATIONS MAY NOT OCCUR AT FEWER OF HPT'S HOTELS THAN IN 2018. -
AS OF
DECEMBER 31, 2018 , APPROXIMATELY 74% 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, CERTAIN OF THESE GUARANTEES AND SECURITY DEPOSITS ARE LIMITED IN AMOUNT AND DURATION AND ALL THE GUARANTEES ARE SUBJECT TO THE GUARANTORS’ ABILITIES AND WILLINGNESS TO PAY. HPT CANNOT BE SURE OF THE FUTURE FINANCIAL PERFORMANCE OF HPT’S PROPERTIES AND WHETHER SUCH 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 WHICH THEY GUARANTEE OR SECURE, OR REGARDING HPT’S MANAGERS’, TENANTS’ OR GUARANTORS’ FUTURE ACTIONS IF AND WHEN THE GUARANTEES AND SECURITY DEPOSITS EXPIRE OR ARE DEPLETED OR THEIR ABILITIES OR WILLINGNESS TO PAY MINIMUM RETURNS AND RENTS OWED TO HPT. MOREOVER, THE SECURITY DEPOSITS HPT HOLDS ARE NOT SEGREGATED FROM HPT’S OTHER ASSETS AND THE APPLICATION OF SECURITY DEPOSITS TO COVER PAYMENT SHORTFALLS WILL RESULT IN HPT RECORDING INCOME, BUT WILL NOT RESULT IN HPT RECEIVING ADDITIONAL CASH. THE BALANCE OF HPT’S ANNUAL MINIMUM RETURNS AND RENTS AS OFDECEMBER 31, 2018 WAS NOT SECURED BY GUARANTEES OR SECURITY DEPOSITS. -
WE EXPECT TO RECOGNIZE A GAIN OF APPROXIMATELY
$160.0 MILLION FROM OUR SALE OF 20 TRAVEL CENTERS TO TA IN THE FIRST QUARTER OF 2019. ANY GAIN WE MAY RECOGNIZE MAY BE LESS THAN THE AMOUNT WE CURRENTLY EXPECT. -
WYNDHAM'S
$35.7 MILLION LIMITED GUARANTY HAS BEEN DEPLETED SINCE 2017. HPT DOES NOT HOLD A SECURITY DEPOSIT WITH RESPECT TO AMOUNTS DUE UNDER THE WYNDHAM AGREEMENT. WYNDHAM HAS PAID 85% OF THE MINIMUM RETURNS DUE TO HPT FOR THE QUARTER AND YEAR ENDEDDECEMBER 31, 2018 . HPT CAN PROVIDE NO ASSURANCE AS TO WHETHER WYNDHAM WILL CONTINUE TO PAY AT LEAST THE GREATER OF AVAILABLE HOTEL CASH FLOWS AFTER PAYMENT OF HOTEL OPERATING EXPENSES AND 85% OF THE MINIMUM RETURNS DUE TO HPT OR IF WYNDHAM WILL DEFAULT ON ITS PAYMENTS. -
HPT HAS NO GUARANTEES OR SECURITY DEPOSITS FOR THE MINIMUM RETURNS DUE
TO HPT FROM HPT'S MARRIOTT NO. 1 OR
SONESTA AGREEMENTS . ACCORDINGLY, HPT MAY RECEIVE AMOUNTS THAT ARE LESS THAN THE CONTRACTUAL MINIMUM RETURNS STATED IN THESE AGREEMENTS.
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.
