Second Quarter Net Income of $0.34 per
share
Normalized FFO of $1.09 per share for the
Second Quarter
Comparable Hotel RevPAR for the Second
Quarter Grows 4.9% Year Over Year
Hospitality Properties Trust (Nasdaq: HPT) today announced its
financial results for the quarter and six months ended June 30,
2016.
Three Months Ended June 30, Six Months
Ended June 30, 2016 2015 2016 2015
($ in thousands,
except per share and RevPAR data) Net income
available for common shareholders $ 50,895 $ 77,980 $ 97,780 $
114,395 Net income available for common shareholders per share $
0.34 $ 0.52 $ 0.65 $ 0.76 Adjusted EBITDA (1) $ 215,608 $ 191,059 $
403,311 $ 358,454 Normalized FFO available for common shareholders
(1) $ 165,714 $ 148,139 $ 305,868 $ 272,888 Normalized FFO
available for common shareholders per share (1) $ 1.09 $ 0.99 $
2.02 $ 1.81
Portfolio
Performance
Comparable hotel RevPAR $ 103.34 $ 98.52 $ 96.72 $ 92.42 Comparable
hotel RevPAR growth 4.9% - 4.7% — RevPAR (all hotels) $ 102.30 $
98.67 $ 95.42 $ 92.51 RevPAR growth (all hotels) 3.7% - 3.1% —
Coverage of HPT’s minimum returns and rents for hotels 1.34x 1.28x
1.14x 1.11x Coverage of HPT's minimum rents for travel centers
1.64x 1.73x 1.51x 1.82x
(1) Reconciliations of net income determined in accordance with
U.S. generally accepted accounting principles, or GAAP, to earnings
before interest, taxes, depreciation and amortization, or EBITDA,
and EBITDA as adjusted, or Adjusted EBITDA, and net income
available for common shareholders determined in accordance with
GAAP to funds from operations, or FFO, and Normalized FFO available
for common shareholders, for the quarters and six months ended June
30, 2016 and 2015 appear later in this press release.
Results for the Three and Six Months Ended June 30, 2016 and
Recent Activities:
- Net Income Available for Common
Shareholders: Net income available for common shareholders for
the quarter ended June 30, 2016 was $50.9 million, or $0.34 per
diluted share, compared to net income available for common
shareholders of $78.0 million, or $0.52 per diluted share, for the
quarter ended June 30, 2015. Net income available for common
shareholders for the quarter ended June 30, 2016 includes $25.9
million, or $0.17 per diluted share, of estimated business
management incentive fee expense. Net income available for common
shareholders for the quarter ended June 30, 2015 includes an $11.0
million, or $0.07 per diluted share, gain on the sale of real
estate. The weighted average number of diluted common shares
outstanding was 151.4 million and 150.3 million for the quarters
ended June 30, 2016 and 2015, respectively.Net income available for
common shareholders for the six months ended June 30, 2016 was
$97.8 million, or $0.64 per diluted share, compared to net income
available for common shareholders of $114.4 million, or $0.76 per
diluted share, for the six months ended June 30, 2015. Net income
available for common shareholders for the six months ended June 30,
2016 includes $31.2 million, or $0.21 per diluted share, of
estimated business management incentive fee expense. Net income
available for common shareholders for the six months ended June 30,
2015 includes $8.8 million, or $0.06 per diluted share, of
estimated business management incentive fee expense and an $11.0
million, or $0.07 per diluted share, gain on the sale of real
estate. The weighted average number of diluted common shares
outstanding was 151.4 million and 150.6 million for the six months
ended June 30, 2016 and 2015, respectively.
- Adjusted EBITDA: Adjusted EBITDA
for the quarter ended June 30, 2016 compared to the same period in
2015 increased 12.8% to $215.6 million.Adjusted EBITDA for the six
months ended June 30, 2016 compared to the same period in 2015
increased 12.5% to $403.3 million.
- Normalized FFO Available for Common
Shareholders: Normalized FFO available for common shareholders
for the quarter ended June 30, 2016 were $165.7 million, or $1.09
per diluted share, compared to Normalized FFO available for common
shareholders of $148.1 million, or $0.99 per diluted share, for the
quarter ended June 30, 2015.Normalized FFO available for common
shareholders for the six months ended June 30, 2016 were $305.9
million, or $2.02 per diluted share, compared to Normalized FFO
available for common shareholders of $272.9 million, or $1.81 per
diluted share, for the six months ended June 30, 2015.
