NEWTON, Mass.--Hospitality Properties Trust (NYSE: HPT) today
announced its results of operations for the quarter and nine months
ended September 30, 2005.
Results for the quarter ended September 30, 2005:
Net income was $30.6 million for the quarter ended September 30,
2005, compared to $30.7 million for the same quarter last year. Net
income available for common shareholders was $28.7 million, or $0.40 per
share, for the quarter ended September 30, 2005, compared to $28.8
million, or $0.43 per share, for the same quarter last year.
Funds from operations (FFO) for the quarter ended September 30, 2005
were $69.7 million, or $0.97 per share. This compares to FFO for the
quarter ended September 30, 2004 of $59.9 million, or $0.89 per share.
The weighted average number of common shares outstanding totaled 71.9
million and 67.2 million for the quarters ended September 30, 2005 and
2004, respectively.
Results for the nine months ended September 30, 2005:
Net income was $81.7 million for the nine months ended September 30,
2005, compared to $91.2 million for the same period last year. Net
income available for common shareholders was $76.0 million, or $1.10 per
share, for the nine months ended September 30, 2005, compared to $80.7
million, or $1.22 per share, for the same period last year.
Funds from operations (FFO) for the nine months ended September 30,
2005 were $197.8 million, or $2.86 per share. This compares to FFO for
the nine months ended September 30, 2004 of $176.5 million, or $2.66 per
share.
The weighted average number of common shares outstanding totaled 69.2
million and 66.3 million for the nine months ended September 30, 2005
and 2004, respectively.
Financing Activities:
On October 6, 2005, HPT raised its regular quarterly common share
dividend by $0.01 to $0.73 per common share ($2.92 per share per year).
This regular quarterly dividend will be paid to common shareholders of
record as of the close of business on October 21, 2005, and distributed
on or about November 17, 2005.
In October 2005, the credit ratings of HPT's senior unsecured debt
obligations were raised to "BBB" and "Baa2" from "BBB-" and "Baa3" by
Standard & Poor's Rating Services and Moody's Investors Service,
respectively. The interest rate on drawings under HPT's revolving credit
facility was reduced from LIBOR plus 80 basis points to LIBOR plus 65
basis points as a result of these ratings increases.
Investing Activities:
On September 30, 2005, HPT sold its Prime Hotel(SM) located in
Atlanta, Georgia for $3.2 million. This hotel was included in a
combination management agreement with Carlson Hotels Worldwide, or
Carlson, with 11 other former Prime Hotels(SM). On November 1, 2005, HPT
acquired a Country Inn & Suites by Carlson(SM) hotel located in
Brooklyn Center, Minnesota with 84 guestrooms from Carlson for $4.1
million as a replacement hotel. The remaining 11 Prime Hotels(SM) were
rebranded as Carlson owned brands during the second quarter of 2005 and
are currently undergoing renovations.
Conference Call:
On Monday, November 7, 2005, at 1:00 p.m. Eastern Time, John Murray,
president and chief operating officer, and Mark Kleifges, chief
financial officer, will host a conference call to discuss the results
for the quarter ended September 30, 2005.
The conference call telephone number is (877) 502-9276. Participants
calling from outside the United States and Canada should dial (913)
981-5591. 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 Friday, November 11, 2005. To hear the replay, dial
(719) 457-0820. The replay pass code is 6192841.
A live audio webcast of the conference call will also be available in
a listen only mode on the company's web site, which is located at www.hptreit.com.
Participants wanting to access the webcast should visit the company's
web site about five minutes before the call. The archived webcast will
be available for replay on HPT's web site for about one week after the
call.
Supplemental Data:
A copy of HPT's Third Quarter 2005 Supplemental Operating and Financial Data is available for download at HPT's web site.
Hospitality Properties Trust is a real estate investment trust, or
REIT, which owns 298 hotels located in 38 states, Puerto Rico and Canada
as of November 1, 2005. HPT is headquartered in Newton, Massachusetts.
