Third Quarter Net Income Available for Common Shareholders of
$0.71 Per Share
Third Quarter Normalized FFO Available for Common Shareholders of
$1.06 Per Share
NEWTON, Mass.--(BUSINESS WIRE)--
Hospitality Properties Trust (Nasdaq: HPT) today announced its financial
results for the quarter and nine months ended September 30, 2018:
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2018
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2017
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2018
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2017
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($ 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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117,099
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$
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85,728
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$
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294,594
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$
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172,270
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Net income available for common shareholders per share
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$
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0.71
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$
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0.52
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$
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1.79
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$
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1.05
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Adjusted EBITDA (1) |
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$
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225,676
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$
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223,469
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$
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655,530
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$
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638,342
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Normalized FFO available for common shareholders (1) |
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$
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174,653
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$
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175,458
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$
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505,714
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$
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497,869
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Normalized FFO available for common shareholders per share (1) |
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$
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1.06
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$
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1.07
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$
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3.08
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$
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3.03
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Portfolio Performance
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Comparable hotel RevPAR
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$
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101.75
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$
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102.28
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$
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99.08
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$
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98.07
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Change in comparable hotel RevPAR
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(0.5
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%)
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—
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1.0
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%
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—
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RevPAR (all hotels)
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$
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100.29
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$
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102.07
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$
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98.00
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$
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98.45
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Change in RevPAR (all hotels)
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(1.7
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%)
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—
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(0.5
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%)
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—
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Coverage of HPT’s minimum returns and rents for hotels
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1.08x
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1.18x
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1.04x
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1.11x
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Coverage of HPT's minimum rents for travel centers
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1.68x
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1.73x
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1.64x
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1.51x
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(1)
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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 three and nine months ended September 30,
2018 and 2017 appear later in this press release.
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John Murray, President and Chief Executive Officer of HPT, made the
following statement:
“HPT’s third quarter 2018 comparable hotel RevPAR declined 0.5% compared
to the prior year period due to occupancy declines associated with
renovations, competition from supply growth and the negative impact from
hurricane related activity. Excluding our recently acquired hotels and
the sixteen comparable hotels that underwent renovation for all or part
of the third quarter 2018, RevPAR increased 0.4%. Additional returns for
the third quarter 2018, in excess of our minimum returns, totaled $9.3
million, and coverage of hotel minimum returns and rents for the third
quarter 2018 was 1.08 times.
Our TA properties' total gross margin increased by $12.7 million, or
4.1%, versus the same period last year driven by a 9.9% increase in fuel
margin and a 2.6% increase in non-fuel margin. Travel center minimum
rent coverage was 1.68 times for the third quarter 2018.”
Results for the Three and Nine Months Ended September 30, 2018 and
Recent Activities:
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Net Income Available for Common Shareholders: Net income
available for common shareholders for the quarter ended September 30,
2018 was $117.1 million, or $0.71 per diluted share, compared to net
income available for common shareholders of $85.7 million, or $0.52
per diluted share, for the quarter ended September 30, 2017. Net
income available for common shareholders for the quarter ended
September 30, 2018 includes $43.5 million, or $0.26 per diluted share,
of unrealized gains on equity securities. Net income available for
common shareholders for the quarter ended September 30, 2017 includes
a $9.3 million, or $0.06 per diluted share, gain on sale of real
estate. The weighted average number of diluted common shares
outstanding was 164.3 million and 164.2 million for the quarters ended
September 30, 2018 and 2017, respectively.
Net income
available for common shareholders for the nine months ended
September 30, 2018 was $294.6 million, or $1.79 per diluted share,
compared to net income available for common shareholders of $172.3
million, or $1.05 per diluted share, for the nine months ended
September 30, 2017. Net income available for common shareholders for
the nine months ended September 30, 2018 includes $89.3 million, or
$0.54 per diluted share, of unrealized gains on equity securities. Net
income available for common shareholders for the nine months ended
September 30, 2017 includes $38.2 million, or $0.23 per diluted share,
of estimated business management incentive fee expense and a $9.3
million, or $0.06 per diluted share, gain on sale of real estate and
was reduced by $9.9 million, or $0.06 per diluted share, for the
amount by which the liquidation preference for HPT's 7.125% Series D
cumulative redeemable preferred shares that were redeemed during the
period exceeded the carrying value of those preferred shares as of the
date of the redemption. The weighted average number of diluted common
shares outstanding was 164.2 million for each of the nine months ended
September 30, 2018 and 2017.
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Adjusted EBITDA: Adjusted EBITDA for the quarter ended
September 30, 2018 compared to the same period in 2017 increased 1.0%
to $225.7 million.
Adjusted EBITDA for the nine months
ended September 30, 2018 compared to the same period in 2017 increased
2.7% to $655.5 million.
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Normalized FFO Available for Common Shareholders: Normalized
FFO available for common shareholders for the quarter ended
September 30, 2018 were $174.7 million, or $1.06 per diluted share,
compared to Normalized FFO available for common shareholders of $175.5
million, or $1.07 per diluted share, for the quarter ended
September 30, 2017.