- Hotel RevPAR (comparable
hotels): For the quarter ended June 30, 2016 compared to the
same period in 2015 for HPT’s 292 hotels that it owned continuously
since April 1, 2015: average daily rate, or ADR, increased 3.0% to
$126.64; occupancy increased 1.5 percentage points to 81.6%; and
revenue per available room, or RevPAR, increased 4.9% to
$103.34.For the six months ended June 30, 2016 compared to the same
period in 2015 for HPT’s 291 hotels that it owned continuously
since January 1, 2015: ADR increased 3.4% to $125.78; occupancy
increased 0.9 percentage points to 76.9%; and RevPAR increased 4.7%
to $96.72.
- Hotel RevPAR (all hotels): For
the quarter ended June 30, 2016 compared to the same period in 2015
for HPT’s 305 hotels: ADR increased 2.8% to $126.77; occupancy
increased 0.7 percentage points to 80.7%; and RevPAR increased 3.7%
to $102.30.For the six months ended June 30, 2016 compared to the
same period in 2015 for HPT’s 305 hotels: ADR increased 3.1% to
$125.55; occupancy remained the same at 76.0%; and RevPAR increased
3.1% to $95.42.
- Coverage of Minimum Returns and
Rents: For the quarter ended June 30, 2016, the aggregate
coverage ratio of (x) total hotel revenues minus all hotel expenses
and FF&E reserve escrows which are not subordinated to minimum
returns and minimum rent payments to HPT to (y) HPT’s minimum
returns and rents due from hotels increased to 1.34x from 1.28x for
the quarter ended June 30, 2015.For the six months ended June 30,
2016, the aggregate coverage ratio of (x) total hotel revenues
minus all hotel expenses and FF&E reserve escrows which are not
subordinated to minimum returns and minimum rent payments to HPT to
(y) HPT’s minimum returns and rents due from hotels increased to
1.14x from 1.11x for the six months ended June 30, 2015.For the
quarter ended June 30, 2016, the aggregate coverage ratio of (x)
total travel center revenues less travel center expenses to (y)
HPT’s minimum rent due from leased travel centers decreased to
1.64x from 1.73x for the quarter ended June 30, 2015.For the six
months ended June 30, 2016, the aggregate coverage ratio of (x)
total travel center revenues less travel center expenses to (y)
HPT’s minimum rent due from leased travel centers decreased to
1.51x from 1.82x for the quarter ended June 30, 2015.As of June 30,
2016, approximately 79% of HPT’s aggregate annual minimum returns
and rents were secured by guarantees or security deposits from
HPT’s managers and tenants pursuant to the terms of HPT’s operating
agreements.
- Recent Property Acquisition
Activities: On June 22, 2016, HPT acquired from TravelCenters
of America LLC (Nasdaq: TA), or TA, two travel centers located in
Remington, IN and Brazil, IN for an aggregate purchase price of
$23.9 million, excluding acquisition related costs. HPT added these
Petro branded travel centers to its TA No. 1 and No. 3 leases,
respectively.On June 30, 2016, HPT acquired from TA a newly
developed travel center located in Wilmington, IL for $22.3
million, excluding acquisition related costs. HPT added this Petro
branded travel center to its TA No. 2 lease.On July 29, 2016, HPT
entered into an agreement to acquire a full service hotel with 236
rooms located in the Silicon Valley region of Milpitas, CA for a
purchase price of $52 million, excluding acquisition related costs.
HPT currently expects to complete this acquisition during the
fourth quarter of 2016. HPT plans to add this hotel to its
management agreement with Sonesta International Hotels Corporation,
or Sonesta.
Tenants and Managers: As of June 30, 2016, HPT had nine
operating agreements with seven hotel operating companies for 305
hotels with 46,347 rooms, which represented 65% of HPT’s total
annual minimum returns and rents, and five lease agreements with
one travel center operating company for 197 travel centers, which
represented 35% of HPT’s total annual minimum returns and
rents.
- Marriott Agreements: As of June
30, 2016, 122 of HPT’s hotels were operated by subsidiaries of
Marriott International, Inc. (Nasdaq: MAR), or Marriott, under
three agreements. HPT’s Marriott No. 1 agreement includes 53
hotels, and provides for annual minimum return payments to HPT of
$68.5 million as of June 30, 2016 (approximately $17.1 million per
quarter). Because there is no guarantee or security deposit for
this agreement, the minimum returns HPT receives under this
agreement may be limited to available hotel cash flow after payment
of operating expenses and funding of the FF&E reserve. During
the three months ended June 30, 2016, HPT realized returns under
its Marriott No. 1 agreement of $22.5 million. HPT’s Marriott No.
