Third Quarter Net Income of $0.30 per share
Normalized FFO of $1.03 per share for the Third Quarter
Comparable Hotel RevPAR for the Third Quarter Grows 3.8% Year Over
Year
NEWTON, Mass.--(BUSINESS WIRE)--
Hospitality Properties Trust (Nasdaq: HPT) today announced its financial
results for the quarter and nine months ended September 30, 2016.
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2016
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2015
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2016
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2015
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($ 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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46,646
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$
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56,019
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$
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144,426
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$
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170,414
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Net income available for common shareholders per share
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$
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0.30
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$
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0.37
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$
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0.94
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$
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1.13
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Adjusted EBITDA (1)
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$
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210,514
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$
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192,713
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$
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613,825
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$
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551,167
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Normalized FFO available for common shareholders (1)
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$
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162,135
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$
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149,692
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$
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468,003
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$
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422,580
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Normalized FFO available for common shareholders per share (1)
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$
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1.03
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$
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0.99
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$
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3.05
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$
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2.80
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Portfolio Performance
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Comparable hotel RevPAR
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$
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101.77
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$
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98.02
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$
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98.37
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$
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94.15
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Comparable hotel RevPAR growth
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3.8%
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—
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4.5%
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—
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RevPAR (all hotels)
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$
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101.35
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$
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97.95
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$
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97.35
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$
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94.33
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RevPAR growth (all hotels)
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3.5%
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—
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3.2%
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—
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Coverage of HPT’s minimum returns and rents for hotels
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1.25x
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1.18x
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1.18x
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1.13x
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Coverage of HPT's minimum rents for travel centers
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1.78x
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1.74x
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1.59x
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1.79x
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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 available for common shareholders, and Normalized FFO
available for common shareholders, for the quarters and nine months
ended September 30, 2016 and 2015 appear later in this press release.
John Murray, President and Chief Operating Officer of HPT, made the
following statement regarding today's announcement:
“We are pleased with the continued strong performance from our hotel and
travel center properties this quarter. HPT’s comparable hotel RevPAR
growth of 3.8% exceeded the industry for the 15th consecutive
quarter and aggregate coverage of our minimum returns and rents improved
compared to the same quarter last year. During the quarter, we also
raised $372 million of net proceeds from a common equity offering and
principally used the net proceeds to repay debt.”
Results for the Three and Nine Months Ended September 30, 2016 and
Recent Activities:
-
Net Income Available for Common Shareholders: Net income
available for common shareholders for the quarter ended September 30,
2016 was $46.6 million, or $0.30 per diluted share, compared to net
income available for common shareholders of $56.0 million, or $0.37
per diluted share, for the quarter ended September 30, 2015. Net
income available for common shareholders includes $25.0 million, or
$0.16 per diluted share, and $8.6 million, or $0.06 per diluted share,
of estimated business management incentive fee expense for the
quarters ended September 30, 2016 and 2015, respectively. The weighted
average number of diluted common shares outstanding was 157.3 million
and 151.4 million for the quarters ended September 30, 2016 and 2015,
respectively.
Net income available for common shareholders
for the nine months ended September 30, 2016 was $144.4 million, or
$0.94 per diluted share, compared to net income available for common
shareholders of $170.4 million, or $1.13 per diluted share, for the
nine months ended September 30, 2015. Net income available for common
shareholders for the nine months ended September 30, 2016 includes
$56.3 million, or $0.37 per diluted share, of estimated business
management incentive fee expense. Net income available for common
shareholders for the nine months ended September 30, 2015 includes
$17.4 million, or $0.12 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 153.4 million and
150.9 million for the nine months ended September 30, 2016 and 2015,
respectively.
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Adjusted EBITDA: Adjusted EBITDA for the quarter ended
September 30, 2016 compared to the same period in 2015 increased 9.2%
to $210.5 million.
Adjusted EBITDA for the nine months
ended September 30, 2016 compared to the same period in 2015 increased
11.4% to $613.8 million.
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Normalized FFO Available for Common Shareholders: Normalized
FFO available for common shareholders for the quarter ended
September 30, 2016 were $162.1 million, or $1.03 per diluted share,
compared to Normalized FFO available for common shareholders of $149.7
million, or $0.99 per diluted share, for the quarter ended
September 30, 2015.
