UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-11527
HOSPITALITY PROPERTIES TRUST
Maryland 04-3262075
(State of incorporation) (IRS Employer Identification No.)
400 Centre Street, Newton, Massachusetts 02458
617-964-8389
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Shares outstanding
Class at May 9, 2000
Common shares of beneficial
interest, $0.01 par value per share 56,462,612
HOSPITALITY PROPERTIES TRUST
FORM 10-Q
MARCH 31, 2000
INDEX
PART I Financial Information (Unaudited)
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - March 31, 2000 and
December 31, 1999............................................. 3
Consolidated Statements of Income - Three Months Ended March 31,
2000 and 1999................................................... 4
Condensed Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2000 and 1999................................. 5
Notes to Condensed Consolidated Financial Statements............ 6
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................ 10
Item 3.
Quantitative and Qualitative Disclosures About Market Risk..... 14
Certain Important Factors...................................... 15
PART II Other Information
Item 2.
Changes in Securities.......................................... 15
Item 6.
Exhibits and Reports on Form 8-K ............................. 15
Signature......................................................... 16
2
HOSPITALITY PROPERTIES TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
March 31, December 31,
2000 1999
----------- ------------
(unaudited)
ASSETS
Real estate properties, at cost ................................ $ 2,281,518 $ 2,270,630
Accumulated depreciation ....................................... (207,807) (187,631)
----------- -----------
2,073,711 2,082,999
Cash and cash equivalents ...................................... 77,173 73,554
Restricted cash (FF&E reserve) ................................. 21,061 26,034
Other assets, net .............................................. 11,975 12,265
----------- -----------
$ 2,183,920 $ 2,194,852
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Senior notes, net of discount .................................. $ 414,786 $ 414,780
Revolving credit facility ...................................... -- --
Security and other deposits .................................... 246,242 246,242
Other liabilities .............................................. 14,141 14,115
Shareholders' equity:
Series A preferred shares, 9 1/2% cumulative redeemable; no
par value; 100,000,000 shares authorized; 3,000,000 shares
issued and outstanding ................................... 72,207 72,207
Common shares of beneficial interest, $0.01 par value,
100,000,000 shares authorized, 56,462,612 and 56,449,743
issued and outstanding, respectively ..................... 565 564
Additional paid-in capital ................................. 1,506,730 1,506,494
Cumulative net income ...................................... 344,970 315,436
Cumulative preferred distributions ......................... (6,887) (5,106)
Cumulative common distributions ............................ (408,834) (369,880)
----------- -----------
Total shareholders' equity ............................... 1,508,751 1,519,715
----------- -----------
$ 2,183,920 $ 2,194,852
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
HOSPITALITY PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Three Months Ended March 31,
-----------------------------
2000 1999
------------ -------------
Revenues:
Rental income ....................................... $55,122 $49,042
FF&E reserve income ................................. 5,967 4,114
Interest income ..................................... 1,088 117
------- -------
Total revenues .................................. 62,177 53,273
------- -------
Expenses:
Interest (including amortization of deferred
financing costs of $512 and $554, respectively) . 8,828 9,935
Depreciation and amortization ....................... 20,176 17,271
General and administrative .......................... 3,639 3,171
------- -------
Total expenses .................................. 32,643 30,377
------- -------
Net income ............................................. 29,534 22,896
Preferred distributions ................................ 1,781 --
------- -------
Net income available for common shareholders ........... $27,753 $22,896
======= =======
Weighted average common shares outstanding ............. 56,458 45,614
======= =======
Basic and diluted earnings per common share:
Net income ......................................... $ 0.52 $ 0.50
======= =======
Net income available for common shareholders ....... $ 0.49 $ 0.50
======= =======
The accompanying notes are an integral part of these financial statements.