234 agreement includes 68 hotels and requires annual minimum
returns to HPT of $106.2 million as of June 30, 2016 (approximately
$26.6 million per quarter). During the three months ended June 30,
2016, HPT realized returns under its Marriott No. 234 agreement of
$26.6 million. HPT’s Marriott No. 234 agreement is partially
secured by a security deposit and a limited guarantee from
Marriott; during the three months ended June 30, 2016, the
available security deposit was replenished by $6.2 million from a
share of hotel cash flows in excess of the minimum returns due to
HPT for the period. At June 30, 2016, the available security
deposit from Marriott for the Marriott No. 234 agreement was $13.2
million and there was $30.7 million remaining under Marriott’s
guaranty for up to 90% of the minimum returns due to HPT to cover
future payment shortfalls after the available security deposit is
depleted. HPT’s Marriott No. 5 agreement includes one resort hotel
in Kauai, HI which is leased to Marriott on a full recourse basis.
The contractual rent due to HPT for this hotel for the three months
ended June 30, 2016 of $2.5 million was paid to HPT.
- InterContinental Agreement: As
of June 30, 2016, 94 of HPT’s hotels were operated by subsidiaries
of InterContinental under one agreement requiring annual minimum
returns and rents to HPT of $160.3 million (approximately $40.1
million per quarter). During the three months ended June 30, 2016,
HPT realized returns and rents under its InterContinental agreement
of $43.7 million. HPT’s InterContinental agreement is partially
secured by a security deposit. During the three months ended June
30, 2016, the available security deposit was replenished by $7.2
million from a share of hotel cash flows in excess of the returns
and rents due to HPT for the period. At June 30, 2016, the
available InterContinental security deposit which HPT held to pay
future payment shortfalls was $63.9 million.
- Wyndham Agreement: As of June
30, 2016, 22 of HPT’s hotels were operated under a management
agreement with a subsidiary of Wyndham Worldwide Corporation (NYSE:
WYN), or Wyndham, requiring annual minimum returns of $26.7 million
(approximately $6.7 million per quarter). During the three months
ended June 30, 2016, HPT realized returns under its Wyndham
management agreement of $6.7 million. The guarantee provided by
Wyndham with respect to the management agreement is limited and as
of June 30, 2016, $2.2 million was available to cover payment
shortfalls of HPT’s minimum returns. During the three months ended
June 30, 2016, the guarantee was replenished by $2.2 million from a
share of hotel cash flows that were in excess of the minimum
returns due to HPT. HPT also leases 48 vacation units in one of the
hotels to Wyndham Vacation Resorts, Inc., a subsidiary of Wyndham,
which requires annual minimum rent of $1.4 million (approximately
$0.4 million per quarter). The guarantee provided by Wyndham with
respect to the lease is unlimited.
- Other Hotel Agreements: As of
June 30, 2016, HPT’s remaining 67 hotels are operated under four
agreements: one management agreement with Sonesta (33 hotels),
requiring annual minimum returns of $85.2 million as of June 30,
2016 (approximately $21.3 million per quarter); one management
agreement with a subsidiary of Hyatt Hotels Corporation (NYSE: H),
or Hyatt (22 hotels), requiring annual minimum returns of $22.0
million as of June 30, 2016 (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 as of June 30, 2016 (approximately $3.2
million per quarter); and one lease with a subsidiary of Morgans
Hotel Group Co. (Nasdaq: MHGC) (1 hotel) requiring annual minimum
rent of $7.6 million as of June 30, 2016 (approximately $1.9
million per quarter). Minimum returns and rents due to HPT are
partially guaranteed under the Hyatt and Carlson agreements. There
is no guarantee or security deposit for the Sonesta agreement and
the minimum returns HPT receives under that agreement are limited
to available hotel cash flow after payment of operating expenses.
The payments due to HPT under these agreements for the three months
ended June 30, 2016 were paid to HPT.
- Travel Center Agreements: As of
June 30, 2016, HPT’s 197 travel centers located along the U.S.
Interstate Highway system were leased to TA under five lease
agreements, which required aggregate annual minimum rents of $268.0
million (approximately $67.0 million per quarter). As of June 30,
2016, all payments due to HPT from TA under these leases were
current.