Hospitality Properties Trust
CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
Quarter Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Revenues:
Hotel operating revenues (1) $184,379 $136,861 $510,485 $378,780
Rental income 31,919 30,312 94,874 95,326
FF&E reserve income (2) 4,963 4,660 14,200 14,000
Interest income 426 159 956 428
--------- --------- --------- ---------
Total revenues 221,687 171,992 620,515 488,534
--------- --------- --------- ---------
Expenses:
Hotel operating expenses (1) 134,888 94,896 367,657 259,216
Interest (including
amortization of deferred
financing costs of $606,
686, 2,285 and $2,058,
respectively) 16,056 12,530 49,076 37,775
Depreciation and
amortization 34,462 28,713 96,924 86,158
General and administrative 5,696 5,146 17,856 14,353
Loss on asset impairment (3) -- -- 7,300 --
--------- --------- --------- ---------
Total expenses 191,102 141,285 538,813 397,502
Income before gain on sale of
real estate 30,585 30,707 81,702 91,032
Gain on sale of real estate -- -- -- 203
--------- --------- --------- ---------
Net income 30,585 30,707 81,702 91,235
Preferred distributions (1,914) (1,914) (5,742) (7,760)
Excess of liquidation
preference over carrying
value of preferred shares (4) -- -- -- (2,793)
--------- --------- --------- ---------
Net income available for
common shareholders $28,671 $28,793 $75,960 $80,682
========= ========= ========= =========
Calculation of FFO (5):
Net income available for common
shareholders $28,671 $28,793 $75,960 $80,682
Add: FF&E deposits not in net
income (2) 490 453 1,487 1,346
Depreciation and
amortization 34,462 28,713 96,924 86,158
Deferred percentage rent
(6) 1,121 900 3,008 2,167
Deferred hotel operating
income (7) 4,928 1,083 13,079 3,546
Loss on asset impairment
(3) -- -- 7,300 --
Excess of liquidation
preference over carrying
value of preferred shares
(4) -- -- -- 2,793
Less:
Gain on sale of real
estate -- -- -- (203)
--------- --------- --------- ---------
Funds from operations ("FFO") $69,672 $59,942 $197,758 $176,489
========= ========= ========= =========
Weighted average common shares
outstanding 71,908 67,191 69,173 66,268
========= ========= ========= =========
Per common share amounts:
Net income available for
common shareholders $0.40 $0.43 $1.10 $1.22
FFO (5) $0.97 $0.89 $2.86 $2.66
Common distributions declared $0.73 $0.72 $2.17 $2.16
See Notes on page 4.
Hospitality Properties Trust
NOTES TO CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
(1) At September 30, 2005, each of our 297 hotels are included in one
of ten combinations of hotels of which 188 are leased to one of our
taxable REIT subsidiaries and managed by independent hotel operating
companies and 109 are leased to third parties. Our consolidated
statement of income includes hotel operating revenues and expenses of
managed hotels and rental income from our leased hotels. Certain of our
managed hotels had net operating results that were less than the minimum
returns due to us by $730 in the third quarter of 2005, and $730 and
$4,070 in the first nine months of 2005 and 2004, respectively. These
amounts are included in our consolidated statement of income as a net
reduction to hotel operating expenses in each period because the minimum
returns were funded by our managers. In the third quarter of 2004, all
our managed hotel combinations had net operating results that were more
than the minimum returns due to us.
(2) Various percentages of total sales at most of our hotels are
escrowed as reserves for future renovations or refurbishment, or
FF&E Reserve escrows. We own the FF&E Reserve escrows for all
the hotels leased to our taxable REIT subsidiaries and for most of the
hotels leased to third parties. We have a security and remainder
interest in the FF&E Reserve escrows for the remaining hotels leased
to third parties. When we own the FF&E Reserve escrows at hotels
leased to third parties we report payments into the escrow as additional
rent. When we have a security and remainder interest in the FF&E
Reserve escrows, deposits are not included in revenue but are included
in FFO. We do not report the amounts which are escrowed as FF&E
reserves for our managed hotels as FF&E reserve income in our
consolidated statement of income.
(3) In June 2005, we authorized Carlson Hotels Worldwide, or Carlson,
to pursue the sale of our Prime Hotel(SM )in Atlanta, GA. In connection
with this decision, we recorded a $7,300 loss on asset impairment in
the second quarter of 2005 to reduce the carrying value of the hotel to
its estimated net realizable value less the cost to sell. We sold the
hotel on September 30, 2005, for $3,227.
(4) On April 12, 2004, we redeemed all of our outstanding 9 1/2%
Series A Preferred Shares at their liquidation preference of $25 per
share, plus accumulated and unpaid dividends. We deducted the $2,793
excess of the liquidation preference of the redeemed shares over their
carrying amount from net income in determining net income available to
common shareholders in the calculation of earnings per share in the 2004
first quarter, which was when the redemption was approved by our board
of trustees.