4
HOSPITALITY PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended March 31,
-----------------------------
2000 1999
----------- -----------
Cash flows from operating activities:
Net income ...................................................... $ 29,534 $ 22,896
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization ............................... 20,176 17,271
Amortization of deferred financing costs as interest ........ 512 554
FF&E reserve income ......................................... (5,967) (4,114)
Deferred percentage rent .................................... 1,213 --
Net change in assets and liabilities ........................ (1,114) 1,791
--------- ---------
Cash provided by operating activities ................... 44,354 38,398
--------- ---------
Cash flows from investing activities:
Real estate acquisitions ........................................ -- (223,019)
Increase in security and other deposits ......................... -- 25,096
--------- ---------
Cash used in investing activities ....................... -- (197,923)
--------- ---------
Cash flows from financing activities:
Draws on revolving credit facility ................................. -- 172,000
Distributions paid to preferred shareholders ....................... (1,781) --
Distributions paid to common shareholders .......................... (38,954) (30,549)
--------- ---------
Cash (used in) provided by financing activities ......... (40,735) 141,451
--------- ---------
Increase (decrease) in cash and equivalents ........................ 3,619 (18,074)
Cash and cash equivalents at beginning of period ................... 73,554 24,610
--------- ---------
Cash and cash equivalents at end of period ......................... $ 77,173 $ 6,536
========= =========
Supplemental cash flow information:
Cash paid for interest ...................................... $ 11,059 $ 11,680
Non-cash investing and financing activities:
Tenant deposits in FF&E reserve ............................. 5,196 3,845
Purchases of property with FF&E reserve ..................... (10,940) (2,504)
The accompanying notes are an integral part of these financial statements.
5
HOSPITALITY PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
Note 1. Basis of Presentation
The accompanying condensed consolidated financial statements of Hospitality
Properties Trust and its subsidiaries have been prepared without audit. Certain
information and footnote disclosures required by generally accepted accounting
principles for complete financial statements have been condensed or omitted. We
believe the disclosures made are adequate to make the information presented not
misleading. However, the accompanying financial statements should be read in
conjunction with the financial statements and notes thereto contained in our
Annual Report on Form 10-K for the year ended December 31, 1999. In the opinion
of management, all adjustments, which include only normal recurring adjustments,
considered necessary for a fair presentation have been included. All
intercompany transactions and balances between Hospitality Properties Trust and
its subsidiaries have been eliminated. Our operating results for interim periods
and those of our tenants are not necessarily indicative of the results that may
be expected for the full year.
In December 1999 the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101 ("SAB 101") which provides the staff's views in
applying generally accepted accounting principles to selected revenue
recognition issues. SAB 101 is expected to have no impact on the Company's
annual results of operations. SAB 101 requires the Company to defer recognition
of certain percentage rental income until certain thresholds are met resulting
in deferral from the first, second and third quarters to the fourth quarter
within a year. We have adopted SAB 101 beginning January 1, 2000, without
restatement of prior periods. If SAB 101 were applicable for the three months
ended March 31, 1999, net income available for common shareholders would have
been $21,959 ($0.48/share) and the deferred percentage rent balance would have
been $937.
Note 2. Shareholders' Equity
In February 2000, we paid a $0.69 per share distribution to common shareholders
for the quarter ended December 31, 1999. On April 4, 2000, our Trustees declared
a dividend of $0.69 per common share to be paid to common shareholders of record
as of April 24, 2000, which will be distributed on or about May 25, 2000.
In March 2000 our Trustees declared a distribution on the preferred shares of
$0.59375 per preferred share to be paid to preferred shareholders of record as
of March 15, 2000, which was paid on March 31, 2000.
We do not present diluted earnings per share because we have no dilutive
instruments.
Note 3. Indebtedness
As of March 31, 2000, we had zero outstanding on our revolving credit facility.