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||||
(amounts in thousands, except share data) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Three Months Ended |
Year Ended | ||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
| Revenues: | |||||||||||||||||||||
| Hotel operating revenues (1) | $ | 464,833 | $ | 450,506 | $ | 1,960,958 | $ | 1,843,501 | |||||||||||||
| Rental income (2) | 84,745 | 83,490 | 328,446 | 323,764 | |||||||||||||||||
| FF&E reserve income (3) | 1,221 | 1,146 | 5,132 | 4,670 | |||||||||||||||||
| Total revenues | 550,799 | 535,142 | 2,294,536 | 2,171,935 | |||||||||||||||||
| Expenses: | |||||||||||||||||||||
| Hotel operating expenses (1) | 336,298 | 314,001 | 1,392,355 | 1,279,547 | |||||||||||||||||
| Depreciation and amortization | 102,769 | 99,848 | 403,077 | 386,659 | |||||||||||||||||
| General and administrative (4) | 66,582 | 49,305 | 104,862 | 125,402 | |||||||||||||||||
| Total expenses | 505,649 | 463,154 | 1,900,294 | 1,791,608 | |||||||||||||||||
| Gain on sale of real estate (5) | — | — | — | 9,348 | |||||||||||||||||
| Dividend income | 876 | 626 | 2,754 | 2,504 | |||||||||||||||||
| Unrealized losses on equity securities (6) | (106,085 | ) | — | (16,737 | ) | — | |||||||||||||||
| Interest income | 435 | 208 | 1,528 | 798 | |||||||||||||||||
|
Interest expense (including amortization of debt issuance costs and
debt discounts and premiums of | (49,624 | ) | (46,250 | ) | (195,213 | ) | (181,579 | ) | |||||||||||||
| Loss on early extinguishment of debt (7) | — | (146 | ) | (160 | ) | (146 | ) | ||||||||||||||
| Income (loss) before income taxes and equity in earnings (losses) of an investee | (109,248 | ) | 26,426 | 186,414 | 211,252 | ||||||||||||||||
| Income tax benefit (expense) (8) | 754 | 5,045 | (1,195 | ) | 3,284 | ||||||||||||||||
| Equity in earnings (losses) of an investee | (366 | ) | 74 | 515 | 607 | ||||||||||||||||
| Net income (loss) | (108,860 | ) | 31,545 | 185,734 | 215,143 | ||||||||||||||||
| Preferred distributions | — | — | — | (1,435 | ) | ||||||||||||||||
|
Excess of liquidation preference over carrying value of preferred
shares
redeemed (9) | — | — | — | (9,893 | ) | ||||||||||||||||
| Net income (loss) available for common shareholders | $ | (108,860 | ) | $ | 31,545 | $ | 185,734 | $ | 203,815 | ||||||||||||
| Weighted average common shares outstanding (basic) | 164,278 | 164,192 | 164,229 | 164,146 | |||||||||||||||||
| Weighted average common shares outstanding (diluted) | 164,278 | 164,205 | 164,258 | 164,175 | |||||||||||||||||
| Net income (loss) available for common shareholders per common share (basic and diluted) | $ | (0.66 | ) | $ | 0.19 | $ | 1.13 | $ | 1.24 | ||||||||||||
See Notes on pages 11 and 12
RECONCILIATIONS OF FUNDS FROM OPERATIONS, | |||||||||||||||||||||||
NORMALIZED FUNDS FROM OPERATIONS, EBITDA AND ADJUSTED EBITDA | |||||||||||||||||||||||
(amounts in thousands, except share data) | |||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
Three Months Ended |
Year Ended | ||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||
| Calculation of FFO and Normalized FFO available for common shareholders: (10) | |||||||||||||||||||||||
| Net income (loss) available for common shareholders | $ | (108,860 | ) | $ | 31,545 | $ | 185,734 | $ | 203,815 | ||||||||||||||
Add (Less): | Depreciation and amortization | 102,769 | 99,848 | 403,077 | 386,659 | ||||||||||||||||||
| Gain on sale of real estate (5) | — | — | — | (9,348 | ) | ||||||||||||||||||
| FFO available for common shareholders | (6,091 | ) | 131,393 | 588,811 | 581,126 | ||||||||||||||||||
Add (Less): | Business management incentive fees (4) | — | (38,243 | ) | — | — | |||||||||||||||||
| Loss on early extinguishment of debt (7) | — | 146 | 160 | 146 | |||||||||||||||||||
| Excess of liquidation preference over carrying value of preferred shares redeemed (9) | — | — | — | 9,893 | |||||||||||||||||||
| Unrealized losses on equity securities (6) | 106,085 | — | 16,737 | — | |||||||||||||||||||
| Deferred tax benefit (8) | — | (5,431 | ) | — | (5,431 | ) | |||||||||||||||||
| Normalized FFO available for common shareholders | 99,994 | $ | 87,865 | $ | 605,708 | $ | 585,734 | ||||||||||||||||
| Weighted average common shares outstanding (basic) | 164,278 | 164,192 | 164,229 | 164,146 | |||||||||||||||||||
| Weighted average common shares outstanding (diluted) | 164,278 | 164,205 | 164,258 | 164,175 | |||||||||||||||||||
| Basic and diluted per common share amounts: | |||||||||||||||||||||||
| FFO available for common shareholders | $ | (0.04 | ) | $ | 0.80 | $ | 3.59 | $ | 3.54 | ||||||||||||||
| Normalized FFO available for common shareholders | $ | 0.61 | $ | 0.54 | $ | 3.69 | $ | 3.57 | |||||||||||||||
