Fourth Quarter Normalized FFO Per Share
Increases 15.7% to $0.81
Q4 Comparable Property RevPAR Growth of
11.3% for Hotels Not Under Renovation
Hospitality Properties Trust (NYSE: HPT) today announced its
financial results for the quarter and year ended December 31, 2014,
compared to the results for the prior year comparable periods:
Three Months
EndedDecember 31, Year EndedDecember 31, 2014 2013 2014 2013
($ in thousands, except per share and RevPAR data)
Net income available for common shareholders $ 51,357 $
27,586 $ 176,521 $ 100,992 Net income available for common
shareholders per share (basic and diluted) $ 0.34 $ 0.19 $ 1.18 $
0.73
Adjusted EBITDA (1)
$ 164,247 $ 146,908 $ 661,802 $ 589,813 Adjusted EBITDA growth
11.8% — 12.2% — Normalized FFO (1) $ 121,458 $ 101,304 $ 493,363 $
410,355 Normalized FFO per share (basic) $ 0.81 $ 0.70 $ 3.30 $
2.99 Normalized FFO per share (diluted) $ 0.81 $ 0.70 $ 3.29 $ 2.98
Hotel Portfolio
Performance
Comparable RevPAR $ 80.03 $ 72.52 $ 84.61 $ 76.78 Comparable RevPAR
growth 10.4% — 10.2% — Comparable RevPAR (excluding hotels under
renovation) $ 81.07 $ 72.85 $ 85.57 $ 76.79 Comparable RevPAR
growth (excluding hotels under renovation) 11.3% — 11.4% — RevPAR
(all hotels) $ 80.24 $ 72.70 $ 84.61 $ 76.84 RevPAR growth (all
hotels) 10.4% — 10.1% — Coverage of HPT’s minimum returns and rents
(all hotels) 0.82x 0.75x 0.93x 0.85x
(1) Reconciliations of net income available
for common shareholders determined in accordance with U.S.
generally accepted accounting principles, or GAAP, to funds from
operations, or FFO, and Normalized FFO and reconciliations of net
income to earnings before interest, taxes, depreciation and
amortization, or EBITDA, and Adjusted EBITDA appear later in this
press release.
John Murray, President and Chief Operating Officer of
Hospitality Properties Trust, made the following statement
regarding today’s announcement:
“Our operating performance continues to
improve as we realize the benefits of our property renovation
program. Our Normalized FFO per share increased 15.7% and our
RevPAR growth exceeded the hotel industry’s strong performance for
the ninth consecutive quarter.”
Results for the Three Months and Year Ended December 31, 2014
and Recent Activities:
- Net Income Available for Common
Shareholders: Net income available for common shareholders for
the quarter ended December 31, 2014 was $51.4 million, or $0.34 per
basic and diluted share, compared to $27.6 million, or $0.19 per
basic and diluted share, for the quarter ended December 31, 2013.
The weighted average number of basic and diluted common shares
outstanding was 149.8 million for the quarter ended December 31,
2014 and 144.9 million and 145.0 million, respectively, for the
quarter ended December 31, 2013.
Net income available for common shareholders
for the year ended December 31, 2014 was $176.5 million, or $1.18
per basic and diluted share, compared to $101.0 million, or $0.73
per basic and diluted share, for the year ended December 31, 2013.
The weighted average number of basic and diluted common shares
outstanding was 149.7 million and 149.8 million, respectively, for
the year ended December 31, 2014 and 137.4 million and 137.5
million, respectively, for the year ended December 31, 2013.
- Adjusted EBITDA: Adjusted EBITDA
for the quarter ended December 31, 2014 compared to the same period
in 2013 increased 11.8% to $164.2 million.
Adjusted EBITDA for the year ended December
31, 2014 compared to the same period in 2013 increased 12.2% to
$661.8 million.
- Normalized FFO: Normalized FFO
for the quarter ended December 31, 2014 were $121.5 million, or
$0.81 per basic and diluted share, compared to Normalized FFO for
the quarter ended December 31, 2013 of $101.3 million, or $0.70 per
basic and diluted share. The $0.11, or 15.7%, increase in
Normalized FFO per basic and diluted share is due primarily to: (i)
increases in annual minimum returns and rents that resulted from
HPT’s funding of improvements to its hotels and travel centers;
(ii) increases in FF&E reserve income and deposits under HPT’s
hotel agreements; and (iii) lower interest expense as a result of
HPT’s debt refinancings in 2014.
