Second Quarter Net Income of $0.05 Per
Common Share
Second Quarter Normalized FFO of $1.03 Per
Common Share
Announced Agreement to Acquire a Net Lease
Portfolio of Service-Oriented Retail Properties for $2.4
Billion
Hospitality Properties Trust (Nasdaq: HPT) today announced its
financial results for the quarter and six months ended June 30,
2019:
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
($ in thousands, except per share
and RevPAR data)
Net income
$
8,782
$
97,289
$
234,569
$
177,495
Net income per common share
$
0.05
$
0.59
$
1.43
$
1.08
Adjusted EBITDAre (1)
$
218,972
$
226,898
$
414,873
$
429,854
Normalized FFO (1)
$
168,766
$
176,193
$
313,406
$
331,061
Normalized FFO per common share (1)
$
1.03
$
1.07
$
1.91
$
2.02
Portfolio
Performance
Comparable hotel RevPAR
$
100.78
$
102.91
$
93.45
$
95.84
Change in comparable hotel RevPAR
(2.1
%)
—
(2.5
%)
—
RevPAR (all hotels)
$
101.86
$
104.40
$
94.73
$
97.50
Change in RevPAR (all hotels)
(2.4
%)
—
(2.8
%)
—
Coverage of HPT’s minimum returns and
rents for hotels
1.10x
1.23x
0.91x
1.03x
Coverage of HPT's minimum rents for travel
centers
1.91x
1.90x
1.81x
1.82x
- Additional information and reconciliations of net income
determined in accordance with U.S. generally accepted accounting
principles, or GAAP, to certain non-GAAP measures including EBITDA,
EBITDAre, Adjusted EBITDAre, FFO and Normalized FFO, for the three
and six months ended June 30, 2019 and 2018 appear later in this
press release.
John Murray, President and Chief Executive Officer of HPT, made
the following statement:
“In the second quarter, comparable RevPAR declined 2.1% compared
to the prior year period due in part to occupancy decreases from
fourteen hotels under renovation, nine of which were relatively
higher contributing full service hotels that impacted our IHG,
Sonesta and Radisson Hotel Group portfolios. For hotels not
impacted by renovations, comparable RevPAR declined by 0.3%. HPT's
179 TA properties performed well during the three months ended June
30, 2019. Total fuel volumes increased 2.6% and total rent coverage
remained strong at 1.91x.
In addition, as previously announced, HPT entered into a
definitive agreement to acquire a high-quality net lease portfolio
of 770 service-oriented retail properties for $2.4 billion in cash,
subject to adjustments and other payments, that will provide HPT
with increased scale, a more secure financial profile and greater
diversity in tenant base, property type and geography. In July
2019, HPT raised $93.9 million, after underwriting fees and before
other offering expenses, by selling its shares of The RMR Group
Inc. and has commenced marketing certain assets as part of its
planned dispositions in connection with this acquisition."
Results for the Three and Six Months Ended June 30, 2019 and
Recent Activities:
- Net Income: Net income for the quarter ended June 30,
2019 was $8.8 million, or $0.05 per diluted common share, compared
to net income of $97.3 million, or $0.59 per diluted common share,
for the quarter ended June 30, 2018. Net income for the quarter
ended June 30, 2019 includes $60.8 million, or $0.37 per diluted
common share, of unrealized losses on equity securities. Net income
for the quarter ended June 30, 2018 includes $20.9 million, or
$0.13 per diluted common share, of net unrealized gains on equity
securities. The weighted average number of diluted common shares
outstanding was 164.3 million and 164.2 million for the quarters
ended June 30, 2019 and 2018, respectively.
Net income for the six months ended June 30,
2019 was $234.6 million, or $1.43 per diluted common share,
compared to net income of $177.5 million, or $1.08 per diluted
common share, for the six months ended June 30, 2018. Net income
for the six months ended June 30, 2019 includes a $159.5 million,
or $0.97 per diluted common share, gain on sale of real estate and
$39.8 million, or $0.24 per diluted common share, of net unrealized
losses on equity securities. Net income for the six months ended
June 30, 2018 includes $45.9 million, or $0.28 per diluted common
share, of net unrealized gains on equity securities. The weighted
average number of diluted common shares outstanding was 164.3
million and 164.2 million for the six months ended June 30, 2019
and 2018, respectively.