Normalized FFO available for
common shareholders for the nine months ended September 30, 2018 were
$505.7 million, or $3.08 per diluted share, compared to Normalized FFO
available for common shareholders of $497.9 million, or $3.03 per
diluted share, for the nine months ended September 30, 2017.
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Hotel RevPAR (comparable hotels): For the quarter ended
September 30, 2018 compared to the same period in 2017 for HPT’s 307
hotels that were owned continuously since July 1, 2017: average daily
rate, or ADR, increased 1.8% to $130.79; occupancy decreased 1.8
percentage points to 77.8%; and revenue per available room, or RevPAR,
decreased 0.5% to $101.75.
For the nine months ended
September 30, 2018 compared to the same period in 2017 for HPT’s 303
hotels that were owned continuously since January 1, 2017: ADR
increased 2.0% to $129.52; occupancy decreased 0.7 percentage points
to 76.5%; and RevPAR increased 1.0% to $99.08.
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Hotel RevPAR (all hotels): For the quarter ended September 30,
2018 compared to the same period in 2017 for HPT’s 325 hotels that
were owned as of September 30, 2018: ADR increased 1.5% to $130.42;
occupancy decreased 2.5 percentage points to 76.9%; and RevPAR
decreased 1.7% to $100.29.
For the nine months ended
September 30, 2018 compared to the same period in 2017 for HPT’s 325
hotels that were owned as of September 30, 2018: ADR increased 1.9% to
$130.49; occupancy decreased 1.8 percentage points to 75.1%; and
RevPAR decreased 0.5% to $98.00.
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Coverage of Minimum Returns and Rents: For the quarter ended
September 30, 2018, the aggregate coverage ratio of (x) total hotel
revenues minus all hotel expenses and FF&E reserve escrows which are
not subordinated to minimum returns or rents due to HPT to (y) HPT’s
minimum returns or rents due from hotels decreased to 1.08x from 1.18x
for the quarter ended September 30, 2017.
For the nine
months ended September 30, 2018, the aggregate coverage ratio of (x)
total hotel revenues minus all hotel expenses and FF&E reserve escrows
which are not subordinated to minimum returns or rents due to HPT to
(y) HPT’s minimum returns or rents due from hotels decreased to 1.04x
from 1.11x for the nine months ended September 30, 2017.
For
the quarter ended September 30, 2018, the aggregate coverage ratio of
(x) total travel center revenues less travel center expenses to (y)
HPT’s minimum rent due from leased travel centers decreased to 1.68x
from 1.73x for the quarter ended September 30, 2017.
For
the nine months ended September 30, 2018, the aggregate coverage ratio
of (x) total travel center revenues less travel center expenses to (y)
HPT’s minimum rent due from leased travel centers increased to 1.64x
from 1.51x for the nine months ended September 30, 2017.
As
of September 30, 2018, approximately 74% of HPT’s aggregate annual
minimum returns and rents were secured by guarantees or security
deposits from HPT’s managers and tenants pursuant to the terms of
HPT’s operating agreements.
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Recent Property Acquisition Activities: In October 2018, HPT
acquired a hotel with 164 suites located in Scottsdale, AZ for a
purchase price of $35.9 million, excluding acquisition related costs.
HPT rebranded this hotel to the Sonesta Suites® brand and
added it to its management agreement with Sonesta International Hotels
Corporation, or Sonesta.
Tenants and Managers:
As of September 30, 2018, HPT had
eight operating agreements with six hotel operating companies for 325
hotels with 50,379 rooms, which represented 67% of HPT’s total annual
minimum returns and rents, and five lease agreements with one travel
center operating company for 199 travel centers, which represented 33%
of HPT’s total annual minimum returns and rents.
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Marriott Agreements: As of September 30, 2018, 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 $69.4 million as of September 30, 2018
(approximately $17.4 million per quarter). During the three months
ended September 30, 2018, HPT realized returns under its Marriott No.
1 agreement of $19.9 million, of which $2.6 million represents HPT's
share of hotel cash flows in excess of the minimum returns due to HPT
for the period. Because there is no guarantee or security deposit for
this agreement, the minimum returns HPT receives under this agreement
are limited to available hotel cash flows after payment of operating
expenses and funding of a FF&E reserve. HPT’s Marriott No. 234
agreement includes 68 hotels and requires annual minimum returns to
HPT of $107.1 million as of September 30, 2018 (approximately $26.8
million per quarter). During the three months ended September 30,
2018, HPT realized returns under its Marriott No. 234 agreement of
$26.8 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, 2018, the available security
deposit was replenished by $2.7 million from a share of hotel cash
flows in excess of the minimum returns due to HPT during the period.
As of September 30, 2018, the available security deposit from Marriott
for the Marriott No. 234 agreement was $33.7 million and there was
$30.7 million available under Marriott’s guaranty for up to 90% of the
minimum returns due to HPT to cover future payment shortfalls if and
after the available security deposit is depleted. HPT's Marriott No. 5
agreement includes one resort hotel 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, 2018 of $2.6
million was paid to HPT.