Normalized FFO for the year ended December
31, 2014 were $493.4 million, or $3.30 and $3.29 per share, basic
and diluted, respectively, compared to Normalized FFO for the year
ended December 31, 2013 of $410.4 million, or $2.99 and $2.98 per
share, basic and diluted, respectively.
- Comparable Hotel RevPAR: For the
quarter ended December 31, 2014 compared to the same period in 2013
for HPT’s 290 hotels that were owned continuously since October 1,
2013: average daily rate, or ADR, increased 7.4% to $113.20;
occupancy increased 1.9 percentage points to 70.7%; and revenue per
available room, or RevPAR, increased 10.4% to $80.03.
For the year ended December 31, 2014 compared
to year ended December 31, 2013 for HPT’s 288 comparable hotels
that were owned continuously since January 1, 2013: ADR increased
6.1% to $112.97; occupancy increased 2.8 percentage points to
74.9%; and RevPAR increased 10.2% to $84.61.
- Comparable RevPAR for Hotels Not
Under Renovation: During the quarter ended December 31, 2014,
HPT had 16 comparable hotels under renovation for all or part of
the quarter. For the quarter ended December 31, 2014 compared to
the same period in 2013 for HPT’s 274 comparable hotels not under
renovation that were owned continuously since October 1, 2013: ADR
increased 7.2% to $113.38; occupancy increased 2.6 percentage
points to 71.5%; and RevPAR increased 11.3% to $81.07.
During the year ended December 31, 2014, HPT
had 34 comparable hotels under renovation for all or part of the
year. For the year ended December 31, 2014 compared to the year
ended December 31, 2013 for HPT’s 254 comparable hotels not under
renovation that were owned continuously since January 1, 2013: ADR
increased 5.5% to $111.57; occupancy increased 4.1 percentage
points to 76.7%; and RevPAR increased 11.4% to $85.57.
- RevPAR (all hotels): For the
quarter ended December 31, 2014 compared to the same period in 2013
for HPT’s 291 hotels: ADR increased 7.4% to $113.50; occupancy
increased 1.9 percentage points to 70.7%; and RevPAR increased
10.4% to $80.24.
For the year ended December 31, 2014 compared
to the year ended December 31, 2013 for HPT’s 291 hotels: ADR
increased 6.0% to $113.27; occupancy increased 2.8 percentage
points to 74.7%; and RevPAR increased 10.1% to $84.61.
- Hotel Coverage of Minimum Returns
and Rents: For the three months ended December 31, 2014, the
aggregate coverage ratio of (x) total property level revenues minus
FF&E reserve escrows, if any, and all property level expenses
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 0.82x from 0.75x for the three months ended
December 31, 2013.
For the year ended December 31, 2014, the
aggregate coverage ratio of (x) total property level revenues minus
FF&E reserve escrows, if any, and all property level expenses
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 0.93x from 0.85x for the year ended December
31, 2013.
As of December 31, 2014, approximately 68% of
HPT’s aggregate annual minimum returns and rents from its hotels
were secured by guarantees or security deposits from HPT’s managers
and tenants pursuant to the terms of HPT’s hotel operating
agreements.
- Recent Investment and Sales
Activity: During the three months ended December 31, 2014, HPT
began marketing for sale its Courtyard by Marriott hotel in
Norcross, GA with a net book value of $4.1 million at December 31,
2014.
In January 2015, HPT entered an agreement to
acquire a 300 room full service hotel located in Rosemont, IL for
$35.5 million, excluding closing costs. HPT plans to add this
“Holiday Inn & Suites” branded hotel to its management
agreement with a subsidiary of InterContinental Hotels Group, plc
(LON: IHG; NYSE: IHG (ADRs)), or InterContinental.
Tenants and Managers: As of December 31, 2014, HPT had
nine operating agreements with seven hotel operating companies for
291 hotels with 44,107 rooms, which represented 67% of HPT’s total
annual minimum returns and rents.