Adjusted EBITDAre: Adjusted EBITDAre
for the quarter ended June 30, 2019 compared to the same period in
2018 decreased 3.5% to $219.0 million.
Adjusted EBITDAre for the six months ended
June 30, 2019 compared to the same period in 2018 decreased 3.5% to
$414.9 million.
Normalized FFO: Normalized FFO for the
quarter ended June 30, 2019 were $168.8 million, or $1.03 per
diluted common share, compared to Normalized FFO of $176.2 million,
or $1.07 per diluted common share, for the quarter ended June 30,
2018.
Normalized FFO for the six months ended June
30, 2019 were $313.4 million, or $1.91 per diluted common share,
compared to Normalized FFO of $331.1 million, or $2.02 per diluted
common share, for the six months ended June 30, 2018.
Hotel RevPAR (comparable hotels): For
the quarter ended June 30, 2019 compared to the same period in 2018
for HPT’s 322 comparable hotels: average daily rate, or ADR,
decreased 1.2% to $130.37; occupancy decreased 0.7 percentage
points to 77.3%; and revenue per available room, or RevPAR,
decreased 2.1% to $100.78.
For the six months ended June 30, 2019
compared to the same period in 2018 for HPT’s 322 comparable
hotels: ADR decreased 0.1% to $129.26; occupancy decreased 1.8
percentage points to 72.3%; and RevPAR decreased 2.5% to
$93.45.
Hotel RevPAR (all hotels): For the
quarter ended June 30, 2019 compared to the same period in 2018 for
HPT’s 328 hotels that were owned as of June 30, 2019: ADR decreased
1.3% to $131.94; occupancy decreased 0.9 percentage points to
77.2%; and RevPAR decreased 2.4% to $101.86.
For the six months ended June 30, 2019
compared to the same period in 2018 for HPT’s 328 hotels that were
owned as of June 30, 2019: ADR decreased 0.3% to $131.03; occupancy
decreased 1.9 percentage points to 72.3%; and RevPAR decreased 2.8%
to $94.73.
Coverage of Minimum Returns and Rents:
For the quarter ended June 30, 2019, 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 1.10x from 1.23x for the quarter ended June 30,
2018.
For the six months ended June 30, 2019, 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 0.91x from
1.03x for the six months ended June 30, 2018.
For the quarter ended June 30, 2019, 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, excluding payments of previously deferred rent,
increased to 1.91x from 1.90x for the quarter ended June 30,
2018.
For the six months ended June 30, 2019, 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, excluding payments of previously deferred rent,
decreased to 1.81x from 1.82x for the six months ended June 30,
2018.
As of June 30, 2019, approximately 73% 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 Acquisition and Investment Activities: As
previously announced, in May 2019, HPT acquired the 198 room Crowne
Plaza® hotel located in Milwaukee, WI for a purchase price of $30.0
million, excluding acquisition related costs. HPT added this hotel
to its management agreement with InterContinental Hotels Group, plc
(LON: IHG; NYSE: IHG (ADRs)), or IHG.
As previously announced, in June 2019, HPT
entered into an agreement to acquire a net lease portfolio from
Spirit MTA REIT (NYSE: SMTA) for $2.4 billion in cash, excluding
transaction costs and subject to customary adjustments or
prorations, or the SMTA Transaction. In addition to the $2.4
billion purchase price, HPT has agreed to pay the prepayment
penalties to extinguish the existing mortgage debt on the
portfolio, which penalties are estimated to be approximately $78.0
million. The portfolio consists of 770 service-oriented retail
properties net leased to tenants in 22 different industries. To
finance the transaction, HPT has secured commitments from lenders
for an up to $2.0 billion unsecured term loan facility. HPT may use
the proceeds from this term loan facility, borrowings under its
existing revolving credit facility, proceeds from the sale of
certain assets, proceeds from the issuance of new unsecured senior
notes or other sources to finance this transaction. This
transaction is subject to the approval by SMTA's shareholders and
other customary conditions and is expected to close in the third
quarter of 2019. HPT has commenced marketing certain assets as part
of its previously announced plan to sell approximately $500.0
million of the assets it will acquire in the SMTA Transaction and
approximately $300.0 million of other assets to reduce leverage
following the SMTA Transaction.