6
HOSPITALITY PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
Note 4. Significant Tenant
At March 31, 2000, HMH HPT Courtyard LLC, a 100% owned special purpose
subsidiary of Host Marriott Corporation ("Host") is the lessee of 53 Courtyard
by Marriott(R) properties which we own and which represent 23% of our
investments, at cost. The following results of operations for the twelve weeks
ended March 24, 2000, and March 26, 1999, and summarized balance sheet data of
HMH HPT Courtyard LLC as provided by the lessee's management are included here
in compliance with applicable accounting regulations of the Securities and
Exchange Commission.
Twelve weeks ended Twelve weeks ended
March 24, 2000 March 26, 1999
(unaudited) (unaudited)
------------------- -------------------
Revenues
Rental income1 ................. $ 11,661 $ 11,767
Interest income ................ 105 58
Amortization of deferred gain .. 664 664
Other income ................... 31 --
-------- --------
Total revenue ............... 12,461 12,489
Expenses
Base and percentage rent expense 12,570 12,357
Corporate expenses ............. 3 54
Other expenses ................. 2 11
-------- --------
Total expenses .............. 12,575 12,422
-------- --------
Income (loss) before taxes ... (114) 67
Provision for income taxes ... -- 40
-------- --------
Net (loss) income ............ $ (114) $ 27
======== ========
March 24, 2000
(unaudited) December 31, 1999
-------------- -----------------
Assets ......................... $ 68,514 $ 67,821
Liabilities .................... 44,479 43,672
Equity ......................... 24,035 24,149
1. The statement of operations for the twelve weeks ended March 26,
1999 has been restated by the lessee to reflect the retroactive
adoption of SAB 101 effective January 1, 1999. As a result of this
adoption of SAB 101, recognition of percentage rental revenue for
the twelve weeks ended March 26, 1999 of $1,952 was deferred.
Recognition of percentage rental revenue for the twelve weeks ended
March 24, 2000 of $1,972 was deferred and is included in liabilities
as deferred rent on the balance sheet as of March 24, 2000.
Percentage rent will be recognized as income during the year once
specified hotel sales thresholds are achieved.
7
HOSPITALITY PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
At March 31, 2000, CCMH Courtyard I LLC, a 100% owned special purpose subsidiary
of Crestline Capital Corporation is the sublessee of the 53 Courtyard by
Marriott(R) properties discussed above. The following results of operations for
the twelve weeks ended March 24, 2000, and March 26, 1999, and summarized
balance sheet data of CCMH Courtyard I LLC as provided by the sublessee's
management are included here in compliance with applicable accounting
regulations of the Securities and Exchange Commission.
Twelve weeks ended Twelve weeks ended
March 24, 2000 March 26, 1999
(unaudited) (unaudited)
------------------ ------------------
Revenues
Hotels
Rooms ............................ $ 47,338 $ 46,717
Food and beverage ................ 3,383 3,462
Other ............................ 2,013 1,852
-------- --------
Total hotel revenue .......... 52,734 52,031
Operating costs and expenses
Hotels
Property-level costs and expenses
Rooms ........................ 10,695 10,142
Food and beverage ............ 3,040 3,022
Other ........................ 18,072 17,620
Other operating costs and expenses
Management fees .............. 6,541 6,542
Lease expense ................ 12,916 13,518
-------- --------
Total hotel expense .......... 51,264 50,844
-------- --------
Operating profit ............. 1,470 1,187
-------- --------
Corporate expenses ........................ (78) (105)
Interest expense .......................... (65) (65)
Interest income ........................... 2 --
-------- --------
Income before income taxes ................ 1,329 1,017
Income taxes .............................. (545) (417)
-------- --------
Net income ................................ $ 784 $ 600
======== ========
March 24, 2000
(unaudited) December 31, 1999
-------------- -----------------
Assets .................................... $ 32,806 $ 30,157
Liabilities ............................... 10,626 8,761
Equity .................................... 22,180 21,396
8
HOSPITALITY PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
Operating results for these 53 Courtyard by Marriott(R) properties derived from
data provided by management of HMH HPT Courtyard LLC (our tenant) and CCMH
Courtyard I LLC (Host's subtenant) are detailed below and present revenues in
excess of those expenses which are not subordinate to our rent:
Twelve weeks ended Twelve weeks ended
March 24, 2000 March 26, 1999
(unaudited) (unaudited)
------------------ ------------------
Total hotel sales
Rooms ................................. $47,338 $46,717
Food and beverage ..................... 3,383 3,462
Other ................................. 2,013 1,852
------- -------
Total hotel sales ..................... 52,734 52,031
Expenses
Rooms ................................. 10,695 10,142
Food and beverage ..................... 3,040 3,022
Other operating departments ........... 269 477
General and administrative ............ 5,678 5,633
Utilities ............................. 1,940 1,887
Repairs, maintenance and accidents .... 1,955 1,967
Marketing and sales ................... 1,567 1,411
Chain services ........................ 1,171 1,041
FF&E escrow deposits .................. 2,637 2,601
Real estate tax ....................... 1,918 1,821
Land rent ............................. 558 471
Other costs ........................... 379 311
------- -------
Total departmental expenses ........... 31,807 30,784
------- -------
Hotel revenues in excess of property-level costs
and expenses ................................. $20,927 $21,247
======= =======
9
HOSPITALITY PROPERTIES TRUST
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations (dollar amounts in thousands, except per share amounts)
Three Months Ended March 31, 2000 versus 1999
Rental income for the 2000 first quarter was $55,122, a 12% increase over rental
income of $49,042 for the 1999 first quarter. This increase was due to the
impact of rent from 13 hotels acquired subsequent to the first quarter 1999 and
nine hotels acquired during the first quarter 1999. Rental income is comprised
principally of minimum rent, which was $55,111 for the 2000 first quarter, a 15%
increase over minimum rent of $48,102 for the 1999 first quarter. Minimum rent
increased because of acquisitions. Percentage rental income was zero and $939 in
the 2000 and 1999 first quarter, respectively. Due to the adoption of SAB 101,
recognition of $1,213 of percentage rent revenue was deferred in the 2000 first
quarter until such time as annual thresholds are met. If we had not adopted SAB
101, percentage rent would have increased by 30%. This increase is primarily the
result of hotels that began to yield percentage rent during the last 12 months,
and to increases in total sales at some of our hotels. FF&E reserve income
represents amounts paid by our tenants into restricted accounts owned by us, the
purpose of which is to accumulate funds for future capital expenditures. The
terms of our leases require these amounts to be calculated as a percentage of
total hotel sales at our properties. The FF&E reserve income for the 2000 first
quarter was $5,967, a 45% increase over FF&E reserve income for the 1999 first
quarter of $4,114. This increase is due principally to the impact of
acquisitions and the increased level of total hotel sales experienced at our
hotels. Interest income for the 2000 first quarter was $1,088, a $971 increase
from interest income of $117 for the 1999 first quarter. This increase was due
to a higher average cash balance in the 2000 period.
Interest expense for the 2000 first quarter was $8,828, an 11% decrease over
interest expense of $9,935 for the 1999 first quarter. The decrease was due to
lower average borrowing during the 2000 period. Depreciation and amortization
expense for the 2000 first quarter was $20,176, a 17% increase over depreciation
and amortization expense of $17,271 for the 1999 first quarter. This increase
was due principally to the full quarter's impact of the depreciation of 13
hotels acquired subsequent to first quarter 1999 and the nine hotels acquired
during the first quarter 1999. General and administrative expense for the 2000
first quarter was $3,639, a 15% increase over general and administrative expense
of $3,171 in the 1999 first quarter. This increase is due principally to the
impact of additional hotels purchased throughout 1999.
Net income for the 2000 first quarter was $29,534, a 29% increase over net
income for the 1999 first quarter of $22,896. The increase was primarily due to
higher rental and interest income and lower interest expense, the effects of
which were partially offset by an increase in depreciation expense. These
increases in rental income and depreciation were primarily the result of the
hotel acquisitions during 1999. The increased interest income and reduced
interest expense were the result of repayment of amounts due under our credit
facility and an increase in the average balance invested in short term deposits.