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InterContinental Agreement: As of September 30, 2018, 100 of
HPT’s hotels were operated by subsidiaries of InterContinental Hotels
Group, plc (LON: IHG; NYSE: IHG (ADRs)), or InterContinental, under
one agreement requiring annual minimum returns and rents to HPT of
$190.5 million as of September 30, 2018 (approximately $47.6 million
per quarter). During the three months ended September 30, 2018, HPT
realized returns and rents under its InterContinental agreement of
$54.3 million, of which $6.7 million represents HPT's share of hotel
cash flows in excess of the minimum returns due to HPT for the period.
HPT's InterContinental agreement is partially secured by a security
deposit. As of September 30, 2018, the available InterContinental
security deposit which HPT held to pay future payment shortfalls
remained at the contractually capped amount of $100.0 million.
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Sonesta Agreement: As of September 30, 2018, 50 of HPT’s hotels
were operated under a management agreement with Sonesta, requiring
annual minimum returns of $123.2 million as of September 30, 2018
(approximately $30.8 million per quarter). During the three months
ended September 30, 2018, HPT realized returns under its Sonesta
agreement of $21.7 million. Because there is no guarantee or security
deposit for this agreement, the minimum returns HPT receives under
this agreement are limited to available hotel cash flows after payment
of operating expenses including management and related fees.
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Wyndham Agreement: As of September 30, 2018, 22 of HPT’s hotels
were operated under a management agreement with a subsidiary of
Wyndham Hotels & Resorts, Inc. (NYSE: WH), or Wyndham, requiring
annual minimum returns of $27.7 million as of September 30, 2018
(approximately $6.9 million per quarter). The guarantee provided by
Wyndham with respect to the management agreement was limited to $35.7
million and was depleted during 2017. HPT's agreement with the Wyndham
subsidiary provides that if the hotels' cash flows available after
payment of hotel operating expenses are less than the minimum returns
due to HPT and if the guaranty is depleted, to avoid default Wyndham
is required to pay HPT the greater of the available hotel cash flows
after payment of hotel operating expenses and 85% of the contractual
minimum amount due. During the three months ended September 30, 2018,
HPT realized returns under its Wyndham agreement of $5.9 million,
which represents 85% of the minimum returns due for the period. HPT
also leases 48 vacation units in one of the hotels to a subsidiary of
Wyndham Destinations, Inc. (NYSE: WYND), or Destinations, which
requires annual minimum rent of $1.4 million (approximately $0.4
million per quarter). The guarantee provided by Destinations with
respect to the lease is unlimited. The contractual rent due to HPT
under the lease for Destinations' 48 vacation units during the three
months ended September 30, 2018 was paid to HPT.
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Hyatt Agreement: As of September 30, 2018, 22 of HPT’s hotels
were operated under a management agreement with a subsidiary of Hyatt
Hotels Corporation (NYSE: H), or Hyatt, requiring annual minimum
returns of $22.0 million as of September 30, 2018 (approximately $5.5
million per quarter). During the three months ended September 30,
2018, HPT realized returns under its Hyatt agreement of $5.5 million.
HPT’s Hyatt agreement is partially secured by a limited guaranty from
Hyatt. During the three months ended September 30, 2018, the hotels
under this agreement generated cash flows that were less than the
minimum returns due to HPT, and Hyatt made $0.3 million of guaranty
payments to cover the shortfall. As of September 30, 2018, there was
$23.5 million available under Hyatt's guaranty.
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Radisson Agreement: As of September 30, 2018, nine of HPT’s
hotels were operated under a management agreement with a subsidiary of
Radisson Hospitality, Inc., or Radisson, requiring annual minimum
returns of $18.9 million as of September 30, 2018 (approximately $4.7
million per quarter). During the three months ended September 30,
2018, HPT realized returns under its Radisson agreement of $4.7
million. HPT’s Radisson agreement is partially secured by a limited
guaranty from Radisson. During the three months ended September 30,
2018, the available guaranty was replenished by $1.6 million from a
share of hotel cash flows in excess of the minimum returns due to HPT
during the period. As of September 30, 2018, there was $43.6 million
available under Radisson's guaranty.
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Travel Center Agreements: As of September 30, 2018, HPT’s 199
travel centers located along the U.S. Interstate Highway system were
leased to TravelCenters of America LLC (Nasdaq: TA), or TA, under five
lease agreements, which require aggregate annual minimum rents of
$288.2 million (approximately $72.1 million per quarter). As of
September 30, 2018, all payments due to HPT from TA under these leases
were current.
Conference Call:
At 1:00 p.m. Eastern Time this afternoon, President and Chief Executive
Officer, John Murray, and Chief Financial Officer and Treasurer, Mark
Kleifges, will host a conference call to discuss HPT's third quarter
2018 financial results. They will be joined by Brian Donley, who will
assume his role as Chief Financial Officer and Treasurer of the Company
effective January 1, 2019. The conference call telephone number is (877)
329-3720. Participants calling from outside the United States and Canada
should dial (412) 317-5434. 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 Tuesday, November 13, 2018. To access the replay,
dial (412) 317-0088. The replay pass code is 10123839.
