NEWTON, Mass., May 10, 2010 (BUSINESS WIRE) -- Hospitality Properties Trust (NYSE: HPT) today announced its operating
results for the quarter ended March 31, 2010.
Results for the Quarter Ended March 31, 2010:
Funds from operations, or FFO, for the quarter ended March 31, 2010,
were $94.3 million, or $0.76 per share, compared to FFO for the quarter
ended March 31, 2009, of $89.6 million, or $0.95 per share. FFO for the
quarter ended March 31, 2009, excludes a $26.6 million, or $0.28 per
share, gain on extinguishment of debt. A reconciliation of FFO to net
income as reported under generally accepted accounting principles, or
GAAP, appears on page 4 of this press release.
Net income available for common shareholders was $33.4 million, or $0.27
per share, for the quarter ended March 31, 2010, compared to $53.6
million, or $0.57 per share, for the same quarter last year. Net income
available for common shareholders for the quarter ended March 31, 2009,
included the $26.6 million gain on extinguishment of debt.
The weighted average number of common shares outstanding totaled 123.4
million and 94.0 million for the quarters ended March 31, 2010 and
2009, respectively.
Hotel Portfolio Performance:
For the quarter ended March 31, 2010 compared to the same quarter last
year, HPT's hotels produced revenue per available room, or RevPAR,
average daily rate, or ADR, and occupancy as follows:
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Quarter Ended
March 31,
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2010
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2009
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Change
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RevPAR
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$58.85
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$61.35
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-4.1%
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ADR
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91.67
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102.42
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-10.5%
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Occupancy
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64.2%
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59.9%
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4.3 pts
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Tenants and Managers:
During the quarter ended March 31, 2010, all payments due to HPT under
its hotel leases and management contracts were paid when due except for
certain payments from Marriott International, Inc., or Marriott, and
Barceló Crestline Corporation, or Crestline.
During the quarter ended March 31, 2010, the payments HPT received under
its management contract with Marriott (Marriott No. 3 contract: 34
hotels which requires minimum returns to HPT of $44.2 million/year) and
under its lease with Crestline (Marriott No. 4 contract: 19 hotels
managed by Marriott which requires minimum rent to HPT of $28.5
million/year) were $6.5 million and $3.0 million, respectively, less
than the minimum amounts contractually required. HPT applied available
security deposits to cover these shortfalls. Also, during the period
between March 31, 2010 and May 9, 2010, HPT did not receive payments to
cure shortfalls for the minimum returns due under this Marriott
management contract and the minimum rent due under this Crestline lease
of $1.3 million and $1.0 million, respectively, and HPT applied the
security deposits it holds to cover these amounts. At May 9, 2010, the
remaining balances of the security deposits for this Marriott management
contract and this Crestline lease held by HPT were $19.2 million and
$15.8 million, respectively.
At this time, HPT expects that Marriott will continue to pay HPT the net
cash flows from operations of the hotels included in the defaulted
contracts. HPT believes the security deposits it holds from Marriott and
from Crestline for these contracts will exceed the 2010 shortfall of the
payments it expects to receive compared to the minimum payments due to
HPT under these contracts. Other than applying the security deposits to
cover the differences between the net cash flows received from
operations of these hotels and the contractual minimum payments, HPT has
not yet determined what additional actions, if any, it may take as a
result of these defaults.
As of May 9, 2010, all other payments due to HPT from its hotel managers
and hotel tenants under its operating agreements are current. Similarly,
all contractually required payments due HPT from TravelCenters of
America LLC, or TA, for the two leases of travel centers by TA are
current but TA continues to defer $5 million/month pursuant to the
previously disclosed rent deferral agreement between TA and HPT.
Financing Activities:
On April 13, 2010, HPT purchased at face value $139.1 million of its
3.8% convertible senior notes due 2027 pursuant to a cash tender offer.
HPT expects to record a loss on debt extinguishment of approximately
$5.2 million in the second quarter of 2010. HPT funded this purchase
using existing cash balances.
Common Dividend:
On April 15, 2010, HPT announced a regular quarterly common dividend of
$0.45 per share ($1.80 per share per year) payable to shareholders of
record on April 30, 2010; this dividend will be paid on or about May 25,
2010.
Conference Call:
On Monday, May 10, 2010, at 1:00 p.m. Eastern Time, John Murray,
President, and Mark Kleifges, Chief Financial Officer, will host a
conference call to discuss the results for the quarter ended March 31,
2010. The conference call telephone number is (888) 218-8164.
Participants calling from outside the United States and Canada should
dial (913) 312-0668. 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 Monday May 17, 2010. To hear the replay, dial (719)
457-0820. The replay pass code is 9134053.