Net income available for common shareholders for the 2000 first quarter was
$27,753, a 21% increase over net income available for common shareholders for
the 1999 first quarter of $22,896. This change resulted from the factors
discussed above, partially offset by preferred dividends in the 2000 first
quarter.
On a per share basis, net income available for common shareholders was $0.49, a
2% decrease from the 1999 first quarter. The decrease results from the net
effect of the factors discussed above, offset by the 24% increase in the
weighted average shares outstanding resulting from common share issuances during
1999 and the adoption of SAB 101.
Funds from operations, or FFO, is defined as net income available for common
shareholders before extraordinary and non-recurring items plus depreciation and
amortization of real estate assets plus deferred percentage rent relating to
operations from the current periods plus deposits made into refurbishment
escrows which are not included in revenue. Cash available for distribution, or
CAD, is FFO less refurbishment escrows plus amortization of deferred financing
costs and other non-cash charges. For the three months ended March 31, 2000, FFO
was $52,601 or $0.93 per share and CAD was $44,029 or $0.78 per share. FFO was
$43,238 or $0.95 per share and CAD was $36,909 or $0.81 per share in the 1999
period. Changes in FFO and CAD are attributable to the effects on revenues and
expenses of acquisition and financing activities in 1999 discussed above.
10
HOSPITALITY PROPERTIES TRUST
Liquidity and Capital Resources (dollar amounts in thousands, except per share
amounts)
Our total assets decreased to $2.18 billion as of March 31, 2000 from $2.19
billion as of December 31, 1999. The decrease resulted primarily from
depreciation expense.
All of our leases require the tenants to post a security deposit, generally
equal to one year's rent. The security deposit is payable to each tenant in the
event the tenant elects not to renew its lease. The terms of some of our leases
and the related guarantees required some of our tenants to deposit with us
$32,442 in addition to their security deposits to secure their obligations under
the leases. These guarantee deposits are payable to our tenants upon the
achievement and documentation of certain operating performance thresholds at the
leased properties; we expect that guarantee deposits of $5,275 will be paid
during 2000.
At March 31, 2000, we had $77,173 of cash and cash equivalents and zero
outstanding on our $300,000 revolving credit facility. From time to time,
including currently, we consider entering or pursuing transactions which would
provide equity or debt capital of various forms and on various terms. On January
15, 1998, our shelf registration statement for up to $2 billion of securities,
including debt securities, was declared effective by the Securities and Exchange
Commission. An effective shelf registration statement enables us to issue
specific securities to the public on an expedited basis by filing a prospectus
supplement with the Securities and Exchange Commission. Currently, we have $1.0
billion available on our shelf registration statement. We believe that the
capital available to us from time to time will be sufficient to enable the
execution of our business plan.
All of our hotels are leased to and operated by third parties. All costs of
operating and maintaining our hotels are paid by our tenants. All of our leases
require a percentage, usually 5%, of total hotel sales to be escrowed by the
tenant or operator as a reserve for future renovations and refurbishment ("FF&E
Reserve"). As of March 31, 2000, we and our tenants had approximately $31,659 on
deposit in these refurbishment escrow accounts.
To maintain our status as a real estate investment trust ("REIT") under the
Internal Revenue Code, we must meet certain requirements including the
distribution of a substantial portion of our taxable income to our shareholders.
Because we are a REIT, we expect not to pay federal income taxes.
Distributions are based principally on cash available for distribution, which is
net income available for common shareholders plus deferred percentage rent,
depreciation and amortization of real estate assets and certain non-cash
charges, less FF&E Reserve income. Cash available for distribution may not equal
cash provided by operating activities because the cash flow is affected by other
factors not included in the cash available for distribution calculation.
On March 7, 2000, our Trustees declared a distribution on preferred shares of
$0.59375 per preferred share to be paid to preferred shareholders of record as
of March 15, 2000, which was distributed on March 31, 2000.