Conference Call:
On Tuesday, August 9, 2016, at 10:00 a.m. Eastern Time, John
Murray, President and Chief Operating Officer, and Mark Kleifges,
Chief Financial Officer and Treasurer, will host a conference call
to discuss the results for the quarter ended June 30, 2016. 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, August 16, 2016. To hear the replay,
dial (412) 317-0088. The replay pass code is 10088732.
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 second quarter conference call
is strictly prohibited without the prior written consent of
HPT.
Supplemental Data:
A copy of HPT’s Second Quarter 2016 Supplemental Operating and
Financial Data is available for download at HPT’s website,
www.hptreit.com. HPT’s website is not incorporated as part of this
press release.
Hospitality Properties Trust is a real estate investment trust,
or REIT, which owns a diverse portfolio of hotels and travel
centers located in 45 states, Puerto Rico and Canada. HPT’s
properties are operated under long term management or lease
agreements. HPT is managed by the operating subsidiary of The RMR
Group Inc. (Nasdaq: RMR), an alternative asset management company
that is headquartered in Newton, Massachusetts.
Please see the following pages for a more detailed statement of
HPT’s operating results and financial condition and for an
explanation of HPT’s calculation of FFO available for common
shareholders and Normalized FFO available for common shareholders,
EBITDA and Adjusted EBITDA.
WARNING CONCERNING
FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO,
WHENEVER HPT USES WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”,
“INTEND”, “PLAN”, “ESTIMATE”, “MAY” OR SIMILAR EXPRESSIONS, HPT IS
MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS
ARE BASED UPON HPT’S PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT
FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT
OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN
OR IMPLIED BY HPT’S FORWARD LOOKING STATEMENTS AS A RESULT OF
VARIOUS FACTORS. FOR EXAMPLE:
- AS OF JUNE 30, 2016, APPROXIMATELY 79%
OF HPT’S AGGREGATE ANNUAL MINIMUM RETURNS AND RENTS WERE SECURED BY
GUARANTEES OR SECURITY DEPOSITS FROM HPT’S MANAGERS AND TENANTS.
THIS MAY IMPLY THAT THESE MINIMUM RETURNS AND RENTS WILL BE PAID.
IN FACT, THESE GUARANTEES AND SECURITY DEPOSITS ARE LIMITED IN
AMOUNT AND DURATION AND THE GUARANTEES ARE SUBJECT TO THE
GUARANTORS’ ABILITY AND WILLINGNESS TO PAY. THE BALANCE OF HPT’S
ANNUAL MINIMUM RETURNS AND RENTS AS OF JUNE 30, 2016 WAS NOT
GUARANTEED NOR DOES HPT HOLD A SECURITY DEPOSIT WITH RESPECT TO
THOSE AMOUNTS. HPT CAN PROVIDE NO ASSURANCE WITH REGARD TO THE
FUTURE PERFORMANCE OF HPT’S PROPERTIES, WHETHER THAT 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, REGARDING HPT’S MANAGERS’,
TENANTS’ OR GUARANTORS’ FUTURE ACTIONS IF AND WHEN THE GUARANTEES
AND SECURITY DEPOSITS EXPIRE OR ARE DEPLETED OR THEIR ABILITY OR
REGARDING WILLINGNESS TO PAY MINIMUM RETURNS AND RENTS OWED TO HPT.
MOREOVER, THE SECURITY DEPOSITS HELD BY HPT ARE NOT SEGREGATED FROM
HPT’S OTHER ASSETS AND THE APPLICATION OF SECURITY DEPOSITS TO
COVER SHORTFALLS WILL RESULT IN HPT RECORDING INCOME, BUT WILL NOT
RESULT IN HPT RECEIVING ADDITIONAL CASH,
- HPT HAS ENTERED INTO AN AGREEMENT TO
ACQUIRE ONE HOTEL FOR A PURCHASE PRICE OF $52 MILLION, AND HPT
EXPECTS TO COMPLETE THIS TRANSACTION DURING THE FOURTH QUARTER OF
2016 AND THAT IT WILL ADD THIS HOTEL TO ITS EXISTING SONESTA
MANAGEMENT AGREEMENT. THIS TRANSACTION IS SUBJECT TO COMPLETION OF
DILIGENCE AND OTHER CLOSING CONDITIONS. THESE TERMS AND CONDITIONS
MAY NOT BE SATISFIED. AS A RESULT, THIS ACQUISITION AND THE
EXPECTED MANAGEMENT ARRANGEMENT MAY NOT OCCUR, MAY BE DELAYED
OR THE PURCHASE OR MANAGEMENT TERMS MAY CHANGE.