Normalized FFO available for
common shareholders for the nine months ended September 30, 2016 were
$468.0 million, or $3.05 per diluted share, compared to Normalized FFO
available for common shareholders of $422.6 million, or $2.80 per
diluted share, for the nine months ended September 30, 2015.
-
Hotel RevPAR (comparable hotels): For the quarter ended
September 30, 2016 compared to the same period in 2015 for HPT’s 293
hotels that were owned continuously since July 1, 2015: average daily
rate, or ADR, increased 3.3% to $126.58; occupancy increased 0.4
percentage points to 80.4%; and revenue per available room, or RevPAR,
increased 3.8% to $101.77.
For the nine months ended
September 30, 2016 compared to the same period in 2015 for HPT’s 291
hotels that were owned continuously since January 1, 2015: ADR
increased 3.4% to $125.95; occupancy increased 0.8 percentage points
to 78.1%; and RevPAR increased 4.5% to $98.37.
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Hotel RevPAR (all hotels): For the quarter ended September 30,
2016 compared to the same period in 2015 for HPT’s 305 hotels: ADR
increased 3.0% to $126.69; occupancy increased 0.4 percentage points
to 80.0%; and RevPAR increased 3.5% to $101.35.
For the
nine months ended September 30, 2016 compared to the same period in
2015 for HPT’s 305 hotels: ADR increased 3.1% to $125.94; occupancy
increased 0.1 percentage points to 77.3%; and RevPAR increased 3.2% to
$97.35.
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Coverage of Minimum Returns and Rents: For the quarter ended
September 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
1.25x from 1.18x for the quarter ended September 30, 2015.
For
the nine months ended September 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 1.18x from 1.13x for the nine months ended September 30,
2015.
For the quarter ended September 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 increased to 1.78x from 1.74x for the quarter ended
September 30, 2015.
For the nine months ended
September 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 1.59x from 1.79x for the
nine months ended September 30, 2015.
As of
September 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 September 30, 2016,
HPT acquired from TravelCenters of America LLC (Nasdaq: TA), or TA, a
newly developed travel center located in Caryville, TN for $16.6
million, excluding acquisition related costs. HPT added this TA
branded travel center to its TA No. 2 lease.
As previously
disclosed, in July 2016, HPT entered into an agreement to acquire a
full service hotel with 236 rooms located in Milpitas, CA for $52.0
million. The agreement was subsequently terminated and in October 2016
HPT entered into a new agreement to acquire this hotel for $46.0
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.
In October
2016, HPT entered into an agreement to acquire a full service hotel
with 101 rooms located in Addison, TX for a purchase price of $9.0
million, excluding acquisition related costs. HPT currently expects to
complete this acquisition in the first quarter of 2017. HPT plans to
add this Radisson branded hotel to its management agreement with
Carlson Hotels Worldwide, or Carlson.
In November 2016, HPT
entered into an agreement to acquire a full service hotel with 483
rooms located in Chicago, IL for a purchase price of $86.7 million,
excluding acquisition related costs. HPT currently expects to complete
this acquisition in the first quarter of 2017. HPT plans to add this
Kimpton branded hotel to its management agreement with
InterContinental Hotels Group, plc (LON: IHG; NYSE: IHG (ADRs)), or
InterContinental.
Financing Activities:
In August 2016, HPT issued 12,650,000 common shares in a public offering
at a price of $30.75 per share. The net proceeds from this offering of
approximately $372.0 million after payment of the underwriters' discount
and other offering expenses were used to repay amounts outstanding under
HPT's revolving credit facility and for general business purposes.
In September 2016, HPT redeemed at par plus accrued interest all $300.0
million of its 5.625% senior notes due 2017 using cash on hand and
borrowings under its revolving credit facility.
Tenants and Managers: As of September 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 198 travel centers, which represented 35%
of HPT’s total annual minimum returns and rents.
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Marriott Agreements: As of September 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 $68.6 million as of September 30, 2016
(approximately $17.2 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 flows after payment of operating expenses and funding of the FF&E
reserve. During the three months ended September 30, 2016, HPT
realized returns under its Marriott No. 1 agreement of $21.5 million.