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 2018 Supplemental Operating and Financial
Data is available for download at HPT’s website, which is located at www.hptreit.com.
HPT’s website is not incorporated as part of this press release.
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 pages attached hereto for a more detailed statement of
HPT’s operating results and financial condition and for an explanation
of HPT’s calculation of FFO available for common shareholders and
Normalized FFO available for common shareholders, EBITDA and Adjusted
EBITDA and a reconciliation of those amounts to amounts determined in
accordance with GAAP.
WARNING CONCERNING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO, WHENEVER HPT USES
WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”,
“ESTIMATE”, "WILL", “MAY” AND NEGATIVES OR DERIVATIVES OF THESE OR
SIMILAR EXPRESSIONS, HPT IS MAKING FORWARD LOOKING STATEMENTS. THESE
FORWARD LOOKING STATEMENTS ARE BASED UPON HPT’S PRESENT INTENT, BELIEFS
OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO
OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
CONTAINED IN OR IMPLIED BY HPT’S FORWARD LOOKING STATEMENTS AS A RESULT
OF VARIOUS FACTORS. FOR EXAMPLE:
-
MR. MURRAY STATES IN THIS PRESS RELEASE THAT HPT'S COMPARABLE HOTEL
REVPAR, EXCLUDING RECENTLY ACQUIRED HOTELS AND HOTELS UNDERGOING
RENOVATIONS, GREW DURING THE THIRD QUARTER OF 2018 COMPARED WITH THE
PRIOR YEAR PERIOD, THAT COVERAGE OF HPT'S HOTEL MINIMUM RETURNS AND
RENTS WAS 1.08 TIMES, THAT TA PROPERTIES' GROSS MARGIN IMPROVED DURING
THE THIRD QUARTER OF 2018 COMPARED WITH THE PRIOR YEAR PERIOD AND THAT
COVERAGE OF HPT'S TRAVEL CENTER MINIMUM RENTS WAS 1.68 TIMES. THESE
STATEMENTS MAY IMPLY HOTEL REVPAR AT HPT'S COMPARABLE HOTELS THAT ARE
NOT UNDER RENOVATION MAY CONTINUE TO GROW, TA PROPERTIES' GROSS MARGIN
WILL CONTINUE TO INCREASE OR COVERAGE OF MINIMUM RETURNS AND RENTS
WILL REMAIN ABOVE 1.0 TIMES FOR HPT'S HOTELS OR TRAVEL CENTERS. IN
FACT, HOTEL REVPAR, EXCLUDING SUCH ITEMS, MAY NOT CONTINUE TO GROW AND
MAY DECLINE. IN ADDITION, TA'S IMPROVED PROPERTY RESULTS MAY NOT
CONTINUE AND ITS OPERATING RESULTS MAY DECLINE. IN ADDITION, COVERAGE
OF HPT'S MINIMUM RETURNS AND RENTS MAY DECLINE IN FUTURE PERIODS.