(5) We compute FFO as shown. Our calculation of FFO differs from the
NAREIT definition because we include FF&E deposits not included in
net income (see note 2), deferred percentage rent (see note 6) and
deferred hotel operating income (see note 7) and exclude loss on asset
impairment (see note 3) and the excess of liquidation preference over
carrying value of redeemed preferred shares (see note 4). We consider
FFO to be an appropriate measure of performance for a REIT, along with
net income and cash flow from operating, investing and financing
activities. We believe that FFO provides useful information to investors
because by excluding the effects of certain historical costs, such as
depreciation expense, impairment charges and losses on early
extinguishment of debt, it may facilitate comparison of current
operating performance among REITs. FFO does not represent cash generated
by operating activities in accordance with GAAP and should not be
considered an alternative to net income or cash flow from operating
activities as a measure of financial performance or liquidity. FFO is
among the important factors considered by our board of trustees when
determining the amount of distributions to shareholders. Other important
factors include, but are not limited to, requirements to maintain our
status as a REIT, limitations in our revolving bank credit facility and
public debt covenants, the availability of debt and equity capital to us
and our expectation of our future capital needs and operating
performance.
(6) In calculating net income we recognize percentage rental income
received for the first, second and third quarters in the fourth quarter,
which is when all contingencies are met and the income is earned.
Although we defer recognition of this revenue until the fourth quarter
for purposes of calculating net income, we include the amount in the
calculation of FFO for each quarter of the year. The fourth quarter FFO
calculation excludes the amounts recognized during the first three
quarters.
(7) Our rights to share in the operating results of our managed
hotels in excess of the minimum returns due to us are generally
determined based upon annual calculations. Our managed hotels generated
net operating results that were $4,928 and $1,083, in the third quarter
of 2005 and 2004, respectively, and $13,079 and $3,546, in the first
nine months of 2005 and 2004, respectively, more than the minimum
returns due to us. Typically the net operating results of our hotels are
strongest during the second and third quarters of the year, which are
the most active periods for business and leisure travel. We recognize
income in excess of our minimum returns in the fourth quarter, which is
when all contingencies are met and the income is earned. Although we
defer recognition of this revenue until the fourth quarter for purposes
of calculating net income, we include the amount in the calculation of
FFO for each quarter of the year. The fourth quarter FFO calculation
excludes the amounts recognized during the first three quarters.
Hospitality Properties Trust
CONSOLIDATED BALANCE SHEET
(dollars in thousands, except share data)
September 30, December 31,
2005 2004
------------- ------------
(Unaudited)
ASSETS
------
Real estate properties, at cost:
Land $536,589 $460,748
Buildings, improvements and equipment 3,067,592 2,720,242
------------- ------------
3,604,181 3,180,990
Accumulated depreciation (596,726) (556,517)
------------- ------------
3,007,455 2,624,473
Cash and cash equivalents 19,164 15,894
Restricted cash (FF&E reserve escrow) 32,369 38,511
Other assets, net 21,434 10,547
------------- ------------
$3,080,422 $2,689,425
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Revolving credit facility $8,000 $72,000
Senior notes, net of discounts 921,484 621,679
Mortgage payable 3,781 3,826
Security deposits 185,304 175,304
Accounts payable and other liabilities 90,738 77,782
Due to affiliate 7,531 2,661
Dividends payable 1,914 50,300
------------- ------------
Total liabilities 1,218,752 1,003,552
------------- ------------
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest,
no par value, 100,000,000 shares
authorized:
Series B preferred shares; 8 7/8%
cumulative redeemable; 3,450,000
shares issued and outstanding,
aggregate liquidation preference
$86,250 83,306 83,306
Common shares of beneficial interest;
$0.01 par value; 100,000,000 shares
authorized, 71,920,578 and 67,203,228
issued and outstanding, respectively 719 672
Additional paid-in capital 2,059,883 1,859,936
Cumulative net income 1,162,871 1,081,169
Cumulative preferred distributions (57,422) (51,680)
Cumulative common distributions (1,387,687) (1,287,530)
------------- ------------
Total shareholders' equity 1,861,670 1,685,873
------------- ------------
$3,080,422 $2,689,425
============= ============
Hospitality Properties Trust
Investor Relations
Timothy A. Bonang
617-796-8149
www.hptreit.com