- Marriott Agreements: During the
three months ended December 31, 2014, 122 hotels owned by HPT were
operated by subsidiaries of Marriott International, Inc. (NASDAQ:
MAR), or Marriott, under three agreements. HPT’s Marriott No. 1
agreement includes 53 hotels, including the hotel HPT is currently
marketing for sale, and provides for annual minimum return payments
to HPT of up to $68.0 million (approximately $17.0 million per
quarter). 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 flow after payment of
operating expenses. During the three months ended December 31,
2014, HPT realized returns under its Marriott No. 1 agreement of
$17.0 million. HPT’s Marriott No. 234 agreement includes 68 hotels
and requires annual minimum returns to HPT of $105.9 million
(approximately $26.5 million per quarter). During the three months
ended December 31, 2014, HPT realized returns under its Marriott
No. 234 agreement of $23.5 million. Marriott was not required to
make any guaranty payments to HPT during the period because the
hotels under the Marriott No. 234 agreement generated cash flows in
excess of the guaranty threshold amount on a cumulative basis for
the year ended December 31, 2014. At December 31, 2014, there was
$30.7 million remaining under the guaranty for the Marriott No. 234
agreement to cover future payment shortfalls for up to 90% of the
minimum returns due to HPT. 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 HPT for this hotel for the
three months ended December 31, 2014 of $2.5 million was paid to
HPT.
- InterContinental Agreement:
During the three months ended December 31, 2014, HPT realized
returns/rents of $34.9 million under its agreement with
subsidiaries of InterContinental, which includes 91 hotels and
requires annual minimum returns/rent to HPT of $140.8 million
(approximately $35.2 million per quarter). During the three months
ended December 31, 2014, HPT replenished the available security
deposit by $0.1 million for the payments HPT received during the
period in excess of the minimum returns due for the period. In
October 2014, InterContinental requested and HPT returned the $4.3
million additional security deposit InterContinental previously
advanced to HPT in the first quarter of 2014 to maintain the
minimum deposit balance required under this agreement. At December
31, 2014, the available security deposit which HPT held to pay
future payment shortfalls was $33.0 million.
- Other Hotel Agreements: As of
December 31, 2014, HPT’s remaining 78 hotels are operated under
five agreements: one management agreement with Sonesta
International Hotels Corporation, or Sonesta (22 hotels), requiring
annual minimum returns of $71.9 million (approximately $18.0
million per quarter); one management agreement with a subsidiary of
Wyndham Worldwide Corporation (NYSE: WYN), or Wyndham (22 hotels),
requiring annual minimum returns of $27.4 million (approximately
$6.9 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
(approximately $5.5 million per quarter); one management agreement
with a subsidiary of Carlson Hotels Worldwide, or Carlson (11
hotels), requiring annual minimum returns of $12.9 million
(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 (approximately $1.9
million per quarter). Minimum returns and rents due 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 this
agreement are limited to available hotel cash flow after payment of
operating expenses. The payments due to HPT under these agreements
for the three months ended December 31, 2014 were paid to HPT.
- Travel Center Agreements: As of
December 31, 2014, HPT had two leases with TravelCenters of America
LLC, or TA, for 184 travel centers located along the U.S.
Interstate Highway system requiring annual minimum rents of $226.9
million ($56.7 million per quarter), which represent 33% of HPT’s
total annual minimum returns and rents. As of December 31, 2014,
all payments due to HPT from TA under these leases were current.
For the three months ended September 30, 2014, the aggregate
coverage ratio of (x) total cash flow at the leased travel centers
available to pay HPT’s minimum rent due from TA to (y) HPT’s
minimum rent due from TA was 1.79x. Coverage data for the three
months ended December 31, 2014 for TA is currently
unavailable.
Conference Call:
On Friday, February 27, 2015, at 1:00 p.m. Eastern Time, John
Murray, President and Chief Operating Officer, and Mark Kleifges,
Treasurer and Chief Financial Officer, will host a conference call
to discuss the results for the quarter and year ended December 31,
2014. The conference call telephone number is (800) 230-1074.
Participants calling from outside the United States and Canada
should dial (612) 234-9959. 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 beginning on Friday, February 27,
2015 and will run through Friday, March 6, 2015. To hear the
replay, dial (320) 365-3844. The replay pass code is 352029.