THE INFORMATION CONTAINED IN HPT’S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER THE CAPTION “RISK
FACTORS” IN HPT’S PERIODIC REPORTS, OR INCORPORATED THEREIN,
IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES
FROM HPT’S FORWARD LOOKING STATEMENTS. HPT’S FILINGS WITH THE SEC
ARE AVAILABLE ON THE SEC’S WEBSITE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING
STATEMENTS.
EXCEPT AS REQUIRED BY LAW, HPT DOES NOT INTEND TO UPDATE OR
CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
HOSPITALITY PROPERTIES TRUST CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share
data)
(Unaudited)
Three Months Ended June 30, Six Months Ended
June 30, 2016 2015 2016 2015 Revenues: Hotel
operating revenues (1) $ 471,910 $ 436,977 $ 868,413 $ 806,573
Rental income (2) 77,293 69,063 153,552 133,814 FF&E reserve
income (3) 1,096 1,026 2,452
2,191 Total revenues 550,299
507,066 1,024,417 942,578
Expenses: Hotel operating expenses (1) 324,922 304,428
601,227 562,086 Depreciation and amortization 88,782 80,582 176,053
159,551 General and administrative (4) 37,365 12,685 53,388 33,989
Acquisition related costs (5) 117 797
729 1,135 Total expenses 451,186
398,492 831,397 756,761
Operating income 99,113 108,574 193,020 185,817
Dividend income 749 - 749 - Interest income 40 10 138 21
Interest expense (including amortization of debt issuance costs and
debt discounts of $2,127 and $1,458 and $3,993 and $2,916,
respectively) (41,698 ) (35,836 ) (83,284 ) (71,290 ) Loss on early
extinguishment of debt (6) - - (70 ) -
Income before income taxes, equity in earnings of an
investee and gain on sale of real estate 58,204 72,748 110,553
114,548 Income tax expense (2,160 ) (640 ) (2,535 ) (931 ) Equity
in earnings of an investee 17 23 94
95 Income before gain on sale of real estate 56,061
72,131 108,112 113,712 Gain on sale of real estate (7) -
11,015 - 11,015 Net income
56,061 83,146 108,112 124,727 Preferred distributions (5,166
) (5,166 ) (10,332 ) (10,332 ) Net income
available for common shareholders $ 50,895 $ 77,980 $
97,780 $ 114,395 Weighted average common
shares outstanding (basic) 151,408 150,260
151,405 150,028 Weighted average
common shares outstanding (diluted) 151,442
150,292 151,428 150,594
Net income available for common shareholders per common share:
Basic and diluted $ 0.34 $ 0.52 $ 0.65 $ 0.76
See Notes on pages 9 and 10
HOSPITALITY PROPERTIES TRUST RECONCILIATIONS OF
FUNDS FROM OPERATIONS, NORMALIZED FUNDS FROM OPERATIONS,
EBITDA AND ADJUSTED EBITDA
(amounts in thousands, except per share
data)
(Unaudited)
Three Months Ended June 30, Six Months Ended
June 30, 2016 2015 2016 2015 Calculation of Funds
from Operations (FFO) and Normalized FFO
available for common shareholders: (8)
Net income available for common shareholders $ 50,895 $ 77,980 $
97,780 $ 114,395 Add (Less): Depreciation and amortization 88,782
80,582 176,053 159,551 Gain on sale of real estate (7) -
(11,015 ) - (11,015 ) FFO available for common
shareholders 139,677 147,547 273,833 262,931 Add (Less):
Acquisition related costs (5) 117 797 729 1,135 Estimated business
management incentive fees (4) 25,920 (205 ) 31,236 8,822 Loss on
early extinguishment of debt (6) - - 70
- Normalized FFO available for common shareholders $
165,714 $ 148,139 $ 305,868 $ 272,888 Weighted
average common shares outstanding (basic) 151,408
150,260 151,405 150,028 Weighted
average common shares outstanding (diluted) 151,442
150,292 151,428 150,594 Basic
and diluted per common share amounts: FFO available for common
shareholders (basic and diluted) $ 0.92 $ 0.98 $ 1.81 $ 1.75
Normalized FFO available for common shareholders (basic) $ 1.09 $
0.99 $ 2.02 $ 1.82 Normalized FFO available for common shareholders
(diluted) $ 1.09 $ 0.99 $ 2.02 $ 1.81
Three Months Ended June 30, Six Months Ended June 30, 2016 2015
2016 2015 Calculation of EBITDA and Adjusted EBITDA: (9) Net income
$ 56,061 $ 83,146 $ 108,112 $ 124,727 Add: Interest expense 41,698
35,836 83,284 71,290 Income tax expense 2,160 640 2,535 931
Depreciation and amortization 88,782 80,582
176,053 159,551 EBITDA 188,701 200,204 369,984
356,499 Add (less): Acquisition related costs (5) 117 797 729 1,135
General and administrative expense paid in common shares (10) 870
1,278 1,292 3,013 Estimated business management incentive fees (4)