-
AS OF SEPTEMBER 30, 2018, APPROXIMATELY 74% OF HPT’S AGGREGATE ANNUAL
MINIMUM RETURNS AND RENTS WERE SECURED BY GUARANTEES OR SECURITY
DEPOSITS FROM HPT’S MANAGERS AND TENANTS. THIS MAY IMPLY THAT THESE
MINIMUM RETURNS AND RENTS WILL BE PAID. IN FACT, CERTAIN OF THESE
GUARANTEES AND SECURITY DEPOSITS ARE LIMITED IN AMOUNT AND DURATION
AND ALL THE GUARANTEES ARE SUBJECT TO THE GUARANTORS’ ABILITIES AND
WILLINGNESS TO PAY. HPT CANNOT BE SURE OF THE FUTURE FINANCIAL
PERFORMANCE OF HPT’S PROPERTIES AND WHETHER SUCH PERFORMANCE WILL
COVER HPT’S MINIMUM RETURNS AND RENTS, WHETHER THE GUARANTEES OR
SECURITY DEPOSITS WILL BE ADEQUATE TO COVER FUTURE SHORTFALLS IN THE
MINIMUM RETURNS OR RENTS DUE TO HPT WHICH THEY GUARANTY OR SECURE, OR
REGARDING HPT’S MANAGERS’, TENANTS’ OR GUARANTORS’ FUTURE ACTIONS IF
AND WHEN THE GUARANTEES AND SECURITY DEPOSITS EXPIRE OR ARE DEPLETED
OR THEIR ABILITIES OR WILLINGNESS TO PAY MINIMUM RETURNS AND RENTS
OWED TO HPT. MOREOVER, THE SECURITY DEPOSITS HPT HOLDS ARE NOT
SEGREGATED FROM HPT’S OTHER ASSETS AND THE APPLICATION OF SECURITY
DEPOSITS TO COVER PAYMENT SHORTFALLS WILL RESULT IN HPT RECORDING
INCOME, BUT WILL NOT RESULT IN HPT RECEIVING ADDITIONAL CASH. THE
BALANCE OF HPT’S ANNUAL MINIMUM RETURNS AND RENTS AS OF SEPTEMBER 30,
2018 WAS NOT SECURED BY GUARANTEES OR SECURITY DEPOSITS.
-
WYNDHAM'S $35.7 MILLION LIMITED GUARANTY WAS DEPLETED DURING THE YEAR
ENDED DECEMBER 31, 2017 AND CONTINUES TO BE DEPLETED. HPT DOES NOT
HOLD A SECURITY DEPOSIT WITH RESPECT TO AMOUNTS DUE UNDER THE WYNDHAM
AGREEMENT. WYNDHAM HAS PAID 85% OF THE MINIMUM RETURNS DUE TO HPT FOR
EACH OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018. HPT CAN
PROVIDE NO ASSURANCE AS TO WHETHER WYNDHAM WILL CONTINUE TO PAY AT
LEAST THE GREATER OF AVAILABLE HOTEL CASH FLOWS AFTER PAYMENT OF HOTEL
OPERATING EXPENSES AND 85% OF THE MINIMUM RETURNS DUE TO HPT OR IF
WYNDHAM WILL DEFAULT ON ITS PAYMENTS.
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HPT HAS NO GUARANTEES OR SECURITY DEPOSITS FOR THE MINIMUM RETURNS DUE
TO HPT FROM HPT'S MARRIOTT NO. 1 OR SONESTA AGREEMENTS. ACCORDINGLY,
HPT MAY RECEIVE AMOUNTS THAT ARE LESS THAN THE CONTRACTUAL MINIMUM
RETURNS STATED IN THESE AGREEMENTS.
THE INFORMATION CONTAINED IN HPT’S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, OR THE 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 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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2018
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2017
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2018
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2017
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Revenues:
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Hotel operating revenues (1) |
|
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$
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521,250
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$
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495,550
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$
|
1,496,125
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$
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1,392,995
|
|
Rental income (2) |
|
|
80,690
|
|
|
|
80,896
|
|
|
|
243,701
|
|
|
|
240,274
|
|
FF&E reserve income (3) |
|
|
1,213
|
|
|
|
1,142
|
|
|
|
3,911
|
|
|
|
3,524
|
|
Total revenues
|
|
|
603,153
|
|
|
|
577,588
|
|
|
|
1,743,737
|
|
|
|
1,636,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel operating expenses (1) |
|
|
366,994
|
|
|
|
343,274
|
|
|
|
1,056,057
|
|
|
|
965,546
|
|
Depreciation and amortization
|
|
|
101,007
|
|
|
|
98,205
|
|
|
|
300,308
|
|
|
|
286,811
|
|
General and administrative (4)
|
|
|
13,425
|
|
|
|
13,404
|
|
|
|
38,280
|
|
|
|
76,097
|
|
Total expenses
|
|
|
481,426
|
|
|
|
454,883
|
|
|
|
1,394,645
|
|
|
|
1,328,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of real estate (5) |
|
|
—
|
|
|
|
9,348
|
|
|
|
—
|
|
|
|
9,348
|
|
Dividend income
|
|
|
626
|
|
|
|
626
|
|
|
|
1,878
|
|
|
|
1,878
|
|
Unrealized gains on equity securities (6) |
|
|
43,453
|
|
|
|
—
|
|
|
|
89,348
|
|
|
|
—
|
|
Interest income
|
|
|
478
|
|
|
|
211
|
|
|
|
1,093
|
|
|
|
590
|
|
Interest expense (including amortization of debt issuance costs and
debt discounts and premiums of $2,570, $2,194, $7,607 and $6,541,
respectively)
|
|
|
(49,308
|
)
|
|
|
(46,574
|
)
|
|
|
(145,589
|
)
|
|
|
(135,329
|
)
|
Loss on early extinguishment of debt (7) |
|
|
—
|
|
|
|
—
|
|
|
|
(160
|
)
|
|
|
—
|
|
Income before income taxes and equity in earnings of an investee
|
|
|
116,976
|
|
|
|
86,316
|
|
|
|
295,662
|
|
|
|
184,826
|
|
Income tax expense
|
|
|
(707
|
)
|
|
|
(619
|
)
|
|
|
(1,949
|
)
|
|
|
(1,761
|
)
|
Equity in earnings of an investee
|
|
|
830
|
|
|
|
31
|
|
|
|
881
|
|
|
|
533
|
|
Net income
|
|
|
117,099
|
|
|
|
85,728
|
|
|
|
294,594
|
|
|
|
183,598
|
|
Preferred distributions
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,435
|
)
|