HPT’s Marriott No. 234 agreement includes 68 hotels and requires
annual minimum returns to HPT of $106.2 million as of September 30,
2016 (approximately $26.6 million per quarter). During the three
months ended September 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 September 30,
2016, the available security deposit was replenished by $4.2 million
from a share of hotel cash flows in excess of the minimum returns due
to HPT for the period. At September 30, 2016, the available security
deposit from Marriott for the Marriott No. 234 agreement was $17.4
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
September 30, 2016 of $2.5 million was paid to HPT. During the quarter
ended September 30, 2016, Marriott notified HPT it does not intend to
extend its lease for the Kauai resort hotel when it expires on
December 31, 2019. HPT intends to have discussions with Marriott about
the future of this hotel.
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InterContinental Agreement: As of September 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 September 30, 2016, HPT realized returns and rents
under its InterContinental agreement of $43.6 million. HPT’s
InterContinental agreement is partially secured by a security deposit.
During the three months ended September 30, 2016, the available
security deposit was replenished by $7.0 million from a share of hotel
cash flows in excess of the returns and rents due to HPT for the
period. At September 30, 2016, the available InterContinental security
deposit which HPT held to pay future payment shortfalls was $71.0
million.
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Other Hotel Agreements: As of September 30, 2016, HPT’s
remaining 89 hotels are operated under five agreements: one management
agreement with Sonesta (33 hotels), requiring annual minimum returns
of $86.0 million as of September 30, 2016 (approximately $21.5 million
per quarter); one management agreement with a subsidiary of Wyndham
Worldwide Corporation (NYSE: WYN), or Wyndham (22 hotels), requiring
annual minimum returns and rents of $28.2 million (approximately $7.1
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 September 30, 2016
(approximately $5.5 million per quarter); one management agreement
with a subsidiary of Carlson (11 hotels), requiring annual minimum
returns of $12.9 million as of September 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 September 30, 2016 (approximately $1.9 million per
quarter). Minimum returns and rents due to HPT are partially
guaranteed under the Wyndham, 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 flows after payment of operating expenses. The
payments due to HPT under these agreements for the three months ended
September 30, 2016 were paid to HPT.
-
Travel Center Agreements: As of September 30, 2016, HPT’s 198
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 $271.2 million (approximately $67.8 million
per quarter). As of September 30, 2016, all payments due to HPT from
TA under these leases were current.
Conference Call:
On Wednesday, November 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 September 30, 2016. The conference
call telephone number is (877) 329-4297. Participants calling from
outside the United States and Canada should dial (412) 317-5435. 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
Wednesday, November 16, 2016. To hear the replay, dial (412) 317-0088.
The replay pass code is 10092992.
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 third
quarter conference call is strictly prohibited without the prior written
consent of HPT.
Supplemental Data:
A copy of HPT’s Third 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”, "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:
-
AS OF SEPTEMBER 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, CERTAIN OF THESE
GUARANTEES AND SECURITY DEPOSITS ARE LIMITED IN AMOUNT AND DURATION,
AND ALL THE GUARANTEES ARE SUBJECT TO THE GUARANTORS’ ABILITY AND
WILLINGNESS TO PAY. THE BALANCE OF HPT’S ANNUAL MINIMUM RETURNS AND
RENTS AS OF SEPTEMBER 30, 2016 WAS NOT GUARANTEED NOR DOES HPT HOLD A
SECURITY DEPOSIT WITH RESPECT TO THOSE AMOUNTS. HPT CANNOT BE SURE
WITH REGARD TO THE FUTURE PERFORMANCE OF HPT’S PROPERTIES, 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, OR 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 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
PAYMENT SHORTFALLS WILL RESULT IN HPT RECORDING INCOME, BUT WILL NOT
RESULT IN HPT RECEIVING ADDITIONAL CASH,
-
HPT HAS ENTERED INTO AGREEMENTS TO ACQUIRE THREE HOTELS FOR AN
AGGREGATE PURCHASE PRICE OF $141.7 MILLION, AND HPT EXPECTS TO
COMPLETE THESE TRANSACTIONS DURING THE FOURTH QUARTER OF 2016 AND
FIRST QUARTER OF 2017 AND TO ADD THESE HOTELS TO ITS EXISTING
MANAGEMENT AGREEMENTS WITH SONESTA, CARLSON AND INTERCONTINENTAL.