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 fourth quarter conference call
is strictly prohibited without the prior written consent of
HPT.
Supplemental Data:
A copy of HPT’s Fourth Quarter 2014 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 44 states, Puerto Rico and Canada. HPT’s
properties are operated under long term management or lease
agreements. HPT 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, Normalized FFO, 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” 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 THESE FORWARD LOOKING STATEMENTS AS A RESULT OF
VARIOUS FACTORS. FOR EXAMPLE:
- THIS PRESS RELEASE QUOTES MR. MURRAY
STATING THAT HPT’S OPERATING PERFORMANCE CONTINUES TO IMPROVE AS
HPT REALIZES THE BENEFITS OF ITS PROPERTY RENOVATION PROGRAM AS
WELL AS OTHER POSITIVE STATEMENTS REGARDING HPT’S STRATEGY AND ITS
EXECUTION AND IMPROVED OPERATING RESULTS AND METRICS. THESE
STATEMENTS MAY IMPLY THAT HPT’S OPERATING PERFORMANCE WILL CONTINUE
TO IMPROVE. HOWEVER, HPT’S BUSINESS IS SUBJECT TO VARIOUS RISKS,
INCLUDING, AMONG OTHERS, THE STATUS OF THE ECONOMY GENERALLY. THERE
CAN BE NO ASSURANCE THAT HPT’S PERFORMANCE WILL CONTINUE TO IMPROVE
OR BE SUSTAINED AND ITS FUTURE RESULTS MAY DECLINE.
- HPT EXPECTS THAT, WHILE THE SECURITY
DEPOSIT FOR ITS MARRIOTT NO. 234 AGREEMENT IS EXHAUSTED, MARRIOTT
WILL PAY HPT UP TO 90% OF ITS MINIMUM RETURNS UNDER A LIMITED
GUARANTY. THIS STATEMENT IMPLIES THAT MARRIOTT WILL FULFILL ITS
OBLIGATION UNDER THIS GUARANTY OR THAT FUTURE SHORTFALLS WILL NOT
EXHAUST THE GUARANTY. HOWEVER, THIS GUARANTY IS LIMITED IN AMOUNT
AND EXPIRES ON DECEMBER 31, 2019, AND HPT CAN PROVIDE NO ASSURANCE
WITH REGARD TO MARRIOTT’S FUTURE ACTIONS OR THE FUTURE PERFORMANCE
OF HPT’S HOTELS TO WHICH THE MARRIOTT LIMITED GUARANTY APPLIES OR
AFTER MARRIOTT’S GUARANTY EXPIRES.
- HPT EXPECTS THAT INTERCONTINENTAL WILL
CONTINUE TO PAY IT THE MINIMUM RETURNS INCLUDED IN HPT’S MANAGEMENT
AGREEMENT WITH INTERCONTINENTAL AND THAT HPT WILL UTILIZE THE
SECURITY DEPOSIT IT HOLDS FOR ANY PAYMENT SHORTFALLS. HOWEVER, THE
SECURITY DEPOSIT HPT HOLDS FOR INTERCONTINENTAL’S OBLIGATIONS IS
FOR A LIMITED AMOUNT AND HPT CAN PROVIDE NO ASSURANCE THAT THE
SECURITY DEPOSIT WILL BE ADEQUATE TO COVER FUTURE SHORTFALLS IN THE
MINIMUM RETURNS DUE HPT FROM ITS HOTELS MANAGED BY
INTERCONTINENTAL. MOREOVER, THIS SECURITY DEPOSIT IS NOT ESCROWED
OR OTHERWISE SEGREGATED FROM HPT’S OTHER ASSETS AND LIABILITIES;
ACCORDINGLY, IF HPT APPLIES THIS SECURITY DEPOSIT TO COVER MINIMUM
PAYMENTS DUE, HPT WILL RECORD INCOME BUT IT WILL NOT RECEIVE ANY
ADDITIONAL CASH.