As previously announced, in July 2019, HPT
sold all 2,503,777 of its class A common shares of The RMR Group
Inc., or RMR Inc., in an underwritten public offering at a price to
the public of $40.00 per common share. HPT received $93.9 million
in net proceeds after underwriting fees and before other offering
expenses that it used to repay debt.
Tenants and Managers: As of June 30, 2019, HPT had eight
operating agreements with six hotel operating companies for 328
hotels with 51,080 rooms, which represented 71% of HPT’s total
annual minimum returns and rents, and five leases with
TravelCenters of America Inc., or TA, for 179 travel centers, which
represented 29% of HPT’s total annual minimum returns and
rents.
- Marriott Agreements: As of June 30, 2019, 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 $71.6 million as of June
30, 2019 (approximately $17.9 million per quarter). During the
three months ended June 30, 2019, HPT realized returns under its
Marriott No. 1 agreement of $21.4 million, of which $1.6 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 hotel 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 $109.0 million
as of June 30, 2019 (approximately $27.3 million per quarter).
During the three months ended June 30, 2019, HPT realized returns
under its Marriott No. 234 agreement of $27.1 million. HPT’s
Marriott No. 234 agreement is partially secured by a security
deposit and a limited guaranty from Marriott; during the three
months ended June 30, 2019, the available security deposit was
replenished by $4.8 million from a share of hotel cash flows in
excess of the minimum returns due to HPT during the period. As of
June 30, 2019, the available security deposit from Marriott for the
Marriott No. 234 agreement was $35.4 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 June 30, 2019 of $2.6 million was paid to HPT.
- IHG Agreement: As of June 30, 2019, 102 of HPT’s hotels
were operated by subsidiaries of IHG under one agreement requiring
annual minimum returns and rents to HPT of $207.4 million as of
June 30, 2019 (approximately $51.9 million per quarter). During the
three months ended June 30, 2019, HPT realized returns and rents
under its IHG agreement of $51.6 million. HPT's IHG agreement is
partially secured by a security deposit. During the three months
ended June 30, 2019, the available security deposit was replenished
by $2.4 million from a share of hotel cash flows in excess of the
minimum returns and rents due to HPT during the period. As of June
30, 2019, the available IHG security deposit which HPT held to pay
future payment shortfalls was $88.1 million.
- Sonesta Agreement: As of June 30, 2019, 51 of HPT’s
hotels were operated under a management agreement with Sonesta
International Hotels Corporation, or Sonesta, requiring annual
minimum returns of $129.0 million as of June 30, 2019
(approximately $32.3 million per quarter). During the three months
ended June 30, 2019, HPT realized returns under its Sonesta
agreement of $28.0 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 hotel operating expenses including
management and related fees.
- Wyndham Agreement: As of June 30, 2019, 22 of HPT’s
hotels were operated under a management agreement with subsidiaries
of Wyndham Hotels & Resorts, Inc. (NYSE: WH), or Wyndham,
requiring annual minimum returns of $28.0 million as of June 30,
2019 (approximately $7.0 million per quarter). The guaranty
provided by Wyndham with respect to the management agreement was
limited to $35.7 million and has been depleted since 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 June 30, 2019, HPT realized returns
under its Wyndham agreement of $6.0 million, which represents 85%
of the minimum returns due for the period.
HPT currently expects to exit its
relationship with Wyndham and to rebrand or sell its 22 hotels
currently managed by Wyndham.
HPT 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 $1.5 million
(approximately $0.4 million per quarter). The guaranty 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 June 30, 2019 was paid
to HPT.
- Hyatt Agreement: As of June 30, 2019, 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 June 30, 2019 (approximately
$5.5 million per quarter). During the three months ended June 30,
2019, 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 June 30, 2019,
the available guaranty was replenished by $1.1 million from a share
of hotel cash flows in excess of the minimum returns due to HPT
during the period. As of June 30, 2019, there was $22.6 million
available under Hyatt's guaranty.