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. The recording and retransmission in any way
of HPT's first quarter conference call is strictly prohibited without
the prior written consent of HPT.
Supplemental Data:
A copy of HPT's First Quarter 2010 Supplemental Operating and Financial
Data is available for download at HPT's web site, 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 289 hotels and 185 travel centers located in 44 states,
Puerto Rico and Canada. HPT is headquartered in Newton, MA.
Hospitality Properties Trust
CONSOLIDATED STATEMENTS OF INCOME AND FUNDS FROM OPERATIONS
(in thousands, except per share data)
(Unaudited)
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Quarter Ended March 31,
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2010
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2009
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Revenues:
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Hotel operating revenues (1)
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$
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169,291
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$
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175,701
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Rental income (1)(2)
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79,502
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73,791
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FF&E reserve income (3)
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5,315
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4,803
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Interest income
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150
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48
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Total revenues
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254,258
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254,343
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Expenses:
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Hotel operating expenses (1)
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105,400
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111,454
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Interest (including amortization of deferred financing costs
and debt discounts of $2,405 and $3,357, respectively)
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36,905
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36,541
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Depreciation and amortization
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60,537
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61,848
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General and administrative
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9,610
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9,599
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Total expenses
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212,452
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219,442
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Income before gain on extinguishment of debt and income taxes
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41,806
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34,901
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Gain on extinguishment of debt (4)
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--
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26,555
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Income before income taxes
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41,806
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61,456
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Income tax expense
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(941
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(373
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Net income
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40,865
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61,083
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Preferred distributions
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(7,470
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(7,470
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Net income available for common shareholders
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$
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33,395
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$
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53,613
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Calculation of FFO (5):
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Net income available for common shareholders
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$
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33,395
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$
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53,613
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Add: Depreciation and amortization
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60,537
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61,848
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Deferred percentage rent (6)
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334
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675
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Less: Gain on extinguishment of debt (4)
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--
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(26,555
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)
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Funds from operations ("FFO")
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$
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94,266
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$
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89,581
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Weighted average common shares outstanding
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123,380
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93,992
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Per common share amounts:
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Net income available for common shareholders
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$
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0.27
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$
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0.57
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FFO (5)
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$
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0.76
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$
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0.95
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See Notes on page 6
Hospitality Properties Trust
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
(Unaudited)
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March 31,
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December 31,
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2010
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2009
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ASSETS
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Real estate properties, at cost:
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Land
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$
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1,392,472
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$
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1,392,472
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Buildings, improvements and equipment
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5,044,881
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5,074,660
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6,437,353
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6,467,132
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Accumulated depreciation
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(1,270,427
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)
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(1,260,624
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)
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5,166,926
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5,206,508
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Cash and cash equivalents
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116,958
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130,399
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Restricted cash (FF&E reserve escrow)
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33,569
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25,083
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Other assets, net
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182,373
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186,380
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$
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5,499,826
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$
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5,548,370
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Senior notes, net of discounts
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$
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1,935,204
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$
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1,934,818
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Convertible senior notes, net of discounts
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256,300
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255,269
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Mortgage payable
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3,451
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3,474
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Security deposits
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142,071
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151,587
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Accounts payable and other liabilities
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86,679
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103,678
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Due to affiliate
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2,917
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2,859
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Dividends payable
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4,754
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4,754
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Total liabilities
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2,431,376
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2,456,439
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Commitments and contingencies
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Shareholders' equity:
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Preferred shares of beneficial interest; no par value; 100,000,000
shares authorized:
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Series B preferred shares; 8 7/8% cumulative redeemable;
3,450,000 shares issued and outstanding, aggregate
liquidation preference $86,250
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83,306
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83,306
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Series C preferred shares; 7% cumulative redeemable; 12,700,000
shares issued and outstanding, aggregate liquidation
preference $317,500
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306,833
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306,833
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Common shares of beneficial interest, $0.01 par value; 150,000,000
shares authorized; 123,380,335 and 123,380,335 shares issued
and outstanding, respectively
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1,234
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1,234
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Additional paid in capital
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3,462,209
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3,462,209
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Accumulated other comprehensive income
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1,875
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3,230
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Cumulative net income
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2,062,027
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2,021,162
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Cumulative preferred distributions
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(160,991
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)
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(153,521
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Cumulative common distributions
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(2,688,043
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)
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(2,632,522
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)
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Total shareholders' equity
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3,068,450
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3,091,931
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$
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5,499,826
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$
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5,548,370
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(1) At March 31, 2010, each of our 289 hotels is included in one of 11
operating agreements and 197 of these hotels are leased to one of our
taxable REIT subsidiaries and managed by independent hotel operating
companies and 92 are leased to third parties. Our 185 travel centers are
leased under two agreements. Our consolidated statements of income
include hotel operating revenues and expenses of managed hotels and
rental income from our leased hotels and travel centers. Certain of our
managed hotel portfolios had net operating results that were, in the
aggregate, $28,590 and $20,391 less than the minimum returns due to us
in the three months ended March 31, 2010 and 2009, respectively. We
reflect these amounts in our consolidated statements of income as a
reduction to hotel operating expenses when the minimum returns were
funded by the manager of these hotels under the terms of our operating
agreements, or in the case of our Marriott No. 3 agreement, applied from
the security deposit we hold.