THESE TRANSACTIONS ARE SUBJECT TO CONDITIONS. THESE CONDITIONS MAY NOT
BE SATISFIED. AS A RESULT, THESE ACQUISITIONS AND THE EXPECTED
MANAGEMENT ARRANGEMENTS MAY NOT OCCUR, MAY BE DELAYED OR THEIR TERMS
MAY CHANGE, AND
-
THIS PRESS RELEASE STATES THAT MARRIOTT HAS NOTIFIED HPT THAT IT DOES
NOT INTEND TO EXTEND ITS LEASE FOR HPT'S RESORT HOTEL ON KAUAI, HAWAII
WHEN THAT LEASE EXPIRES ON DECEMBER 31, 2019 AND THAT HPT INTENDS TO
HAVE DISCUSSIONS WITH MARRIOTT ABOUT THE FUTURE OF THIS HOTEL. THESE
STATEMENTS MAY IMPLY THAT MARRIOTT WILL NOT OPERATE THIS HOTEL IN THE
FUTURE OR THAT HPT MAY RECEIVE LESS CASH FLOW FROM THIS HOTEL IN THE
FUTURE. HPT'S DISCUSSIONS WITH MARRIOTT HAVE ONLY RECENTLY BEGUN. AT
THIS TIME HPT CANNOT PREDICT HOW ITS DISCUSSIONS WITH MARRIOTT WILL
IMPACT THE FUTURE OF THIS HOTEL. FOR EXAMPLE, THIS HOTEL MAY CONTINUE
TO BE OPERATED BY MARRIOTT ON DIFFERENT CONTRACT TERMS THAN THE
CURRENT LEASE, HPT MAY IDENTIFY A DIFFERENT OPERATOR FOR THIS HOTEL,
OR THE CASH FLOW WHICH HPT RECEIVES FROM ITS OWNERSHIP OF THIS HOTEL
MAY BE DIFFERENT THAN THE RENT HPT NOW RECEIVES. ALSO, ALTHOUGH THE
CURRENT LEASE EXPIRES ON DECEMBER 31, 2019, HPT AND MARRIOTT MAY AGREE
UPON A DIFFERENT TERMINATION DATE.
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
|
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
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(amounts in thousands, except per share data)
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|
(Unaudited)
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Three Months Ended September 30,
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Nine Months Ended September 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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|
Revenues:
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|
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|
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|
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|
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Hotel operating revenues (1)
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|
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|
$
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464,173
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|
$
|
437,171
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$
|
1,332,586
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|
|
$
|
1,243,744
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|
Rental income (2)
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|
|
|
|
78,278
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|
|
|
73,747
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|
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231,830
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|
|
|
207,561
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|
|
FF&E reserve income (3)
|
|
|
|
|
1,065
|
|
|
|
968
|
|
|
|
3,517
|
|
|
|
3,159
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|
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Total revenues
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|
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543,516
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|
|
|
511,886
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|
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|
1,567,933
|
|
|
|
1,454,464
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|
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Expenses:
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|
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|
|
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|
|
Hotel operating expenses (1)
|
|
|
|
|
322,012
|
|
|
|
308,603
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|
|
|
923,239
|
|
|
|
870,689
|
|
|
Depreciation and amortization