Excess of liquidation preference over carrying value of preferred
shares redeemed (8)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,893
|
)
|
Net income available for common shareholders
|
|
|
$
|
117,099
|
|
|
|
$
|
85,728
|
|
|
|
$
|
294,594
|
|
|
|
$
|
172,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
164,232
|
|
|
|
164,149
|
|
|
|
164,212
|
|
|
|
164,131
|
|
Weighted average common shares outstanding (diluted)
|
|
|
164,274
|
|
|
|
164,188
|
|
|
|
164,242
|
|
|
|
164,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common shareholders per common share (basic
and diluted)
|
|
|
$
|
0.71
|
|
|
|
$
|
0.52
|
|
|
|
$
|
1.79
|
|
|
|
$
|
1.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HOSPITALITY PROPERTIES TRUST
|
|
|
|
RECONCILIATIONS OF FUNDS FROM OPERATIONS,
|
|
|
|
NORMALIZED FUNDS FROM OPERATIONS, EBITDA AND ADJUSTED EBITDA
|
|
|
|
(amounts in thousands, except share data)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Calculation of FFO and Normalized FFO available for common
shareholders: (9) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common shareholders
|
|
|
$
|
117,099
|
|
|
|
$
|
85,728
|
|
|
|
$
|
294,594
|
|
|
|
$
|
172,270
|
|
Add (Less):
|
|
|
Depreciation and amortization
|
|
|
101,007
|
|
|
|
98,205
|
|
|
|
300,308
|
|
|
|
286,811
|
|
|
|
|
Gain on sale of real estate (5) |
|
|
—
|
|
|
|
(9,348
|
)
|
|
|
—
|
|
|
|
(9,348
|
)
|
FFO available for common shareholders
|
|
|
218,106
|
|
|
|
174,585
|
|
|
|
594,902
|
|
|
|
449,733
|
|
Add (Less):
|
|
|
Estimated business management incentive fees (4)
|
|
|
—
|
|
|
|
873
|
|
|
|
—
|
|
|
|
38,243
|
|
|
|
|
Loss on early extinguishment of debt (7) |
|
|
—
|
|
|
|
—
|
|
|
|
160
|
|
|
|
—
|
|
|
|
|
Excess of liquidation preference over carrying value of preferred
shares redeemed (8) |
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,893
|
|
|
|
|
Unrealized gains on equity securities (6) |
|
|
(43,453
|
)
|
|
|
—
|
|
|
|
(89,348
|
)
|
|
|
—
|
|
Normalized FFO available for common shareholders
|
|
|
$
|
174,653
|
|
|
|
$
|
175,458
|
|
|
|
$
|
505,714
|
|
|
|
$
|
497,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
164,232
|
|
|
|
164,149
|
|
|
|
164,212
|
|
|
|
164,131
|
|
Weighted average common shares outstanding (diluted)
|
|
|
164,274
|
|
|
|
164,188
|
|
|
|
164,242
|
|
|
|
164,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted per common share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO available for common shareholders
|
|
|
$
|
1.33
|
|
|
|
$
|
1.06
|
|
|
|
$
|
3.62
|
|
|
|
$
|
2.74
|
|
|
|
|
Normalized FFO available for common shareholders
|
|
|
$
|
1.06
|
|
|
|
$
|
1.07
|
|
|
|
$
|
3.08
|
|
|
|
$
|
3.03
|
|
|
|
|
Distributions declared per share
|
|
|
$
|
0.53
|
|
|
|
$
|
0.52
|
|
|
|
$
|
1.58
|
|
|
|
$
|
1.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Calculation of EBITDA and Adjusted EBITDA: (10)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
117,099
|
|
|
|
$
|
85,728
|
|
|
|
$
|
294,594
|
|
|
|
$
|
183,598
|
|
Add:
|
|
|
Interest expense
|
|
|
49,308
|
|
|
|
46,574
|
|
|
|
145,589
|
|
|
|
135,329
|
|
|
|
|
Income tax expense
|
|
|
707
|
|
|
|
619
|
|
|
|
1,949
|
|
|
|
1,761
|
|
|
|
|
Depreciation and amortization
|
|
|
101,007
|
|
|
|
98,205
|
|
|
|
300,308
|
|
|
|
286,811
|
|
EBITDA
|
|
|
268,121
|
|
|
|
231,126
|
|
|
|
742,440
|
|
|
|
607,499
|
|
Add (Less):
|
|
|
General and administrative expense paid in common shares (11)
|
|
|
1,008
|
|
|
|
818
|
|
|
|
2,278
|
|
|
|
1,948
|
|
|
|
|
Estimated business management incentive fees (4) |
|
|
—
|
|
|
|
873
|
|
|
|
—
|
|
|
|
38,243
|
|
|
|
|
Loss on early extinguishment of debt (7) |
|
|
—
|
|
|
|
—
|
|
|
|
160
|
|
|
|
—
|
|
|
|
|
Gain on sale of real estate (5) |
|
|
—
|
|
|
|
(9,348
|
)
|
|
|
—
|
|
|
|
(9,348
|
)
|
|
|
|
Unrealized gains on equity securities (6) |
|
|
(43,453
|
)
|
|
|
—
|
|
|
|
(89,348
|
)
|
|
|
—
|
|
Adjusted EBITDA
|
|
|
$
|
225,676
|
|
|
|
$
|
223,469
|
|
|
|
$
|
655,530
|
|
|
|
$
|
638,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
As of September 30, 2018, HPT owned 325 hotels; 323 of these hotels
were managed by hotel operating companies and two hotels were leased
to hotel operating companies. As of September 30, 2018, HPT also
owned 199 travel centers; all 199 of these travel centers were
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, $9,216 and $5,699 less than the minimum returns due to
HPT for the three months ended September 30, 2018 and 2017,
respectively, and $31,030 and $18,971 less than the minimum returns
due to HPT for the nine months ended September 30, 2018 and 2017,
respectively. When managers of these hotels are required to fund the
shortfalls under the terms of HPT’s management 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. The reduction to hotel
operating expenses was $299 for the three months ended September 30,
2018 and $2,377 and $2,689 for the nine months ended September 30,
2018 and 2017, respectively. There was no reduction to hotel
operating expenses for the three months ended September 30, 2017.
