HPT Expects to Realize a Gain on Sale of $160 million
Agreements are Expected to Significantly Improve Property Level Rent
Coverage
HPT Will Receive $70.5 Million of Previously Deferred Rent
Obligations Starting in 2019 and Additional Percentage Rent Starting in
2020
NEWTON, Mass.--(BUSINESS WIRE)--
Hospitality Properties Trust (Nasdaq: HPT) today announced it entered
agreements with TravelCenters of America LLC (Nasdaq: TA), or TA, to
sell 20 travel centers to TA that HPT currently owns and leases to TA
and that HPT and TA amended their existing leases. The transaction
highlights are:
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HPT will sell 20 travel centers located in 15 states to TA for $308.2
million. HPT expects to realize a gain of $160.0 million from these
sales.The sales price reflects a 5.7% capitalization rate
based on property level cash flows (property level revenues minus
property level expenses) for the twelve months ended September 30,
2018. HPT expects to use the proceeds from these sales to repay
borrowings under its revolving credit facility and for general
business purposes.
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HPT expects the agreements to result in stronger property level rent
coverage for its travel center portfolio. The aggregate annual minimum
rents due from TA for the remaining 179 travel centers HPT leases to
TA will be $243.9 million. On a proforma basis, coverage for the
twelve-month period ending September 30, 2018 would have increased
from 1.60x to approximately 1.80x.
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HPT will receive $70.5 million of previously deferred rents in 16
equal quarterly installments beginning on April 1, 2019. Timing of the
repayment was accelerated from the previous staggered due dates
between June 2024 and December 2030 in exchange for the deferred rent
amounts being discounted.
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HPT will receive additional potential percentage rent beginning in
2020 equal to 0.5% of the excess of nonfuel revenues over nonfuel
revenues in 2019. This percentage rent is in addition to any
percentage rent amounts HPT is already receiving from TA.
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The lease term under each of the five TA leases was extended three
years.
John Murray, HPT’s President and Chief Executive Officer, made the
following statement:
“I am pleased with the agreements announced today and believe they
benefit HPT in several ways. First, the agreed upon sales are at an
attractive cap rate and are expected to result in a significant gain for
HPT. Furthermore, the sales unlock value in our existing asset base and
provide liquidity for additional hotel investments. Second, these
agreements enable HPT to improve the quality of its travel center
portfolio by materially improving the aggregate coverage of minimum
rents for the portfolio. As we move into the tenth year of this economic
recovery, materially improving rent coverage for a tenant that accounts
for approximately one third of HPT’s returns helps HPT maintain secure,
steady cash flows and provides our largest tenant financial flexibility
to help weather any potential economic downturns in the future. Third,
the acceleration of payment of the previously deferred rent obligations
at a discounted value addresses potential uncertainty relating to our
collection of these deferred rents.”
The terms of the agreements between HPT and TA were negotiated and
approved by special committees of HPT's Independent Trustees and TA's
Independent Directors who were represented by separate counsel.
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.
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:
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THIS PRESS RELEASE STATES THAT HPT HAS AGREED TO SELL 20 TRAVEL
CENTERS TO TA AND EXPECTS TO RECOGNIZE A GAIN OF $160.0 MILLION. THESE
SALES ARE SUBJECT TO CONDITIONS. AS A RESULT, THESE SALES MAY NOT
OCCUR, MAY BE DELAYED OR THEIR TERMS MAY CHANGE AND ANY GAIN HPT MAY
RECOGNIZE MAY BE LESS THAN THE AMOUNT IT CURRENTLY EXPECTS.
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THIS PRESS RELEASE STATES THAT HPT EXPECTS TO USE THE PROCEEDS FROM
THE SALES OF 20 TRAVEL CENTERS TO TA TO REPAY BORROWINGS UNDER ITS
REVOLVING CREDIT FACILITY AND FOR GENERAL BUSINESS PURPOSES. THIS MAY
IMPLY THAT HPT’S LEVERAGE WILL BE REDUCED. HPT MAY REBORROW AMOUNTS
UNDER ITS CREDIT FACILITY OR MAY OBTAIN ADDITIONAL DEBT FINANCING IN
THE FUTURE. FOR THESE AND OTHER POSSIBLE REASONS, HPT’S LEVERAGE MAY
NOT BE REDUCED.
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THIS PRESS RELEASE STATES THAT, AS A RESULT OF THE AGREEMENTS
ANNOUNCED TODAY, HPT EXPECTS THE COVERAGE RATIO FROM HPT’S TRAVEL
CENTER PORTFOLIO WILL IMPROVE AND THAT THE COVERAGE RATIO WOULD HAVE
CHANGED FROM 1.60X to APPROXIMATELY 1.80X ON A PRO FORMA BASIS FOR THE
TWELVE MONTHS ENDED SEPTEMBER 30, 2018. HOWEVER, THE COVERAGE RATIO IN
THE FUTURE WILL DEPEND ON TA’S OPERATING RESULTS AND MAY DECLINE.