- AS OF DECEMBER 31, 2014, APPROXIMATELY
68% OF HPT’S AGGREGATE ANNUAL MINIMUM RETURNS AND RENTS FOR ITS
HOTELS WERE SECURED BY GUARANTEES AND SECURITY DEPOSITS FROM HPT’S
MANAGERS AND TENANTS. THIS MAY IMPLY THAT THESE MINIMUM RETURNS AND
RENTS WILL BE PAID. IN FACT, THESE GUARANTEES AND SECURITY DEPOSITS
ARE LIMITED IN AMOUNT AND DURATION AND THE GUARANTEES ARE SUBJECT
TO THE GUARANTORS’ ABILITY AND WILLINGNESS TO PAY. FURTHER, THE
SECURITY DEPOSITS ARE NOT SEGREGATED FROM HPT’S OTHER ASSETS AND
THE APPLICATION OF SECURITY DEPOSITS TO COVER SHORTFALLS WILL
RESULT IN HPT RECORDING INCOME, BUT WILL NOT RESULT IN HPT
RECEIVING ADDITIONAL CASH.
- HPT HAS ENTERED AN AGREEMENT TO ACQUIRE
A HOTEL IN ROSEMONT, IL FOR $35.5 MILLION AND HPT EXPECTS THAT IT
WILL ADD THIS HOTEL TO ITS EXISTING MANAGEMENT AGREEMENT WITH
INTERCONTINENTAL. THIS TRANSACTION IS SUBJECT TO VARIOUS TERMS AND
CONDITIONS. THESE TERMS AND CONDITIONS MAY NOT BE MET. AS A RESULT,
THIS TRANSACTION AND THE EXPECTED MANAGEMENT ARRANGEMENT MAY BE
DELAYED OR MAY NOT OCCUR OR ITS TERMS MAY CHANGE.
- HPT IS MARKETING ONE HOTEL IN NORCROSS,
GA WITH A CARRYING VALUE OF $4.1 MILLION FOR SALE. THERE CAN BE NO
ASSURANCE THAT HPT WILL COMPLETE A SALE OF THIS HOTEL OR THAT ANY
SUCH SALE WOULD REALIZE NET PROCEEDS IN AN AMOUNT AT LEAST EQUAL TO
ITS CARRYING VALUE.
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 HPT’S 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.
HOSPITALITY PROPERTIES
TRUSTCONSOLIDATED STATEMENTS OF INCOME(amounts in
thousands, except per share data)(Unaudited)
Three Months Ended December 31,
Year Ended December 31, 2014 2013 2014 2013 Revenues: Hotel
operating revenues (1) $ 362,600 $ 320,533 $ 1,474,757 $ 1,310,969
Minimum rent (1) 64,207 62,965 255,166 249,764 Percentage rent (2)
2,896 2,102 2,896 2,102 FF&E reserve income (3) 830
(808) 3,503 1,020 Total revenues
430,533 384,792 1,736,322 1,563,855
Expenses: Hotel operating expenses (1) 254,183 224,527 1,035,138
929,581 Depreciation and amortization 79,179 77,397 315,878 299,323
General and administrative (4) 4,468 12,931 45,897 50,087
Acquisition related costs (5) 2 93 239 3,273 Loss on asset
impairment (6) - - - 8,008 Total
expenses 337,832 314,948 1,397,152
1,290,272 Operating income 92,701 69,844 339,170 273,583
Interest income 14 24 77 121 Interest expense (including
amortization of deferred financing costs and debt discounts of
$1,458, $1,584, $5,491 and $6,204, respectively) (35,385) (37,766)
(139,486) (145,954) Loss on early extinguishment of debt (7) - -
(855) - Income before income taxes and equity in earnings of an
investee 57,330 32,102 198,906 127,750 Income tax benefit (expense)
(8) (835) 535 (1,945) 5,094 Equity in earnings of an investee 28
115 94 334 Income before gain on sale of real estate 56,523 32,752
197,055 133,178 Gain on sale of real estate (9) - - 130 - Net
income 56,523 32,752 197,185 133,178 Excess of liquidation
preference over carrying value of preferred shares redeemed (10) -
- - (5,627) Preferred distributions (5,166) (5,166)
(20,664) (26,559) Net income available for common
shareholders $ 51,357 $ 27,586 $ 176,521 $ 100,992 Weighted
average common shares outstanding (basic) 149,758
144,893 149,652 137,421 Weighted average common
shares outstanding (diluted) 149,769 145,004
149,817 137,514 Net income available for common
shareholders per common share: Basic and diluted $ 0.34 $ 0.19 $
1.18 $ 0.73
HOSPITALITY PROPERTIES
TRUSTRECONCILIATIONS OF FUNDS FROM
OPERATIONS,NORMALIZED FUNDS FROM OPERATIONS, EBITDA AND