|
|
|
|
|
90,139
|
|
|
|
84,261
|
|
|
|
266,192
|
|
|
|
243,812
|
|
|
General and administrative (4)
|
|
|
|
|
37,739
|
|
|
|
19,831
|
|
|
|
91,127
|
|
|
|
53,820
|
|
|
Acquisition related costs (5)
|
|
|
|
|
156
|
|
|
|
851
|
|
|
|
885
|
|
|
|
1,986
|
|
|
Total expenses
|
|
|
|
|
450,046
|
|
|
|
413,546
|
|
|
|
1,281,443
|
|
|
|
1,170,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
93,470
|
|
|
|
98,340
|
|
|
|
286,490
|
|
|
|
284,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend income
|
|
|
|
|
626
|
|
|
|
—
|
|
|
|
1,375
|
|
|
|
—
|
|
|
Interest income
|
|
|
|
|
89
|
|
|
|
11
|
|
|
|
227
|
|
|
|
32
|
|
|
Interest expense (including amortization of debt issuance costs
and
debt discounts of $2,122, $1,458, $6,114 and $4,374, respectively)
|
|
|
|
|
(41,280
|
)
|
|
|
(36,628
|
)
|
|
|
(124,564
|
)
|
|
|
(107,918
|
)
|
|
Loss on early extinguishment of debt (6)
|
|
|
|
|
(158
|
)
|
|
|
—
|
|
|
|
(228
|
)
|
|
|
—
|
|
|
Income before income taxes, equity in earnings (losses) of an
investee
and gain on sale of real estate
|
|
|
|
|
52,747
|
|
|
|
61,723
|
|
|
|
163,300
|
|
|
|
176,271
|
|
|
Income tax expense
|
|
|
|
|
(948
|
)
|
|
|
(514
|
)
|
|
|
(3,483
|
)
|
|
|
(1,445
|
)
|
|
Equity in earnings (losses) of an investee
|
|
|
|
|
13
|
|
|
|
(24
|
)
|
|
|
107
|
|
|
|
71
|
|
|
Income before gain on sale of real estate
|
|
|
|
|
51,812
|
|
|
|
61,185
|
|
|
|
159,924
|
|
|
|
174,897
|
|
|
Gain on sale of real estate (7)
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,015
|
|
|
Net income
|
|
|
|
|
51,812
|
|
|
|
61,185
|
|
|
|
159,924
|
|
|
|
185,912
|
|
|
Preferred distributions
|
|
|
|
|
(5,166
|
)
|
|
|
(5,166
|
)
|
|
|
(15,498
|
)
|
|
|
(15,498
|
)
|
|
Net income available for common shareholders
|
|
|
|
$
|
46,646
|
|
|
$
|
56,019
|
|
|
$
|
144,426
|
|
|
$
|
170,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
|
|
157,217
|
|
|
|
151,359
|
|
|
|
153,357
|
|
|
|
150,476
|
|
|
Weighted average common shares outstanding (diluted)
|
|
|
|
|
157,263
|
|
|
|
151,386
|
|
|
|
153,390
|
|
|
|
150,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common shareholders per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
|
$
|
0.30
|
|
|
$
|
0.37
|
|
|
$
|
0.94
|
|
|
$
|
1.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
September 30,
|
|
September 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
|
|
|
|
$
|
46,646
|
|
|
$
|
56,019
|
|
|
$
|
144,426
|
|
|
$
|
170,414
|
|
|
Add (Less):
|
|
Depreciation and amortization
|
|
|
|
|
90,139
|
|
|
|
84,261
|
|
|
|
266,192
|
|
|
|
243,812
|
|
|
|
|
Gain on sale of real estate (7)
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,015
|
)
|
|
FFO available for common shareholders
|
|
|
|
|
136,785
|
|
|
|
140,280
|
|
|
|
410,618
|
|
|
|
403,211
|
|
|
Add:
|
|
Acquisition related costs (5)
|
|
|
|
|
156
|
|
|
|
851
|
|
|
|
885
|
|
|
|
1,986
|
|
|
|
|
Estimated business management incentive fees (4)
|
|
|
|
|
25,036
|
|
|
|
8,561
|
|
|
|
56,272
|
|
|
|
17,383
|
|
|
|
|
Loss on early extinguishment of debt (6)
|
|
|
|
|
158
|
|
|
|
—
|
|
|
|
228
|
|
|
|
—
|
|
|
Normalized FFO available for common shareholders
|
|
|
|
$
|
162,135
|
|
|
$
|
149,692
|
|
|
$
|
468,003
|
|
|
$
|
422,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
|
|
157,217
|
|
|
|
151,359
|
|
|
|
153,357
|
|
|
|
150,476
|
|
|
Weighted average common shares outstanding (diluted)
|
|
|
|
|
157,263
|
|
|
|
151,386
|
|
|
|
153,390
|
|
|
|
150,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted per common share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO available for common shareholders (basic)
|
|
|
|
$
|
0.87
|
|
$
|
0.93
|
|
$
|
2.68
|
|
$
|
2.68
|
|
|
|
FFO available for common shareholders (diluted)
|
|
|
|
$
|
0.87
|
|
$
|
0.93
|
|
$
|
2.68
|
|
$
|
2.67
|
|
|
|
Normalized FFO available for common shareholders (basic)
|
|
|
|
$
|
1.03
|
|
$
|
0.99
|
|
$
|
3.05
|
|
$
|
2.81
|
|