(2) As permitted under the previously announced rent deferral agreement,
TravelCenters of America LLC, or TA, elected to defer rent of $15,000,
or $0.12 per share, and $15,000, or $0.16 per share, during the three
months ended March 31, 2010 and 2009, respectively. As of March 31,
2010, TA has deferred rent totaling $105,000 under this agreement. We
have not recognized any deferred rents as revenue due to uncertainties
regarding future payments of these amounts by TA. Under the terms of the
agreement, interest began to accrue on deferred amounts outstanding on
January 1, 2010, at 1% per month, and we received and recorded $2,850,
or $0.02 per share, of income for the first quarter of 2010 which has
been reflected as rental income in our consolidated statements of income.
(3) Various percentages of total sales at our hotels are escrowed as
reserves for future renovations or refurbishment, or FF&E reserve
escrows. We own all the FF&E escrows for our hotels. We report deposits
by our third party tenants into the escrow accounts as FF&E reserve
income. We do not report the amounts which are escrowed as FF&E reserves
for our managed hotels as FF&E reserve income.
(4) During the first quarter of 2009, we recorded a $26,555, or $0.28
per share, non-cash gain on the extinguishment of debt relating to our
purchase of $121,330 face amount of our 3.8% convertible senior notes
due 2027 for an aggregate purchase price of $87,517, excluding accrued
interest. The gain on extinguishment of debt is net of unamortized
issuance costs and discounts of $7,406 and a portion of the allocated
equity component on the convertible notes of $148.
(5) We compute FFO as shown above. Our calculation of FFO differs from
the definition of FFO by the National Association of Real Estate
Investment Trusts, or NAREIT, because we include deferred percentage
rent (see Note 6) and exclude gain on early extinguishment of debt (see
Note 4). We consider FFO to be an appropriate measure of performance for
a REIT, along with net income and cash flows 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, it may facilitate
comparison of operating performance among REITs. FFO does not represent
cash generated by operating activities in accordance with generally
accepted accounting principles, or 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 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 these amounts 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.
WARNING REGARDING FORWARD LOOKING
STATEMENTS
THE FOREGOING PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND
OTHER SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON
HPT'S CURRENT BELIEFS AND EXPECTATIONS. HOWEVER, THESE FORWARD LOOKING
STATEMENTS AND THEIR IMPLICATIONS ARE NOT GUARANTEED TO OCCUR AND THEY
MAY NOT OCCUR FOR VARIOUS REASONS, SOME OF WHICH ARE BEYOND HPT'S
CONTROL. FOR EXAMPLE:
-
THIS PRESS RELEASE REFERS TO A RENT DEFERRAL AGREEMENT WHICH HPT HAS
ENTERED WITH TA. THE DESCRIPTION OF THIS ARRANGEMENT AS A DEFERRAL
AGREEMENT MAY IMPLY THAT RENT AMOUNTS WHICH ARE NOT PAID WILL BE LATER
PAID. IN FACT, SINCE ITS FORMATION, TA HAS NOT PRODUCED CONSISTENT
OPERATING PROFITS. IF THE CURRENT U.S. ECONOMIC SLOWDOWN AND DECLINE
IN TRUCKING ACTIVITY CONTINUES FOR AN EXTENDED PERIOD OR WORSENS, IF
THE PRICE OF DIESEL FUEL INCREASES SIGNIFICANTLY OR FOR VARIOUS OTHER
REASONS, TA MAY BECOME UNABLE TO PAY THE DEFERRED RENTS DUE TO HPT.