When HPT reduces the amounts of the security deposit it holds for
any of its operating agreements for payment deficiencies, it does
not result in additional cash flows to HPT of the deficiency
amounts, but reduces the refunds due to the respective tenants or
managers who have provided HPT with these deposits upon expiration
of the respective operating agreement. The security deposits are
non-interest bearing and are not held in escrow. HPT had shortfalls
at certain of its managed hotel portfolios not funded by the
managers of these hotels under the terms of its management
agreements of $9,818 and $28,653 for the three and nine months ended
September 30, 2018, respectively, which represent the unguaranteed
portions of HPT's minimum returns from its Sonesta and Wyndham
agreements. HPT had shortfalls at certain of its managed hotel
portfolios not funded by the managers of these hotels under the
terms of its management agreements of $5,699 and $16,282 for the
three and nine months ended September 30, 2017, respectively, which
represents the unguaranteed portion of HPT's minimum returns from
its Sonesta agreement. Certain of HPT’s managed hotel portfolios had
net operating results that were, in the aggregate, $21,321 and
$31,355 more than the minimum returns due to HPT for the three
months ended September 30, 2018 and 2017, respectively, and $47,901
and $67,052 more than the minimum returns due to HPT for the nine
months ended September 30, 2018 and 2017, respectively. Certain of
HPT's guarantees and its security deposits may be replenished by a
share of future cash flows from the applicable hotel operations in
excess of the minimum returns due to HPT pursuant to the terms of
the respective agreements. When HPT's guarantees and 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. HPT
had $5,204 and $10,099 of guarantee and security deposit
replenishments for the three months ended September 30, 2018 and
2017, respectively, and $14,299 and $26,319 of guarantee and
security deposit replenishments for the nine months ended September
30, 2018 and 2017, respectively.
|
|
|
|
|
(2)
|
|
|
Rental income includes $3,136 and $3,087 in the three months ended
September 30, 2018 and 2017, respectively, and $9,359 and $9,208 in
the nine months ended September 30, 2018 and 2017, 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.
|
|
|
|
|
(3)
|
|
|
Various percentages of total sales at certain of HPT’s hotels are
escrowed as reserves for future renovations or refurbishment, or
FF&E reserve escrows. HPT owns all the FF&E reserve escrows for its
hotels. HPT reports deposits by its tenants into the escrow accounts
under its hotel leases as FF&E reserve income. HPT does not report
the amounts which are escrowed as FF&E reserves for its managed
hotels as FF&E reserve income.
|
|
|
|
|
(4)
|
|
|
Incentive fees under HPT’s business management agreement with The
RMR Group LLC 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, in the first, second and third
quarters. Although HPT recognizes this expense, if any, in the
first, second and third quarters 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 business management
incentive fee expense amount for the year, if any, is determined.
General and administrative expense includes $873 and $38,243 of
estimated business management incentive fee expense for the three
and nine months ended September 30, 2017, respectively. No business
management incentive fee expense was recorded for the three and nine
months ended September 30, 2018.
|
|
|
|
|
(5)
|
|
|
HPT recorded a $9,348 gain on sale of real estate during the three
months ended September 30, 2017 in connection with the sales of
three hotels.
|
|
|
|
|
(6)
|
|
|
Unrealized gains on equity securities represent the adjustment
required to adjust the carrying value of HPT's investments in The
RMR Group Inc. and TA common shares to their fair value as of
September 30, 2018 in accordance with new GAAP standards effective
January 1, 2018.
|
|
|
|
|
(7)
|
|
|
HPT recorded a loss of $160 on early extinguishment of debt in the
three months ended June 30, 2018 in connection with the amendment of
its revolving credit facility and term loan.
|
|
|
|
|
(8)
|
|
|
In February 2017, HPT redeemed all 11,600,000 of its outstanding
7.125% Series D cumulative redeemable preferred shares at the stated
liquidation preference of $25.00 per share plus accrued and unpaid
distributions to the date of redemption (an aggregate of $291,435).