|
|
Normalized FFO available for common shareholders (diluted)
|
|
|
|
$
|
1.03
|
|
$
|
0.99
|
|
$
|
3.05
|
|
$
|
2.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Calculation of EBITDA and Adjusted EBITDA: (9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
51,812
|
|
|
$
|
61,185
|
|
|
$
|
159,924
|
|
|
$
|
185,912
|
|
|
Add:
|
|
Interest expense
|
|
|
|
|
41,280
|
|
|
|
36,628
|
|
|
|
124,564
|
|
|
|
107,918
|
|
|
|
|
Income tax expense
|
|
|
|
|
948
|
|
|
|
514
|
|
|
|
3,483
|
|
|
|
1,445
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
90,139
|
|
|
|
84,261
|
|
|
|
266,192
|
|
|
|
243,812
|
|
|
EBITDA
|
|
|
|
|
184,179
|
|
|
|
182,588
|
|
|
|
554,163
|
|
|
|
539,087
|
|
|
Add (less):
|
|
Acquisition related costs (5)
|
|
|
|
|
156
|
|
|
|
851
|
|
|
|
885
|
|
|
|
1,986
|
|
|
|
|
General and administrative expense paid in common shares (10)
|
|
|
|
|
985
|
|
|
|
713
|
|
|
|
2,277
|
|
|
|
3,726
|
|
|
|
|
Estimated business management incentive fees (4)
|
|
|
|
|
25,036
|
|
|
|
8,561
|
|
|
|
56,272
|
|
|
|
17,383
|
|
|
|
|
Loss on early extinguishment of debt (6)
|
|
|
|
|
158
|
|
|
|
—
|
|
|
|
228
|
|
|
|
—
|
|
|
|
|
Gain on sale of real estate (7)
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,015
|
)
|
|
Adjusted EBITDA
|
|
|
|
$
|
210,514
|
|
|
$
|
192,713
|
|
|
$
|
613,825
|
|
|
$
|
551,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) At September 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 September 30, 2016, HPT also owned 198
travel centers; all 198 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. Certain of HPT's managed hotels had net operating
results that were, in the aggregate, $2,248 and $6,560 less than the
minimum returns due to HPT in the three months ended September 30, 2016
and 2015, respectively, and $12,618 and $17,395 less than the minimum
returns due to HPT in the nine months ended September 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 September 30, 2016 or 2015 and reductions of
$592 and $1,295 in the nine months ended September 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 $2,248 and
$6,560 in the three months ended September 30, 2016 and 2015,
respectively, and $12,026 and $16,100 in the nine months ended
September 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, $35,123 and $28,969 more than the minimum returns due to
HPT in the three months ended September 30, 2016 and 2015, respectively,
and $80,867 and $65,973 more than the minimum returns due to HPT in the
nine months ended September 30, 2016 and 2015, respectively. Certain of
HPT’s guarantees and its security deposits may be replenished by a share
of these excess 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 $15,103 and $11,970
in the three months ended September 30, 2016 and 2015, respectively, and
$33,897 and $27,551 in the nine months ended September 30, 2016 and
2015, respectively, as a result of such replenishments.
(2) Rental income includes $2,932 and $3,752 in the three months ended
September 30, 2016 and 2015, respectively, and $10,377 and $5,807 in the
nine months ended September 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 nine months ended September 30, 2015 includes $2,048 of percentage
rent recorded because the amount was no longer contingent as a result of
HPT’s lease modifications with TA.
(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 estimated business management incentive fees of
$25,036 and $8,561 during the three months ended September 30, 2016 and
2015, respectively, and $56,272 and $17,383 during the nine months ended
September 30, 2016 and 2015, respectively.
(5) Represents costs associated with HPT’s acquisition activities.
(6) HPT recorded losses of $158 and $228 on early extinguishment of debt
during the three and nine months ended September 30, 2016, respectively,
in connection with the redemption of certain senior unsecured notes.