-
THIS PRESS RELEASE STATES THAT HPT EXPECTS THAT MARRIOTT WILL CONTINUE
TO PAY HPT THE NET CASH FLOWS FROM OPERATIONS OF THE HOTELS INCLUDED
IN THE DEFAULTED CONTRACTS. THIS EXPECTATION IS BASED UPON STATEMENTS
MADE BY MARRIOTT TO HPT. HOWEVER, MARRIOTT MAY BECOME UNABLE TO MAKE
SUCH PAYMENTS IF ITS OWN FINANCIAL CONDITION DETERIORATES OR MARRIOTT
MAY REFUSE TO MAKE THESE PAYMENTS FOR SOME OTHER REASON. HPT HAS
CERTAIN CONTRACTUAL RIGHTS TO RECEIVE THESE PAYMENTS BUT COMPANIES
WHICH HAVE DEFAULTED PAYMENT OBLIGATIONS OFTEN REFUSE TO MAKE ANY
PAYMENTS, AND HPT CAN PROVIDE NO ASSURANCE WITH REGARD TO MARRIOTT'S
FUTURE ACTIONS.
-
THIS PRESS RELEASE STATES THAT HPT EXPECTS THAT THE SECURITY DEPOSITS
IT HOLDS FROM MARRIOTT AND CRESTLINE ARE IN AMOUNTS WHICH WILL EXCEED
THE 2010 SHORTFALL OF PAYMENTS IT EXPECTS TO RECEIVE UNDER THE
DEFAULTED CONTRACTS. THIS EXPECTATION IS BASED UPON CASH FLOW
PROJECTIONS PREPARED BY MARRIOTT AND REVIEWED BY HPT AND HPT'S OWN
PROJECTIONS. BOTH MARRIOTT'S AND HPT'S HISTORICAL PROJECTIONS OF HOTEL
CASH FLOWS HAVE, AT TIMES, PROVED INACCURATE. IF THE U.S. ECONOMY DOES
NOT FULLY RECOVER IN A REASONABLE TIME PERIOD OR IF THE TRAVEL
INDUSTRY SUFFERS SIGNIFICANT ADDITIONAL DECLINES BECAUSE OF PANDEMIC
CONCERNS, ACTS OF TERRORISM OR FOR OTHER REASONS, THE ACTUAL CASH
FLOWS FROM THESE HOTELS MAY BE LESS THAN THE AMOUNTS PROJECTED AND MAY
BE LOWER BY A MATERIAL AMOUNT.
-
THIS PRESS RELEASE STATES THAT HPT IS HOLDING AND HAS APPLIED OR MAY
APPLY SECURITY DEPOSITS TO COVER THE SHORTFALL OF THE PAYMENTS IT HAS
RECEIVED OR EXPECTS TO RECEIVE UNDER THE DEFAULTED HOTEL CONTRACTS
COMPARED TO THE MINIMUM PAYMENTS DUE HPT UNDER THESE CONTRACTS. THE
SECURITY DEPOSITS WHICH HPT IS HOLDING ARE IN LIMITED AMOUNTS:
APPROXIMATELY $19.2 MILLION FOR THE MARRIOTT NO. 3 CONTRACT AND
APPROXIMATELY $15.8 MILLION FOR THE MARRIOTT NO. 4 CONTRACT AS OF MAY
9, 2010. AS DISCUSSED ABOVE, THERE CAN BE NO ASSURANCE REGARDING THE
AMOUNTS OF PAYMENTS HPT MAY RECEIVE UNDER THE DEFAULTED CONTRACTS IN
THE FUTURE; AND FUTURE SHORTFALLS MAY EXCEED THE AMOUNTS OF THE
SECURITY DEPOSITS HPT HOLDS. MOREOVER, THESE SECURITY DEPOSITS ARE NOT
ESCROWED OR OTHERWISE SEGREGATED FROM HPT'S OTHER ASSETS AND
LIABILITIES; ACCORDINGLY, WHEN HPT APPLIES THESE SECURITY DEPOSITS TO
COVER MINIMUM PAYMENTS DUE, IT WILL RECORD INCOME BUT IT WILL NOT
RECEIVE CASH FLOW.
FOR THESE REASONS, AMONG OTHERS, INVESTORS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE UPON THE FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE.
SOURCE: Hospitality Properties Trust
Hospitality Properties Trust
Timothy A. Bonang, Vice President, Investor Relations
or
Carlynn Finn, Manager, Investor Relations
617-796-8232
www.hptreit.com
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