25,920 (205 ) 31,236 8,822 Loss on early extinguishment of debt (6)
- - 70 - Gain on sale of real estate (7) - (11,015 )
- (11,015 ) Adjusted EBITDA $ 215,608 $ 191,059
$ 403,311 $ 358,454
See Notes on pages 9 and 10
(1) At June 30, 2016, HPT owned 305 hotels; 302 of these hotels
are managed by hotel operating companies and three hotels are
leased to hotel operating companies. At June 30, 2016, HPT also
owned 197 travel centers; all 197 of these travel centers are
leased to a travel center operating company under five lease
agreements. HPT’s condensed consolidated statements of income
include hotel operating revenues and expenses of managed hotels and
rental income from its leased hotels and travel centers. Net
operating results of HPT’s managed hotel portfolios exceeded the
minimum returns due to HPT in both the three months ended June 30,
2016 and 2015. Certain of HPT’s managed hotel portfolios had net
operating results that were, in the aggregate, $11,544 and $11,443
less than the minimum returns due to HPT in the six months ended
June 30, 2016 and 2015, respectively. When the managers of these
hotels fund the shortfalls under the terms of HPT’s operating
agreements or their guarantees, HPT reflects such fundings
(including security deposit applications) in its condensed
consolidated statements of income as a reduction of hotel operating
expenses. There was no reduction to hotel operating expenses in the
three months ended June 30, 2016 or 2015 and reductions of $1,766
and $1,903 in the six months ended June 30, 2016 and 2015,
respectively, as a result of such fundings. HPT had shortfalls at
certain of its managed hotel portfolios not funded by the managers
of these hotels under the terms of its operating agreements of
$9,778 and $9,540 in the six months ended June 30, 2016 and 2015,
respectively, which represent the unguaranteed portions of HPT’s
minimum returns from Sonesta. Certain of HPT’s managed hotel
portfolios had net operating results that were, in the aggregate,
$43,440 and $35,902 more than the minimum returns due to HPT in the
three months ended June 30, 2016 and 2015, respectively, and
$46,918 and $37,611 more than the minimum returns due to HPT in the
six months ended June 30, 2016 and 2015, respectively. Certain of
HPT’s guarantees and HPT’s security deposits may be replenished by
future cash flows from the applicable hotel operations pursuant to
the terms of the respective operating agreements. When HPT’s
guarantees and its security deposits are replenished by cash flows
from hotel operations, HPT reflects such replenishments in its
condensed consolidated statements of income as an increase to hotel
operating expenses. Hotel operating expenses were increased by
$20,057 and $14,976 in the three months ended June 30, 2016 and
2015, respectively, and $19,968 and $16,189 in the six months ended
June 30, 2016 and 2015, respectively, as a result of such
replenishments.
(2) Rental income includes $3,693 and $1,511 in the three months
ended June 30, 2016 and 2015, respectively, and $7,445 and $2,056
in the six months ended June 30, 2016 and 2015, respectively, of
adjustments necessary to record scheduled rent increases under
certain of HPT’s leases, the deferred rent obligations under HPT’s
travel center leases and the estimated future payments to HPT under
its travel center leases for the cost of removing underground
storage tanks on a straight line basis. In calculating net income
in accordance with GAAP, HPT generally recognizes percentage rental
income received for the first, second and third quarters in the
fourth quarter, which is when all contingencies have been met and
the income is earned. Rental income for the second quarter of 2015
includes $2,048 of percentage rent recorded as a result of HPT’s
lease modifications with TA because the amount was no longer
contingent.
(3) Various percentages of total sales at certain of HPT’s
hotels are escrowed as reserves for future renovations or
refurbishment, or FF&E reserve escrows. HPT owns all the
FF&E reserve escrows for its hotels. HPT reports deposits by
its tenants into the escrow accounts under its three hotel leases
as FF&E reserve income. HPT does not report the amounts which
are escrowed as FF&E reserves for its managed hotels as
FF&E reserve income.