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THIS PRESS RELEASE STATES THAT HPT WILL RECEIVE $70.5 MILLION OF
PREVIOUSLY DEFERRED RENTS IN 16 EQUAL QUARTERLY INSTALLMENTS BEGINNING
ON APRIL 1, 2019. HPT’S RECEIPT OF THESE DEFERRED RENT AMOUNTS WILL
DEPEND ON TA’S ABILITY TO PAY. TA HAS REALIZED OPERATING LOSSES IN
PAST PERIODS AND ITS DEFERRED RENT WAS AGREED TO PREVIOUSLY BECAUSE OF
TA’S THEN FINANCIAL CONDITION. AS A RESULT, HPT CANNOT BE SURE THAT IT
WILL RECEIVE THE DEFERRED RENT AMOUNTS IN ACCORDANCE WITH THE TIMING
ANNOUNCED TODAY OR AT ALL. THESE AGREEMENTS MAY ALSO IMPLY THAT WE
WILL REALIZE A CORRESPONDING BENEFIT IN OUR OPERATING RESULTS AS THE
PAYMENTS ARE MADE. UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, WE
ARE REQUIRED TO RECORD RENTAL INCOME FROM OUR OPERATING LEASES ON A
STRAIGHT-LINE BASIS OVER THE TERMS OF THE AGREEMENTS, WHICH EXTEND
BEYOND WHEN THE PAYMENTS ARE DUE. FURTHER, WE HAD PREVIOUSLY RECORDED
AS RENTAL INCOME ON A STRAIGHT-LINE BASIS SOME OF THE PREVIOUS $150.0
MILLLION DEFERRED RENT OBLIGATION. THOSE AMOUNTS THAT WE ALREADY
RECOGNIZED AS RENTAL INCOME WILL REDUCE FUTURE RENTAL INCOME AMOUNTS
WE RECORD FOR THESE RENT OBLIGATION PAYMENTS.
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THIS PRESS RELEASE STATES THAT BEGINNING IN 2020, HPT WILL BEGIN TO
RECEIVE ADDITIONAL PERCENTAGE RENTS. THE PERCENTAGE RENT PAYABLE TO
HPT BY TA IS BASED UPON INCREASES IN CERTAIN REVENUES OVER CERTAIN
THRESHOLD AMOUNTS AT THE SITES LEASED BY TA FROM HPT. THERE IS NO
GUARANTEE THAT TA’S REVENUES WILL INCREASE OR THAT THE PERCENTAGE RENT
PAYABLE BY TA TO HPT WILL INCREASE AS A RESULT OR AT ALL.
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HPT’S PRESIDENT AND CHIEF EXECUTIVE OFFICER, MR. JOHN MURRAY, STATES
IN THIS PRESS RELEASE THAT THE AGREEMENTS ANNOUNCED TODAY PROVIDE
LIQUIDITY FOR ADDITIONAL HOTEL INVESTMENTS. THIS MAY IMPLY THAT HPT
WILL BE SUCCESSFUL IN MAKING ADDITIONAL HOTEL INVESTMENTS IN THE
FUTURE AND THAT ITS OPERATING RESULTS MAY IMPROVE AS A RESULT. HPT’S
ABILITY TO MAKE FUTURE HOTEL INVESTMENTS WILL DEPEND ON VARIOUS
FACTORS, INCLUDING FACTORS NOT WITHIN ITS CONTROL. ALSO, HOTEL
INVESTMENTS ARE SUBJECT TO RISKS AND ANY FUTURE HOTEL INVESTMENTS MAY
NOT IMPROVE ITS OPERATING RESULTS.
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HPT’S PRESIDENT AND CHIEF EXECUTIVE OFFICER, MR. JOHN MURRAY, STATES
IN THIS PRESS RELEASE THAT THE AGREEMENTS ANNOUNCED TODAY HELP HPT
MAINTAIN SECURE, STEADY CASH FLOWS AND PROVIDE HPT’S LARGEST TENANT,
TA, FINANCIAL FLEXIBILITY TO HELP WEATHER ANY POTENTIAL ECONOMIC
DOWNTURNS IN THE FUTURE. THESE STATEMENTS MAY IMPLY THAT HPT WILL
MAINTAIN SECURE, STEADY CASH FLOWS IN THE FUTURE. HOWEVER, HPT’S
BUSINESS IS SUBJECT TO RISKS, INCLUDING RISKS THAT ARE NOT WITHIN ITS
CONTROL. ACCORDINGLY, HPT MAY BE UNABLE TO MAINTAIN SECURE, STEADY
CASH FLOWS IN THE FUTURE. IN ADDITION, THE AGREEMENTS ANNOUNCED TODAY
MAY NOT PROVIDE TA WITH SUFFICIENT FINANCIAL FLEXIBILITY TO WEATHER
FUTURE ECONOMIC DOWNTURNS OR OTHER CHALLENGES TO ITS BUSINESS.
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THIS PRESS RELEASE STATES THAT THE TERMS OF THE AGREEMENTS DESCRIBED
IN THIS PRESS RELEASE WERE NEGOTIATED AND APPROVED BY SPECIAL
COMMITTEES OF HPT’S INDEPENDENT TRUSTEES AND TA’S INDEPENDENT
DIRECTORS WHO WERE REPRESENTED BY SEPARATE COUNSEL. AN IMPLICATION OF
THESE STATEMENTS MAY BE THAT THESE AGREEMENTS ARE EQUIVALENT TO “ARM’S
LENGTH” AGREEMENTS BETWEEN UNRELATED PARTIES. HPT AND TA ARE
AFFILIATED BECAUSE THEY HAVE A COMMON BOARD MEMBER, BECAUSE BOTH HAVE
CERTAIN MANAGEMENT CONTRACTS WITH THE SAME COMPANY AND OTHERWISE.
ALSO, AN AGREEMENT WHICH WAS ENTERED BY HPT AND TA AT THE TIME TA WAS
SPUN OUT OF HPT TO BECOME A SEPARATE PUBLIC COMPANY GRANTS HPT CERTAIN
RIGHTS OF FIRST REFUSAL REGARDING TA’S REAL ESTATE AGREEMENTS.
ACCORDINGLY, HPT CAN PROVIDE NO ASSURANCE THAT THE TERMS OF THE
AGREEMENTS ANNOUNCED TODAY ARE EQUIVALENT TO “ARM’S LENGTH” 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.
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/20190116005843/en/
Katie Strohacker, Senior Director, Investor Relations
(617) 796-8232
www.hptreit.com
Source: Hospitality Properties Trust