(7) HPT recorded an $11,015 gain on sale of real estate during the nine
months ended September 30, 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 and
operating income. 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 credit
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 and operating income as presented in
HPT’s condensed consolidated statements of income. Other real estate
companies and REITs may calculate FFO available for common shareholders
and Normalized FFO available for common shareholders differently than
HPT does.
(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 and operating income. 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 and operating income as
presented in HPT’s condensed consolidated statements of income. Other
real estate companies and REITs may calculate EBITDA and Adjusted EBITDA
differently than HPT does.
(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)
|
|
|
|
|
|
|
|
|
|
|
|
|
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September 30,
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December 31,
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|
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2016
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2015
|
|
ASSETS
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|
|
|
|
|
|
|
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Real estate properties:
|
|
|
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|
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|
Land
|
|
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|
$
|
1,550,174
|
|
|
$
|
1,529,004
|
|
|
Buildings, improvements and equipment
|
|
|
|
|
7,047,370
|
|
|
|
6,732,768
|
|
|
Total real estate properties, gross
|
|
|
|
|
8,597,544
|
|
|
|
8,261,772
|
|
|
Accumulated depreciation
|
|
|
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|
(2,436,327
|
)
|
|
|
(2,217,135
|
)
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|
Total real estate properties, net
|
|
|
|
|
6,161,217
|
|
|
|
6,044,637
|
|
|
Cash and cash equivalents
|
|
|
|
|
9,534
|
|
|
|
13,682
|
|
|
Restricted cash (FF&E reserve escrow)
|
|
|
|
|
60,606
|
|
|
|
51,211
|
|
|
Due from related persons
|
|
|
|
|
62,949
|
|
|
|
50,987
|
|
|
Other assets, net
|
|
|
|
|
291,826
|
|
|
|
234,280
|
|
|
Total assets
|
|
|
|
$
|
6,586,132
|
|
|
$
|
6,394,797
|
|
|
|
|
|
|
|
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|
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|
LIABILITIES AND SHAREHOLDERS’ EQUITY
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Unsecured revolving credit facility
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|
|
|
$
|
150,000
|
|
|
$
|
465,000
|
|
|
Unsecured term loan, net
|
|
|
|
|
398,254
|
|
|
|
397,756
|
|
|
Senior unsecured notes, net
|
|
|
|
|
2,564,476
|
|
|
|
2,403,439
|
|
|
Convertible senior unsecured notes
|
|
|
|
|
8,478
|
|
|
|
8,478
|
|
|
Security deposits
|
|
|
|
|
88,524
|
|
|
|
53,579
|
|
|
Accounts payable and other liabilities
|
|
|
|
|
155,433
|
|
|
|
179,783
|
|
|
Due to related persons
|
|
|
|
|
64,303
|
|
|
|
69,514
|
|
|
Dividends payable
|
|
|
|
|
5,166
|
|
|
|
5,166
|
|
|
Total liabilities
|
|
|
|
|
3,434,634
|
|
|
|
3,582,715
|
|
|
|
|
|
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|
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|
Commitments and contingencies
|
|
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Shareholders’ equity:
|
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|
|
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Preferred shares of beneficial interest, no par value; 100,000,000
shares authorized:
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|
|
|
|
|
|
|
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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; 164,269,211 and 151,547,288 shares issued
and outstanding,
respectively
|
|
|
|
|
1,643
|
|
|
|
1,515
|
|
|
Additional paid in capital
|
|
|
|
|
4,539,704
|
|
|
|
4,165,911
|
|
|
Cumulative net income
|
|
|
|
|
3,041,581
|
|
|
|
2,881,657
|
|
|
Cumulative other comprehensive income (loss)
|
|
|
|
|
35,904
|
|
|
|
(15,523
|
)
|
|
Cumulative preferred distributions
|
|
|
|
|
(336,811
|
)
|
|
|
(321,313
|
)
|
|
Cumulative common distributions
|
|
|
|
|
(4,410,630
|
)
|
|
|
(4,180,272
|
)
|
|
Total shareholders’ equity
|
|
|
|
|
3,151,498
|
|
|
|
2,812,082
|
|
|
Total liabilities and shareholders’ equity
|
|
|
|
$
|
6,586,132
|
|
|
$
|
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/20161109005458/en/
Source: Hospitality Properties Trust