ADJUSTED EBITDA(amounts in thousands, except per share
data)(Unaudited)
Three Months Ended
December 31, Year Ended December 31, 2014 2013 2014 2013
Calculation of Funds from Operations (FFO) and Normalized FFO: (11)
Net income available for common shareholders $ 51,357 $ 27,586 $
176,521 $ 100,992 Add (Less): Depreciation and amortization 79,179
77,397 315,878 299,323 Loss on asset impairment (6) - - - 8,008
Gain on sale of real estate (9) - - (130)
- FFO 130,536 104,983 492,269 408,323 Add (Less):
Acquisition related costs (5) 2 93 239 3,273 Business management
incentive fees (12) (6,951) (2,026) - - Excess of liquidation
preference over carrying value of preferred shares redeemed (10) -
- - 5,627 Loss on early extinguishment of debt (7) - - 855 -
Deferred income tax benefit (8) - - - (6,868) Deferred percentage
rent previously recognized in Normalized FFO (2) (2,129)
(1,746) - - Normalized FFO $ 121,458 $ 101,304
$ 493,363 $ 410,355 Weighted average common shares
outstanding (basic) 149,758 144,893 149,652
137,421 Weighted average common shares outstanding (diluted)
149,769 145,004 149,817 137,514
Basic and diluted per common share amounts: FFO (basic and diluted)
$ 0.87 $ 0.72 $ 3.29 $ 2.97 Normalized FFO (basic) $ 0.81 $ 0.70 $
3.30 $ 2.99 Normalized FFO (diluted) $ 0.81 $ 0.70 $ 3.29 $ 2.98
Three
Months Ended December 31, Year Ended December 31, 2014 2013 2014
2013 Calculation of EBITDA and Adjusted EBITDA: (13) Net income $
56,523 $ 32,752 $ 197,185 $ 133,178 Add (Less): Interest expense
35,385 37,766 139,486 145,954 Income tax expense 835 (535) 1,945
1,774 Depreciation and amortization 79,179 77,397 315,878 299,323
Deferred income tax benefit (8) - - -
(6,868) EBITDA 171,922 147,380 654,494 573,361 Add (Less):
Acquisition related costs (5) 2 93 239 3,273 General and
administrative expense paid in common shares (14) (5,548) 1,181
6,344 5,171 Loss on asset impairment (6) - - - 8,008 Loss on early
extinguishment of debt (7) - - 855 - Gain on sale of real estate
(9) - - (130) - Deferred percentage rent previously recognized in
EBITDA (2) (2,129) (1,746) - - Adjusted
EBITDA $ 164,247 $ 146,908 $ 661,802 $ 589,813
(1) At December 31, 2014 HPT owned 291 hotels; 288 of these
hotels are leased by HPT to its taxable REIT subsidiaries, or TRSs,
and managed by hotel operating companies and three hotels are
leased to hotel operating companies. At December 31, 2014, HPT also
owned 184 travel centers; all 184 of these travel centers are
leased to a travel center operating company under two lease
agreements. HPT’s 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,
$18,233 and $24,748, less than the minimum returns due to HPT in
the three months ended December 31, 2014 and 2013, respectively,
and $47,026 and $65,623 less than the minimum returns due to HPT in
the year ended December 31, 2014 and 2013, 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
consolidated statements of income and comprehensive income as a
reduction of hotel operating expenses. The reduction to hotel
operating expenses was $5,185 and $10,313 in the three months ended
December 31, 2014 and 2013, respectively, and $9,499 and $19,311 in
the years ended December 31, 2014 and 2013, respectively. 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 $13,048 and $14,435 in the three months ended
December 31, 2014 and 2013, respectively, and $37,527 and $46,312
in the year ended December 31, 2014 and 2013, respectively, which
represent the unguaranteed portions of HPT’s minimum returns from
Marriott and from Sonesta.