(4) Incentive fees under HPT’s business management agreement are
payable after the end of each calendar year, are calculated based
on common share total return, as defined, and are included in
general and administrative expense in HPT’s condensed consolidated
statements of income. In calculating net income in accordance with
GAAP, HPT recognizes estimated business management incentive fee
expense, if any, each quarter. Although HPT recognizes this
expense, if any, each quarter for purposes of calculating net
income, HPT does not include these amounts in the calculation of
Normalized FFO available for common shareholders or Adjusted EBITDA
until the fourth quarter, which is when the actual incentive fee
expense amount for the year, if any, is determined. HPT recorded
$25,920 and reversed $205 of estimated business management
incentive fees during the three months ended June 30, 2016 and
2015, respectively. HPT recorded $31,236 and $8,822 of estimated
business management incentive fees during the six months ended June
30, 2016 and 2015, respectively.
HPT recorded a liability for the amount by which the estimated
fair value for accounting purposes exceeded the price HPT paid for
its investment in RMR common stock in June 2015. A portion of
this liability is being amortized on a straight line basis
through December 31, 2035, as a reduction to business
management fees, which are included in general and administrative
expense. General and administrative expense was reduced
by $896 and $231 during the three months ended June
30, 2016 and 2015, respectively, and by $1,793 and $231 during the
six months ended June 30, 2016 and 2015, respectively, as a result
of this amortization.
(5) Represents costs associated with HPT’s acquisition
activities.
(6) HPT recorded a $70 loss on early extinguishment of debt in
the first quarter of 2016 in connection with the redemption of
certain senior unsecured notes.
(7) HPT recorded an $11,015 gain on sale of real estate in the
second quarter of 2015 in connection with the sale of five travel
centers.
(8) HPT calculates FFO available for common shareholders and
Normalized FFO available for common shareholders as shown above.
FFO available for common shareholders is calculated on the basis
defined by The National Association of Real Estate Investment
Trusts, or NAREIT, which is net income available for common
shareholders calculated in accordance with GAAP, excluding any gain
or loss on sale of properties and loss on impairment of real estate
assets, plus real estate depreciation and amortization, as well as
certain other adjustments currently not applicable to HPT. HPT’s
calculation of Normalized FFO available for common shareholders
differs from NAREIT’s definition of FFO available for common
shareholders because HPT includes business management incentive
fees, if any, only in the fourth quarter versus the quarter when
they are recognized as expense in accordance with GAAP due to their
quarterly volatility not necessarily being indicative of HPT’s core
operating performance and the uncertainty as to whether any such
business management incentive fees will ultimately be payable when
all contingencies for determining any such fees are determined at
the end of the calendar year and HPT excludes acquisition related
costs and loss on early extinguishment of debt. HPT considers FFO
available for common shareholders and Normalized FFO available for
common shareholders to be appropriate supplemental measures of
operating performance for a REIT, along with net income, net income
available for common shareholders, operating income and cash flow
from operating activities. HPT believes that FFO available for
common shareholders and Normalized FFO available for common
shareholders provide useful information to investors because by
excluding the effects of certain historical amounts, such as
depreciation expense, FFO available for common shareholders and
Normalized FFO available for common shareholders may facilitate a
comparison of HPT’s operating performance between periods and with
other REITs. FFO available for common shareholders and Normalized
FFO available for common shareholders are among the factors
considered by HPT’s Board of Trustees when determining the amount
of distributions to shareholders. Other factors include, but are
not limited to, requirements to maintain HPT’s qualification for
taxation as a REIT, limitations in its unsecured revolving credit
facility and unsecured term loan agreement and public debt
covenants, the availability to HPT of debt and equity capital,
HPT’s expectation of its future capital requirements and operating
performance and HPT’s expected needs for and availability of cash
to pay its obligations. FFO available for common shareholders and
Normalized FFO available for common shareholders do not represent
cash generated by operating activities in accordance with GAAP and
should not be considered as alternatives to net income, net income
available for common shareholders or operating income as an
indicator of HPT’s operating performance or as a measure of HPT’s
liquidity. These measures should be considered in conjunction with
net income, net income available for common shareholders, operating
income and cash flow from operating activities as presented in
HPT’s condensed consolidated statements of income and condensed
consolidated statements of cash flows. Other real estate companies
and REITs may calculate FFO available for common shareholders and
Normalized FFO available for common shareholders differently than
HPT does. Effective with the quarter ended June 30, 2016, HPT has
changed its calculation of Normalized FFO to no longer include
adjustments for estimated percentage rent. Historically, when
calculating Normalized FFO, HPT estimated an amount of percentage
rental income for each of the first three quarters of the year and
then, in the fourth quarter, excluded the amounts that had been
included in the first three quarters. In calculating net income in
accordance with GAAP, HPT recognizes percentage rental income for
the full year in the fourth quarter, which is when all
contingencies are met and the income is earned. Normalized FFO for
historical periods has been restated to be comparable with the
current period calculation.