| Distributions declared per share | $ | 0.53 | $ | 0.52 | $ | 2.11 | $ | 2.07 | |||||||||||||||
Three Months Ended |
Year Ended | ||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||
Calculation of EBITDA and Adjusted EBITDA: (11) | |||||||||||||||||||||||
Net income (loss) | $ | (108,860 | ) | $ | 31,545 | $ | 185,734 | $ | 215,143 | ||||||||||||||
Add (Less): | Interest expense | 49,624 | 46,250 | 195,213 | 181,579 | ||||||||||||||||||
| Income tax expense (benefit) (8) | (754 | ) | (5,045 | ) | 1,195 | (3,284 | ) | ||||||||||||||||
| Depreciation and amortization | 102,769 | 99,848 | 403,077 | 386,659 | |||||||||||||||||||
EBITDA | 42,779 | 172,598 | 785,219 | 780,097 | |||||||||||||||||||
Add (Less): | General and administrative expense paid in common shares (12) | 909 | 811 | 3,187 | 2,759 | ||||||||||||||||||
| Business management incentive fees (4) | — | (38,243 | ) | — | — | ||||||||||||||||||
| Loss on early extinguishment of debt (7) | — | 146 | 160 | 146 | |||||||||||||||||||
| Gain on sale of real estate (5) | — | — | — | (9,348 | ) | ||||||||||||||||||
| Unrealized losses on equity securities (6) | 106,085 | — | 16,737 | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 149,773 | $ | 135,312 | $ | 805,303 | $ | 773,654 | |||||||||||||||
See Notes on pages 11 and 12
| (1) |
As of | |
| (2) |
Rental income includes | |
| (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 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 with | |
| (5) |
HPT recorded a | |
| (6) |
Unrealized losses on equity securities represent the adjustment
required to adjust the carrying value of HPT's investments in | |
| (7) |
HPT recorded a loss of | |
| (8) |
HPT realized a | |
| (9) |
In | |
| (10) |
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 | |
| (11) | 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 (loss) and net income (loss) available for common shareholders. 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 be payable when all contingencies for determining such fees are known 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 alternatives to net income (loss) or net income (loss) available for common shareholders as indicators of operating performance or as measures of HPT’s liquidity. These measures should be considered in conjunction with net income (loss) and net income (loss) available for common shareholders as presented in HPT’s consolidated statements of income. Other real estate companies and REITs may calculate EBITDA and Adjusted EBITDA differently than HPT does. | |
| (12) | Amounts represent the equity compensation for HPT’s trustees, its officers and certain other employees of HPT’s manager. | |
CONSOLIDATED BALANCE SHEETS | |||||||||||
(amounts in thousands, except share data) | |||||||||||
(Unaudited) | |||||||||||
| 2018 | 2017 | ||||||||||
| ASSETS | |||||||||||
| Real estate properties: | |||||||||||
| Land | $ | 1,626,239 | $ | 1,668,797 | |||||||
| Buildings, improvements and equipment | 7,896,734 | 7,758,862 | |||||||||
| Total real estate properties, gross | 9,522,973 | 9,427,659 | |||||||||
| Accumulated depreciation | (2,973,384 | ) | (2,784,478 | ) | |||||||
| Total real estate properties, net | 6,549,589 | 6,643,181 | |||||||||
| Cash and cash equivalents | 25,966 | 24,139 | |||||||||
| Restricted cash | 50,037 | 73,357 | |||||||||
| Due from related persons | 91,212 | 78,513 | |||||||||
| Other assets, net | 460,275 | 331,195 | |||||||||
| Total assets | $ | 7,177,079 | $ | 7,150,385 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Unsecured revolving credit facility | $ | 177,000 | $ | 398,000 | |||||||
| Unsecured term loan, net | 397,292 | 399,086 | |||||||||
| Senior unsecured notes, net | 3,598,295 | 3,203,962 | |||||||||
| Security deposits | 132,816 | 126,078 | |||||||||
| Accounts payable and other liabilities | 211,332 | 184,788 | |||||||||
| Due to related persons | 62,913 | 83,049 | |||||||||
| Total liabilities | 4,579,648 | 4,394,963 | |||||||||
| Commitments and contingencies | |||||||||||
| Shareholders’ equity: | |||||||||||
|
Common shares of beneficial interest, | 1,644 | 1,643 | |||||||||
| Additional paid in capital | 4,545,481 | 4,542,307 | |||||||||
| Cumulative net income | 3,575,307 | 3,310,017 | |||||||||
| Cumulative other comprehensive income (loss) | (266 | ) | 79,358 | ||||||||
| Cumulative preferred distributions | (343,412 | ) | (343,412 | ) | |||||||
| Cumulative common distributions | (5,181,323 | ) | (4,834,491 | ) | |||||||
| Total shareholders’ equity | 2,597,431 | 2,755,422 | |||||||||
| Total liabilities and shareholders’ equity | $ | 7,177,079 | $ | 7,150,385 | |||||||
A
No shareholder,
Trustee or officer is personally liable for any act or obligation of the
Trust.
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