- Radisson Agreement: As of June 30, 2019, 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 $20.3 million as of June 30, 2019 (approximately
$5.1 million per quarter). During the three months ended June 30,
2019, HPT realized returns under its Radisson agreement of $5.0
million. HPT’s Radisson agreement is partially secured by a limited
guaranty from Radisson. During the three months ended June 30,
2019, the available guaranty was replenished by $0.6 million from a
share of hotel cash flows in excess of the minimum returns due to
HPT during the period. As of June 30, 2019, there was $40.6 million
available under Radisson's guaranty.
- Travel Center Agreements: As of June 30, 2019, HPT’s 179
travel centers located along the U.S. Interstate Highway system
were leased to TA under five lease agreements, which require
aggregate annual minimum rents of $246.1 million (approximately
$61.5 million per quarter). In addition, HPT received the first of
16 quarterly installments of $4.4 million of previously deferred
rents under the terms of the TA leases. As of June 30, 2019, all
payments due to HPT from TA under these leases were current.
Conference Call:
At 10:00 a.m. Eastern Time this morning, President and Chief
Executive Officer, John Murray, Chief Financial Officer and
Treasurer, Brian Donley, and Vice President, Todd Hargreaves, will
host a conference call to discuss HPT's second quarter 2019
financial results. 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 Friday, August 16,
2019. To access the replay, dial (412) 317-0088. The replay pass
code is 10132777.
A live audio webcast of the conference call will also be
available in a listen-only mode on HPT’s website, 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 2019 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, the District of Columbia, Puerto Rico
and Canada. HPT’s properties are operated under long term
management or lease agreements. HPT is managed by the operating
subsidiary of RMR Inc. (Nasdaq: RMR), an alternative asset
management company that is headquartered in Newton,
Massachusetts.
Non-GAAP Financial Measures:
HPT presents certain “non-GAAP financial measures” within the
meaning of applicable Securities and Exchange Commission, or SEC,
rules, including EBITDA, EBITDAre, Adjusted EBITDAre, FFO and
Normalized FFO. These measures do not represent cash generated by
operating activities in accordance with GAAP and should not be
considered alternatives to net income as indicators of HPT’s
operating performance or as measures of HPT’s liquidity. These
measures should be considered in conjunction with net income as
presented in HPT’s condensed consolidated statements of income. HPT
considers these non-GAAP measures to be appropriate supplemental
measures of operating performance for a REIT, along with net
income. HPT believes these measures provide useful information to
investors because by excluding the effects of certain historical
amounts, such as depreciation and amortization expense, they may
facilitate a comparison of HPT’s operating performance between
periods and with other REITs.
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 and Normalized FFO,
EBITDA, EBITDAre and Adjusted EBITDAre and a reconciliation of
those amounts to amounts determined in accordance with GAAP.
Comparable Hotels Data:
HPT presents RevPAR, ADR and occupancy for the periods presented
on a comparable basis to facilitate comparisons between periods.
HPT generally defines comparable hotels as those that were owned by
it and were open and operating for the entire periods being
compared. For each of the three and six months ended June 30, 2019
and 2018, HPT excluded six hotels from its comparable results. Five
of these hotels were not owned for the entire periods and one was
closed for a major renovation during part of the periods
presented.
HOSPITALITY PROPERTIES
TRUST
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(amounts in thousands, except
share data)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Revenues:
Hotel operating revenues (1)
$
541,668
$
529,599
$
997,053
$
974,875
Rental income (2)
67,764
81,018
135,915
163,011
FF&E reserve income (3)
1,130
1,334
2,502
2,698
Total revenues
610,562
611,951
1,135,470
1,140,584
Expenses:
Hotel operating expenses (1)
381,703
374,081
700,828
689,063
Depreciation and amortization
99,196
99,684
198,561
199,301
General and administrative (4)
12,207
13,121
24,442
24,855
Total expenses
493,106
486,886
923,831
913,219
Gain on sale of real estate (5)
—
—
159,535
—
Dividend income
876
626
1,752
1,252
Unrealized gains and (losses) on equity