(9) HPT calculates EBITDA and Adjusted EBITDA as shown above.
HPT considers EBITDA and Adjusted EBITDA to be appropriate
supplemental measures of its operating performance, along with net
income, net income available for common shareholders, 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 HPT’s past operating performance. In
calculating Adjusted EBITDA, HPT includes business management
incentive fees only in the fourth quarter versus the quarter when
they are recognized as expense in accordance with GAAP due to their
quarterly volatility not necessarily being indicative of HPT’s core
operating performance and the uncertainty as to whether any such
business management incentive fees will ultimately be payable when
all contingencies for determining any such fees are determined at
the end of the calendar year. EBITDA and Adjusted EBITDA do not
represent cash generated by operating activities in accordance with
GAAP and should not be considered an alternative to net income, net
income available for common shareholders or operating income as an
indicator of operating performance or as a measure of HPT’s
liquidity. These measures should be considered in conjunction with
net income, net income available for common shareholders, operating
income and cash flow from operating activities as presented in
HPT’s condensed consolidated statements of income and condensed
consolidated statements of cash flows. Other real estate companies
and REITs may calculate EBITDA and Adjusted EBITDA differently than
HPT does. Effective with the quarter ended June 30, 2016, HPT has
changed its calculation of Adjusted EBITDA to no longer include
adjustments for estimated percentage rent. Historically, when
calculating Adjusted EBITDA, HPT estimated an amount of percentage
rental income for each of the first three quarters of the year and
then, in the fourth quarter, excluded the amounts that had been
included in the first three quarters. In calculating net income in
accordance with GAAP, HPT recognizes percentage rental income for
the full year in the fourth quarter, which is when all
contingencies are met and the income is earned. Adjusted EBITDA for
historical periods has been restated to be comparable with the
current period calculation.
(10) Amounts represent the portion of business management fees
that were payable in HPT’s common shares as well as equity based
compensation for HPT’s trustees, its officers and certain other
employees of HPT’s manager. Beginning June 1, 2015, all business
management fees are paid in cash.
HOSPITALITY PROPERTIES TRUST CONDENSED
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share
data)
(Unaudited)
June 30, December 31, 2016 2015 ASSETS
Real estate properties: Land $ 1,547,774 $ 1,529,004 Buildings,
improvements and equipment 6,993,371 6,740,423
Total real estate properties, gross 8,541,145 8,269,427
Accumulated depreciation (2,361,264 ) (2,218,499 )
Total real estate properties, net 6,179,881 6,050,928 Cash and cash
equivalents 20,347 13,682 Restricted cash (FF&E reserve escrow)
61,419 51,211 Due from related persons 58,991 50,987 Other assets,
net 288,697 227,989 Total assets $
6,609,335 $ 6,394,797 LIABILITIES AND
SHAREHOLDERS’ EQUITY Unsecured revolving credit facility $
232,000 $ 465,000 Unsecured term loan, net 398,088 397,756 Senior
unsecured notes, net 2,862,800 2,403,439 Convertible senior
unsecured notes 8,478 8,478 Security deposits 77,269 53,579
Accounts payable and other liabilities 190,304 179,783 Due to
related persons 40,724 69,514 Dividends payable 5,166
5,166 Total liabilities 3,814,829
3,582,715 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; 151,559,788 and 151,547,288 shares
issued and outstanding, respectively 1,516 1,515 Additional paid in
capital 4,166,301 4,165,911 Cumulative net income 2,989,769
2,881,657 Cumulative other comprehensive income (loss) 21,793
(15,523 ) Cumulative preferred distributions (331,645 ) (321,313 )
Cumulative common distributions (4,333,335 )
(4,180,272 ) Total shareholders’ equity 2,794,506
2,812,082 Total liabilities and shareholders’ equity
$ 6,609,335 $ 6,394,797
A Maryland Real Estate Investment Trust with
transferable shares of beneficial interest listed on the Nasdaq.No
shareholder, Trustee or officer is personally liable for any act or
obligation of the Trust.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160809005502/en/
Hospitality Properties TrustKatie Strohacker, 617-796-8232Senior
Director, Investor Relations
Hospitality Properties (NASDAQ:HPT)
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