The liquidation preference of the redeemed shares exceeded the
carrying amount for the redeemed shares as of the date of redemption
by $9,893, or $0.06 per share, and HPT reduced net income available
to common shareholders in the three months ended March 31, 2017 by
that excess amount.
|
|
|
|
|
(9)
|
|
|
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, if any,
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 be payable when all contingencies for
determining such fees are known at the end of the calendar year, and
HPT excludes the loss on early extinguishment of debt, excess of
liquidation preference over carrying value of preferred shares
redeemed and unrealized gains on equity securities. 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 and net
income available for common shareholders. 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 its 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 alternatives to net income or net income
available for common shareholders as indicators of HPT’s operating
performance or as measures of HPT’s liquidity. These measures should
be considered in conjunction with net income and net income
available for common shareholders 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.
|
|
|
|
|
(10)
|
|
|
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 and net
income available for common shareholders. HPT believes that EBITDA
and Adjusted EBITDA provide useful information to investors because
by excluding the effects of certain historical amounts, such as
interest, depreciation and amortization expense, EBITDA and Adjusted
EBITDA may facilitate a comparison of current operating performance
with HPT’s past operating performance. In calculating Adjusted
EBITDA, HPT includes business management incentive fees only in the
fourth quarter versus the quarter when they are recognized as
expense in accordance with GAAP due to their quarterly volatility
not necessarily being indicative of HPT’s core operating performance
and the uncertainty as to whether any such business management
incentive fees will be payable when all contingencies for
determining such fees are known at the end of the calendar year.
EBITDA and Adjusted EBITDA do not represent cash generated by
operating activities in accordance with GAAP and should not be
considered alternatives to net income or net income available for
common shareholders as indicators of operating performance or as
measures of HPT’s liquidity. These measures should be considered in
conjunction with net income and net income available for common
shareholders 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.
|
|
|
|
|
(11)
|
|
|
Amounts represent the equity compensation for HPT’s trustees, its
officers and certain other employees of HPT’s manager.
|
|
|
|
|
|
HOSPITALITY PROPERTIES TRUST
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(amounts in thousands, except share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
ASSETS
|
|
|
|
|
|
|
Real estate properties:
|
|
|
|
|
|
|
Land
|
|
|
$
|
1,673,113
|
|
|
|
$
|
1,668,797
|
|
Buildings, improvements and equipment
|
|
|
7,964,429
|
|
|
|
7,758,862
|
|
Total real estate properties, gross
|
|
|
9,637,542
|
|
|
|
9,427,659
|
|
Accumulated depreciation
|
|
|
(2,998,741
|
)
|
|
|
(2,784,478
|
)
|
Total real estate properties, net
|
|
|
6,638,801
|
|
|
|
6,643,181
|
|
Cash and cash equivalents
|
|
|
19,849
|
|
|
|
24,139
|
|
Restricted cash
|
|
|
65,644
|
|
|
|
73,357
|
|
Due from related persons
|
|
|
88,164
|
|
|
|
78,513
|
|
Other assets, net
|
|
|
439,095
|
|
|
|
331,195
|
|
Total assets
|
|
|
$
|
7,251,553
|
|
|
|
$
|
7,150,385
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
Unsecured revolving credit facility
|
|
|
$
|
143,000
|
|
|
|
$
|
398,000
|
|
Unsecured term loan, net
|
|
|
397,143
|
|
|
|
399,086
|
|
Senior unsecured notes, net
|
|
|
3,596,275
|
|
|
|
3,203,962
|
|
Security deposits
|
|
|
133,770
|
|
|
|
126,078
|
|
Accounts payable and other liabilities
|
|
|
178,321
|
|
|
|
184,788
|
|
Due to related persons
|
|
|
10,473
|
|
|
|
83,049
|
|
Total liabilities
|
|
|
4,458,982
|
|
|
|
4,394,963
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
Common shares of beneficial interest, $.01 par value; 200,000,000
shares authorized; 164,442,379 and 164,349,141 shares issued and
outstanding, respectively
|
|
|
1,644
|
|
|
|
1,643
|
|
Additional paid in capital
|
|
|
4,544,449
|
|
|
|
4,542,307
|
|
Cumulative net income
|
|
|
3,684,167
|
|
|
|
3,310,017
|
|
Cumulative other comprehensive income (loss)
|
|
|
(108
|
)
|
|
|
79,358
|
|
Cumulative preferred distributions
|
|
|
(343,412
|
)
|
|
|
(343,412
|
)
|
Cumulative common distributions
|
|
|
(5,094,169
|
)
|
|
|
(4,834,491
|
)
|
Total shareholders’ equity
|
|
|
2,792,571
|
|
|
|
2,755,422
|
|
Total liabilities and shareholders’ equity
|
|
|
$
|
7,251,553
|
|
|
|
$
|
7,150,385
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
https://www.businesswire.com/news/home/20181106005199/en/
Hospitality Properties Trust
Katie Strohacker, 617-796-8232
Senior
Director, Investor Relations
Source: Hospitality Properties Trust