securities, net (6)
(60,788
)
20,940
(39,811
)
45,895
Interest income
449
323
1,086
615
Interest expense (including amortization
of debt issuance costs and debt discounts and premiums of $2,570,
$2,559, $5,140 and $5,037, respectively)
(49,601
)
(48,741
)
(99,367
)
(96,281
)
Loss on early extinguishment of debt
(7)
—
(160
)
—
(160
)
Income before income taxes and equity in
earnings of an investee
8,392
98,053
234,834
178,686
Income tax benefit (expense)
260
(771
)
(799
)
(1,242
)
Equity in earnings of an investee
130
7
534
51
Net income
$
8,782
$
97,289
$
234,569
$
177,495
Weighted average common shares outstanding
(basic)
164,284
164,205
164,281
164,202
Weighted average common shares outstanding
(diluted)
164,326
164,243
164,324
164,226
Net income per common share (basic and
diluted)
$
0.05
$
0.59
$
1.43
$
1.08
See Notes on pages 9 and 10
HOSPITALITY PROPERTIES
TRUST
RECONCILIATIONS OF FUNDS FROM
OPERATIONS,
NORMALIZED FUNDS FROM
OPERATIONS, EBITDA, EBITDAre AND ADJUSTED EBITDAre
(amounts in thousands, except
share data)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Calculation of FFO and Normalized FFO:
(8)
Net income
$
8,782
$
97,289
$
234,569
$
177,495
Add (Less): Depreciation and
amortization
99,196
99,684
198,561
199,301
Gain on sale of real estate (5)
—
—
(159,535
)
—
Unrealized (gains) and losses on equity
securities, net (6)
60,788
(20,940
)
39,811
(45,895
)
FFO
168,766
176,033
313,406
330,901
Add: Loss on early extinguishment of debt
(7)
—
160
—
160
Normalized FFO
$
168,766
$
176,193
$
313,406
$
331,061
Weighted average common shares outstanding
(basic)
164,284
164,205
164,281
164,202
Weighted average common shares outstanding
(diluted)
164,326
164,243
164,324
164,226
Basic and diluted per common share
amounts:
FFO and Normalized FFO
$
1.03
$
1.07
$
1.91
$
2.02
Distributions declared per share
$
0.54
$
0.53
$
1.07
$
1.05
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Calculation of EBITDA, EBITDAre and
Adjusted EBITDAre: (9)
Net income
$
8,782
$
97,289
$
234,569
$
177,495
Add (Less): Interest expense
49,601
48,741
99,367
96,281
Income tax benefit (expense)
(260
)
771
799
1,242
Depreciation and amortization
99,196
99,684
198,561
199,301
EBITDA
157,319
246,485
533,296
474,319
Less: Gain on sale of real estate (5)
—
—
(159,535
)
—
EBITDAre
157,319
246,485
373,761
474,319
Add (Less): General and administrative
expense paid in common shares (10)
865
1,193
1,301
1,270
Loss on early extinguishment of debt
(7)
—
160
—
160
Unrealized (gains) and losses on equity
securities, net (6)
60,788
(20,940
)
39,811
(45,895
)
Adjusted EBITDAre
$
218,972
$
226,898
$
414,873
$
429,854
See Notes on pages 9 and 10
- As of June 30, 2019, HPT owned 328 hotels; 326 of these hotels
were managed by hotel operating companies and two hotels were
leased to hotel operating companies. As of June 30, 2019, HPT also
owned 179 travel centers; all 179 of these travel centers were
leased to TA 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, $4,853 and $1,434
less than the minimum returns due to HPT for the three months ended
June 30, 2019 and 2018, respectively, and $37,085 and $22,113 less
than the minimum returns due to HPT for the six months ended June
30, 2019 and 2018, 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. There was no reduction of hotel operating expenses for
the three months ended June 30, 2019 or 2018 and there were
reductions of $16,679 and $3,278 for the six months ended June 30,
2019 and 2018, respectively. 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 applicable 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 $5,090 and $2,284 for the
three months ended June 30, 2019 and 2018, respectively, and
$23,797 and $18,835 for the six months ended June 30, 2019 and
2018, respectively, which represent the unguaranteed portions of
HPT's minimum returns from its Sonesta and Wyndham agreements.
Certain of HPT’s managed hotel portfolios had net operating results
that were, in the aggregate, $21,102 and $32,512 more than the
minimum returns due to HPT for the three months ended June 30, 2019
and 2018, respectively, and $10,494 and $26,879 more than the
minimum returns due to HPT for the six months ended June 30, 2019
and 2018, 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 applicable
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 $9,208 and
$16,593 of guaranty and security deposit replenishments for the
three months ended June 30, 2019 and 2018, respectively, and $3,422
and $10,295 of guaranty and security deposit replenishments for the
six months ended June 30, 2019 and 2018, respectively.
