Implements Changes Announced Earlier this Year to Further Align
Interests of Management with Shareholders While Maintaining Low Cost
Structure
New Incentive Fee Based on Three Year Total Return per Share Relative
to Performance of Other Hotel REITs
Eliminates Related Party Purchase Rights for Property Sales
NEWTON, Mass.--(BUSINESS WIRE)--
Hospitality Properties Trust (NYSE: HPT) today announced that it has
amended its business management agreement with Reit Management &
Research LLC, or RMR, effective January 1, 2014. The amended agreement
implements the previously announced plan to change the business
management agreement, as follows:
New Base Management Fee:
-
The new calculation of the base management fee will be based on
approximately 0.5% multiplied by the lower of:
(i) the historical cost of HPT's real estate assets or (ii) HPT's
total market capitalization. The comparatively low level of general
and administrative, or G&A, expenses that HPT has historically enjoyed
will continue, but with this change it is possible that G&A expenses
may further decline if the market value of HPT's common shares
declines.
-
10% of the base fee will be paid in HPT's common shares. As a result,
management's share ownership is expected to increase over time.
New Incentive Fee:
-
The new incentive fee will be calculated based on total return per
share (dividends and share price changes) realized by HPT's
shareholders in comparison to the total return of the SNL U.S. REIT
Hotel Index, or the Benchmark. The incentive fee formula will be based
on the amount of outperformance, if any, realized by HPT's
shareholders during the measurement periods compared to the Benchmark,
multiplied by a 12% participation rate. For example, if HPT's
shareholders' total return is 10% during the measurement period and
the Benchmark's total return is 5% during that same period, the
incentive fee will be 12% of the 5% of total outperformance realized
by HPT's shareholders.
-
The measurement period for the new incentive fee will be a rolling,
cumulative three year period starting January 1, 2014. In other words,
the incentive fee payable at the end of 2016 will be based upon the
outperformance realized by HPT's shareholders compared to the
Benchmark cumulatively during 2014, 2015 and 2016; the incentive fee
payable at the end of the 2017 would be based upon the cumulative
outperformance realized in 2015, 2016 and 2017; etc.
-
No incentive fee will be payable by HPT in the event the total return
realized during any measurement period is negative, even if the total
return realized by HPT's shareholders exceeds the Benchmark. Also, the
incentive fee formula includes a "high performance modifier" so that,
within specific parameters, if the total return realized by HPT's
shareholders over a three year period exceeds 36% an adjusted
incentive fee may be paid.
-
The incentive fee will be paid in HPT's common shares. The annual
payment of the incentive fee will be limited, or capped, at 1.5% of
the number of HPT's common shares outstanding at the end of each
measurement period. Common shares issued for payment of the incentive
fees will vest over a multi-year period and the shares will be subject
to "claw back" in the event of subsequent financial restatements.
Also, because it will take three years for the new incentive fee
formula to become fully effective, a one year interim fee may be paid
at the end of 2014 and a two year cumulative interim fee may be paid
at the end of 2015 based on outperforming the pro-rata hurdles in each
of those periods.
The previous incentive fee arrangement was based on a percentage of
annual increases in cash available for distribution, or CAD, per share.
The new incentive fee formula is intended to more directly align the fee
paid with the total return realized by shareholders relative to HPT's
hotel REIT peers.
The new incentive fee formula was established by the HPT Board of
Trustees' Compensation Committee (which is comprised solely of
Independent Trustees) and it was developed by that Committee in
consultation with FTI Consulting, Inc., an independent compensation
consultant selected by the Committee.
Other Management Contract Terms:
In addition to the new fee formulas described above, the amended
business management agreement eliminates the historical "right of first
offer" for property dispositions among HPT and other REITs managed by
RMR.
The amended business management agreement continues to require RMR to
provide all personnel and substantially all corporate office functions
typically included in G&A expenses, except certain third party services
and expenses such as outside counsel and accountants as well as the fees
and expenses of the Independent Trustees.
Hospitality Properties Trust is a real estate investment trust, or REIT,
which owns 291 hotels and 184 travel centers located in 44 states,
Puerto Rico and Canada. HPT is headquartered in Newton, Massachusetts.
WARNING REGARDING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE INCLUDES 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 AND ITS INDEPENDENT TRUSTEES' PRESENT BELIEFS AND EXPECTATIONS,
BUT THEY ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR FOR VARIOUS
REASONS, INCLUDING SOME REASONS WHICH ARE BEYOND HPT'S AND THE
INDEPENDENT TRUSTEES' CONTROL. FOR EXAMPLE: THIS PRESS RELEASE REFERS TO
THE COMPARATIVELY LOW LEVEL OF G&A EXPENSES WHICH HPT HAS HISTORICALLY
EXPERIENCED AND STATES THAT HPT MAY CONTINUE TO RECEIVE HIGH QUALITY
MANAGEMENT SERVICES AT BELOW AVERAGE COSTS. THE COMPARATIVE AND AVERAGE
COSTS OF MANAGEMENT COSTS AND G&A EXPENSES MAY BE CALCULATED IN
DIFFERENT WAYS: BY AMOUNTS, AS A PERCENTAGE OF ASSETS, AS A PERCENTAGE
OF REVENUES AND OTHERWISE. HPT AND ITS INDEPENDENT TRUSTEES BELIEVE THAT
THEIR CALCULATIONS OF SUCH COSTS AND EXPENSES ARE APPROPRIATE. HOWEVER,
IT IS POSSIBLE THAT OTHERS MAY DISPUTE THESE CALCULATIONS TO ARGUE THAT
SUCH COSTS AND EXPENSE ARE NOT AT A LOW LEVEL OR BELOW AVERAGE.
FOR THESE REASONS, AMONG OTHERS, INVESTORS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE OR
THEIR IMPLICATIONS.
A Maryland Real Estate Investment Trust with transferable shares of
beneficial interest listed on the New York Stock Exchange.
No shareholder, Trustee or officer is personally liable for any act
or obligation of the Trust.
Hospitality Properties Trust
Timothy A. Bonang, 617-796-8232
Vice
President, Investor Relations
or
Katie Strohacker, 617-796-8232
Senior
Manager, Investor Relations
www.hptreit.com