Common share distributions with respect to the fourth quarter 1999 results of
$0.69 per common share were made in February 2000. Common share distributions
declared with respect to first quarter 2000 results of $0.69 per common share
will be paid to shareholders on or about May 25, 2000.
Funding for current expenses and distributions is provided by our operations,
primarily our leasing of owned hotels.
Property Leases
As of March 31, 2000, we own 210 hotels which are grouped into combinations and
leased to 11 separate affiliates of publicly owned hotel companies Marriott
International, Inc., Host, Crestline, Wyndham International, Inc., Homestead
Village, Inc., Candlewood Hotel Company and ShoLodge, Inc. The tables on the
following pages summarize the key terms of our leases and some recent operating
results of our tenants.
11
HOSPITALITY PROPERTIES TRUST
- ------------------------------------------------------------------------------------------------------------------------
Lease Pool Courtyard by Residence Inn by Residence Residence Marriott(R)/Residence
Marriott(R) Marriott(R) Inn(R)/Courtyard Inn(R)/Courtyard Inn(R)/Courtyard(R)/
by Marriott(R) by Marriott(R) TownePlace Suite(R)
- ------------------------------------------------------------------------------------------------------------------------
Number of Hotels 53 18 14 9 17
Number of Rooms 7,610 2,178 1,819 1,336 2,663
Number of States 24 14 7 8 7
Tenant Subsidiary of Subsidiary of Subsidiary of Subsidiary of Subsidiary of
Host subleased Host subleased Marriott Marriott Marriott
to subsidiary of to subsidiary of
Crestline Crestline
Manager Subsidiary of Subsidiary of Subsidiary of Subsidiary of Subsidiary of
Marriott Marriott Marriott Marriott Marriott
Investment at
March 31, 2000
(000s) $507,933 $174,671 $148,812 $129,377 $201,643
Security Deposits
(000s) $50,540 $17,220 $14,881 $12,938 $21,322
End of Initial
Lease Term 2012 2010 2014 2012 2013
Renewal Options (1) 3 for 12 years 1 for 10 years, 1 for 12 years, 2 for 10 years 2 for 10 years
each 2 for 15 years 1 for 10 years each each
each
Current Annual
Minimum Rent (000s)
$50,793 $17,412 $14,881 $12,938 $21,322
Percentage Rent (2) 5.0% 7.5% 7.0% 7.0% 7.0%
First Three Months:
2000: Occupancy 76.1% 81.4% 78.5% 78.2% 68.1%
ADR $97.28 $101.77 $87.80 $107.87 $83.04
RevPAR $74.05 $82.84 $68.95 $84.31 $56.56
1999: Occupancy 79.1% 81.2% 80.5% 74.4% 70.6%
ADR $92.42 $100.77 $85.51 $105.68 $82.18
RevPAR $73.10 $81.83 $68.84 $78.63 $58.02
- ------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Renewal options may be exercised by the tenant for all, but not less than all, of the hotels within a lease pool.
(2) Each lease provides for payment to us as additional rent of a percentage of increases in total hotel sales over base year
levels.