- HPT reduced rental income by $3,190 and $4,322 in the three and
six months ended June 30, 2019, respectively, and increased rental
income by $3,144 and $6,223 for the three and six months ended June
30, 2018, respectively, to record scheduled rent changes 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.
- 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.
- 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 or Adjusted EBITDAre until the fourth quarter,
which is when the business management incentive fee expense amount
for the year, if any, is determined. No estimated business
management incentive fee expense was recorded for the three and six
months ended June 30, 2019 or 2018.
- HPT recorded a $159,535 gain on sale of real estate during the
three months ended March 31, 2019 in connection with the sales of
20 travel centers.
- Unrealized gains and (losses) on equity securities, net
represent the adjustment required to adjust the carrying value of
HPT's investments in RMR Inc. and TA common shares to their fair
value as of June 30, 2019 and 2018.
- HPT recorded a loss of $160 on early extinguishment of debt in
the three months ended June 30, 2018 in connection with amending
its revolving credit facility and term loan.
- HPT calculates funds from operations, or 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, 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, less any unrealized gains and losses on equity
securities, as well as certain other adjustments currently not
applicable to HPT. In calculating Normalized FFO, HPT adjusts for
the item shown above and includes business management incentive
fees, if any, only in the fourth quarter versus the quarter when
they are recognized as an 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. FFO and Normalized FFO 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 distribution rate as a percentage of the trading
price of its common shares, or dividend yield, and the dividend
yield of other REITs, 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. Other real
estate companies and REITs may calculate FFO and Normalized FFO
differently than HPT does.
- HPT calculates earnings before interest, taxes, depreciation
and amortization, or EBITDA, EBITDA for real estate, or EBITDAre,
and Adjusted EBITDAre as shown above. EBITDAre is calculated on the
basis defined by Nareit which is EBITDA, excluding gains and losses
on the sale of real estate, loss on impairment of real estate
assets, if any, as well as certain other adjustments currently not
applicable to HPT. In calculating Adjusted EBITDAre, HPT adjusts
for the items shown above and includes business management
incentive fees only in the fourth quarter versus the quarter when
they are recognized as an 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. Other real estate companies and REITs may
calculate EBITDA, EBITDAre and Adjusted EBITDAre differently than
HPT does.
- 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)
June 30,
December 31,
2019
2018
ASSETS
Real estate properties:
Land
$
1,674,653
$
1,626,239
Buildings, improvements and equipment
8,002,833
7,896,734
Total real estate properties, gross
9,677,486
9,522,973
Accumulated depreciation
(3,026,473
)
(2,973,384
)
Total real estate properties, net
6,651,013
6,549,589
Cash and cash equivalents
15,688
25,966
Restricted cash
37,792
50,037
Due from related persons
75,939
91,212
Other assets, net
397,314
460,275
Total assets
$
7,177,746
$
7,177,079
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility
$
90,000
$
177,000
Unsecured term loan, net
397,591
397,292
Senior unsecured notes, net
3,602,333
3,598,295
Security deposits
123,637
132,816
Accounts payable and other liabilities
298,625
211,332
Due to related persons
8,118
62,913
Total liabilities
4,520,304
4,579,648
Commitments and contingencies
Shareholders’ equity:
Common shares of beneficial interest, $.01
par value; 200,000,000 shares authorized; 164,454,537 and
164,441,709 shares issued and outstanding, respectively
1,645
1,644
Additional paid in capital
4,546,737
4,545,481
Cumulative other comprehensive loss
(129
)
(266
)
Cumulative net income available for common
shareholders
3,466,464
3,231,895
Cumulative common distributions
(5,357,275
)
(5,181,323
)
Total shareholders’ equity
2,657,442
2,597,431
Total liabilities and shareholders’
equity
$
7,177,746
$
7,177,079
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. Forward-looking
statements involve known and unknown risks, uncertainties and other
factors, some of which are beyond HPT's control. For example:
- Mr. Murray indicates in this press release that comparable
hotels not impacted by renovations during the second quarter had
lower RevPAR declines than comparable hotels under renovation. Mr.