(2) In calculating net income in accordance with GAAP, HPT
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. Although HPT
defers recognition of this revenue until the fourth quarter for
purposes of calculating net income, HPT includes these estimated
amounts in the calculation of Normalized FFO and Adjusted EBITDA
for each quarter of the year. The fourth quarter Normalized FFO and
Adjusted EBITDA calculations exclude the amounts recognized during
the first three quarters. Percentage rental income included in
Normalized FFO and Adjusted EBITDA was $767 and $356 in the fourth
quarter of 2014 and 2013, respectively.
(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 third party tenants into the escrow accounts 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. We reversed $1,339, or $0.01 per share, of FF&E reserve
income in the fourth quarter of 2013 in connection with an
amendment to our Marriott No. 5 agreement.
(4) During the fourth quarter of 2014, HPT reversed $6,951 of
estimated business management incentive fees accrued during the
first three quarters of the year.
(5) Represents costs associated with HPT’s hotel acquisition
activities.
(6) HPT recorded a $2,171, or $0.02 per share, loss on asset
impairment in the second quarter of 2013 in connection with its
plan to sell one hotel. HPT recorded a $5,837, or $0.04 per share,
loss on asset impairment in the third quarter of 2013 in connection
with an eminent domain taking of its travel center in Roanoke, VA
by the Virginia Department of Transportation.
(7) HPT recorded a $726 loss on early extinguishment of debt in
the first quarter of 2014 in connection with amending the terms of
its revolving credit facility and unsecured term loan and the
redemption of its 7.875% senior notes due 2014. HPT recorded a $129
loss on early extinguishment of debt in the third quarter of 2014
in connection with its redemption of its 5⅛% senior notes due
2015.
(8) HPT recorded a $6,868, or $0.05 per share, income tax
benefit in the second quarter of 2013 in connection with the
restructuring of certain of its TRSs.
(9) HPT recorded a $130 gain on sale of real estate in the
second quarter of 2014 in connection with the sale of one
hotel.
(10) On July 1, 2013, HPT redeemed all of its outstanding 7.0%
Series C Preferred Shares at their liquidation preference of $25
per share, plus accumulated and unpaid distributions. The
liquidation preference of the redeemed shares exceeded the carrying
amount for the redeemed shares as of the date of redemption by
$5,627, or $0.04 per share, and HPT reduced net income available to
common shareholders in the third quarter of 2013 by that excess
amount.
(11) HPT calculates FFO and Normalized FFO as shown above. FFO
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 differs from
NAREIT's definition of FFO because it includes estimated percentage
rent in the period to which it estimates that it relates rather
than when it is recognized as income in accordance with GAAP and
includes business management incentive fees, if any, only in the
fourth quarter versus the quarter they are recognized as expense in
accordance with GAAP and excludes acquisition related costs, excess
liquidation preference over carrying value of preferred shares
redeemed, loss on early extinguishment of debt and the deferred
income tax benefit described above. HPT considers FFO and
Normalized FFO to be appropriate measures of operating performance
for a REIT, along with net income, net income available for common
shareholders, operating income and cash flow from operating
activities. HPT believes that FFO and Normalized FFO provide useful
information to investors because by excluding the effects of
certain historical amounts, such as depreciation expense, FFO and
Normalized FFO may facilitate a comparison of HPT’s operating
performance between periods and with other REITs. FFO and
Normalized FFO 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 status as a REIT, limitations in its
revolving credit facility and term loan agreement and public debt
covenants, the availability of debt and equity capital to HPT,
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 and Normalized FFO do not represent
cash generated by operating activities in accordance with GAAP and
should not be considered as alternatives to net income, operating
income, net income available for common shareholders or cash flow
from operating activities determined in accordance with GAAP, or as
indicators of HPT’s financial performance or liquidity, nor are
these measures necessarily indicative of sufficient cash flow to
fund all of HPT’s needs. These measures should be considered in
conjunction with net income, operating income, net income available
for common shareholders and cash flow from operating activities as
presented in HPT’s consolidated statements of income and
comprehensive income and consolidated statements of cash flows.