Murray also states in this press release that total fuel volumes at
HPT's TA properties increased during the second quarter of 2019
compared with the prior year period and that coverage of HPT's
minimum rents for HPT's TA leases was 1.91 times for the three
months ended June 30, 2019. These statements may imply that HPT's
comparable hotels that were impacted by renovation activities will
experience improved RevPAR performance once those hotels are no
longer impacted by those matters similar to or better than the
RevPAR experienced by HPT's other hotels. In addition, these
statements may imply that TA properties' total fuel volumes will
continue to improve or that coverage of minimum rents under the TA
leases will remain at similar or higher levels. In fact, those
comparable hotels, excluding the impact of renovations, may not
realize similar RevPAR performance. Further, TA's fuel volumes at
HPT's TA properties may not continue to improve and they could
decline or operating results at HPT's TA properties may decline and
coverage of minimum rents at HPT's TA properties may decline in
future periods.
- HPT has agreed to acquire a net lease portfolio from SMTA and
expects the SMTA Transaction to close in the third quarter of 2019.
The closing of the SMTA Transaction is subject to conditions,
including approval of SMTA's shareholders. HPT cannot be sure that
these conditions will be satisfied. Accordingly, the SMTA
Transaction may not close during the third quarter of 2019 or at
all, or the terms of the SMTA Transaction may change.
- Mr. Murray states various benefits HPT expects to realize from
the SMTA Transaction, if it is completed, including increased
scale, a more secure financial profile and greater diversity in
tenant base, property type and geography. However, HPT may not
realize these benefits from the SMTA Transaction, if it is
completed, at the levels it expects or at all. Further, integration
and acquisitions of large portfolios and businesses and entering
into new areas of business entail significant risks, including,
among others, execution and operation risks. HPT may incur losses
and its financial position may worsen if the SMTA Transaction is
completed and HPT does not successfully integrate and operate the
acquired assets.
- HPT expects to refinance the term loan it plans to obtain in
connection with the SMTA Transaction with a combination of
unsecured senior notes, borrowings under its existing credit
facility, the sale of assets following closing of the SMTA
Transaction or other sources. HPT may not be able to raise a
sufficient amount of debt or at attractive prices, or at all, or
sell the assets it may seek to sell and at acceptable prices, and
HPT’s leverage and interest costs may increase above amounts it
currently expects.
- The commitment for the $2.0 billion unsecured term loan
facility that HPT has received is subject to conditions. If those
conditions are not satisfied, the lenders may elect not to fund
some or all of this commitment, which may impact HPT’s ability to
complete the SMTA Transaction or increase its costs as a result of
obtaining any alternative financing.
- HPT estimates the prepayment penalties to extinguish SMTA's
mortgage debt to be approximately $78.0 million. This estimate is
based on interest rate and other assumptions. The actual amount of
these prepayment penalties may be more or less than this
estimate.
- As of June 30, 2019, approximately 73% 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
guarantee 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, although the application of security deposits to cover
payments shortfalls will result in HPT recording income, it will
not result in HPT receiving additional cash. The balance of HPT's
annual minimum returns and rents as of June 30, 2019 was not
secured by guarantees or security deposits.
- HPT has no guarantees or security deposits for the minimum
returns due to HPT from HPT's Marriott No. 1 or Sonesta agreements
and the guaranty from Wyndham has been depleted. Accordingly, HPT
may receive amounts that are less than the contractual minimum
returns stated in these agreements. If cash flows from HPT's
Wyndham managed hotels continue to be less than minimum returns,
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.
- HPT currently expects to exit its relationship with Wyndham and
to rebrand or sell its 22 hotels currently managed by Wyndham.
There can be no assurance that HPT will exit this relationship or
that rebranding any of these hotels will result in improved
performance. In fact, rebranding hotels likely will result in short
term disruption to operations of these hotels. In addition, HPT
cannot be sure it will be able to sell any of these hotels and any
sales it may complete may be at prices less than HPT expects and
less than net book value. HPT may incur losses in connection with
any sales of these hotels or as a result of any plan to sell these
hotels.
The information contained in HPT's filings with 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/20190809005055/en/
Katie Strohacker, Senior Director, Investor Relations (617)
796-8232
Hospitality Properties (NASDAQ:HPT)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
Hospitality Properties (NASDAQ:HPT)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024