Other REITs and real estate companies may calculate FFO and
Normalized FFO differently than HPT does.
(12) Amounts represent incentive fees under HPT’s business
management agreement payable in common shares after the end of each
calendar year calculated: (i) prior to 2014 based upon increases in
annual cash available for distribution per share, as defined, and
(ii) beginning in 2014 based on common share total return. 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 until the fourth
quarter, which is when the actual expense amount for the year is
determined. The calculation of net income for the fourth quarter of
2014 includes the reversal of $6,951 of estimated business
management incentive fees accrued during the first three quarters
of the year. The calculation of fourth quarter 2014 Normalized FFO
includes a deduction for this amount. The calculation of fourth
quarter 2013 Normalized FFO includes a deduction of $2,026 for
estimated business management incentive fees accrued during the
first three quarters of the year. Incentive business management fee
expense was zero and $2,772 for the years ended December 31, 2014
and 2013, respectively. Adjustments were made to prior period
amounts to conform to the current period Normalized FFO
calculation.
(13) HPT calculates EBITDA and Adjusted EBITDA as shown above.
HPT considers EBITDA and Adjusted EBITDA to be appropriate measures
of its operating performance, along with net income, net income
available for common shareholders, operating income and cash flow
from operating activities. 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
past operating performance. 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, operating income or cash
flow from operating activities, determined in accordance with GAAP,
or as an indicator of financial performance or liquidity, nor are
these measures necessarily indicative of sufficient cash flow to
fund all of HPT’s needs. These measures should be considered in
conjunction with net income, operating income, net income available
for common shareholders and cash flow from operating activities as
presented in HPT’s consolidated statements of income and
comprehensive income and consolidated statements of cash flows.
Other REITs and real estate companies may calculate EBITDA and
Adjusted EBITDA differently than HPT does.
(14) Amounts represent the portion of business management fees
that are payable in HPT’s common shares as well as equity based
compensation for HPT’s trustees, its officers and certain employees
of HPT’s manager. Adjustments were made to prior period amounts to
conform to the current period Adjusted EBITDA calculation.
HOSPITALITY PROPERTIES
TRUSTCONSOLIDATED BALANCE SHEETS(amounts in thousands,
except share data)(Unaudited)
As of December 31, 2014 2013 ASSETS
Real estate properties, at cost: Land $ 1,484,210 $
1,470,513 Buildings, improvements and equipment 6,171,983
5,946,852 Total real estate properties, gross 7,656,193
7,417,365 Accumulated depreciation (1,982,033)
(1,757,151) Total real estate properties, net 5,674,160 5,660,214
Cash and cash equivalents 11,834 22,500 Restricted cash (FF&E
reserve escrow) 33,982 30,873 Due from related persons 40,253
38,064 Other assets, net 222,333 215,893 Total assets
$ 5,982,562 $ 5,967,544 LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility $ 18,000 $ - Unsecured
term loan 400,000 400,000 Senior notes, net of discounts 2,412,135
2,295,527 Convertible senior notes 8,478 8,478 Security deposits
33,069 27,876 Accounts payable and other liabilities 106,903
130,448 Due to related persons 8,658 13,194 Dividends payable
5,166 5,166 Total liabilities 2,992,409
2,880,689 Commitments and contingencies Shareholders’
equity: Preferred shares of beneficial interest, no par value;
100,000,000 shares authorized: 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; 149,920,449 and 149,606,024 shares issued and
outstanding, respectively 1,499 1,496 Additional paid in capital
4,118,551 4,109,600 Cumulative net income 2,715,239 2,518,054
Cumulative other comprehensive income 25,804 15,952 Cumulative
preferred distributions (300,649) (279,985) Cumulative common
distributions (3,850,398) (3,558,369) Total
shareholders’ equity 2,990,153 3,086,855 Total
liabilities and shareholders’ equity $ 5,982,562 $ 5,967,544
A Maryland Real Estate Investment Trust with
transferable shares of beneficial interest listed on the New York
Stock Exchange. No shareholder, Trustee or officer is personally
liable for any act or obligation of the Trust.
Hospitality Properties TrustKatie Strohacker,
617-796-8232Director, Investor Relations
Hospitality Properties (NASDAQ:HPT)
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