</FN>
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HOSPITALITY PROPERTIES TRUST
- ---------------------------------------------------------------------------------------------------------------------
Lease Pool Wyndham(R) Summerfield Sumner Candlewood Candlewood Homestead
Suites by Suites(R) Suites(R) Suites(R) Village(R)
Wyndham(R)
- ---------------------------------------------------------------------------------------------------------------------
Number of Hotels 12 15 20 17 17 18
Number of Rooms 2,321 1,822 2,409 1,839 2,053 2,399
Number of States 8 8 12 14 14 5
Tenant Subsidiary of Subsidiary of Subsidiary of Subsidiary of Subsidiary of Subsidiary of
Wyndham Wyndham ShoLodge Candlewood Candlewood Homestead
Manager Subsidiary of Subsidiary of Subsidiary of Subsidiary of Subsidiary of Subsidiary of
Wyndham Wyndham ShoLodge Candlewood Candlewood Homestead
Investment at
March 31, 2000
(000s) $182,570 $240,000 $205,000 $118,500 $142,400 $145,000
Security Deposits
(000s) $18,325 $15,000 $21,280 $12,081 $14,253 $15,960
End of Initial
Lease Term 2014 2017 2011 2011 2011 2015
Renewal Options (1) 4 for 12 4 for 12 5 for 10 3 for 15 3 for 15 2 for 15
years each years each years each years each years each years each
Current Annual
Minimum Rent
(000s) $18,325 $25,000 $21,280 $12,081 $14,253 $15,960
Percentage Rent (2) 8.0% 7.5% 8.0% 10.0% 10.0% 10.0%
First Three Months:
2000: Occupancy 71.4% 78.8% 62.3% (3) 77.7% (4) 78.9% (4) 77.1% (4)
ADR $98.09 $125.52 $81.12 (3) $54.28 (4) $55.09 (4) $50.21 (4)
RevPAR $70.08 $98.88 $50.51 (3) $42.16 (4) $43.49 (4) $38.69 (4)
1999: Occupancy 69.7% 78.3% (4) 59.7% (3) 63.7% (4) 62.1% 70.9% (4)
ADR $104.87 $122.31 (4) $80.58 (3) $58.62 (4) $60.48 $52.97 (4)
RevPAR $73.09 $95.77 (4) $48.10 (3) $37.34 (4) $37.56 $37.56 (4)
- ------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Renewal options may be exercised by the tenant for all, but not less than all, of the hotels within a lease
pool.
(2) Each lease provides for payment to us as additional rent of a percentage of increases in total hotel sales
over base year levels.
(3) Includes the 15 hotels open throughout the entire 2000 and comparable 1999 periods. Also, includes information
for periods prior to our acquisition of certain properties.
(4) Includes information for periods prior to our acquisition of certain properties.
</FN>
13
HOSPITALITY PROPERTIES TRUST
Seasonality
Our hotels have historically experienced seasonal differences typical of the
hotel industry with higher revenues in the second and third quarters of calendar
years compared with the first and fourth quarters. This seasonality is not
expected to cause fluctuations in our rental income because we believe that the
revenues generated by our hotels will be sufficient for the tenants to pay our
rents on a regular basis notwithstanding seasonal fluctuations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk (dollar
amounts in thousands)
We are exposed to risks associated with market changes in interest rates.
We manage our exposure to this market risk by monitoring available financing
alternatives. Our strategy to manage exposure to changes in interest rates is
unchanged since December 31, 1999. Other than described below we do not foresee
any significant changes in our exposure to fluctuations in interest rates or in
how we manage this exposure in the near future. At March 31, 2000, our total
outstanding debt consisted of three issues of fixed rate, senior unsecured
notes:
Interest Rate Total Interest
Principal Balance Per Year Maturity Interest Payments Due Expense Per Year
- ----------------- -------- -------- --------------------- ----------------
$115,000 8 1/4% 2005 Monthly $ 9,488
$150,000 7% 2008 Semi-Annually 10,500
$150,000 8 1/2% 2009 Monthly 12,750
No principal repayments are due under these notes until maturity. Because
interest on all of our outstanding debt at March 31, 2000, is at fixed rates,
changes in interest rates during the term of this debt will not effect our
operating results. If at maturity these notes were refinanced at interest rates
which are 10% higher than shown above, our per annum interest cost would
increase by approximately $3,273. Based on the balances outstanding as of March
31, 2000, a hypothetical immediate 10% change in interest rates would change the
fair value of our fixed rate debt obligations by approximately $21,000.
Each of our fixed rate debt arrangements allow us to make repayments earlier
than the stated maturity date. In some cases, we are allowed to make early
repayment at par after a set date and in other cases we are allowed to make
prepayments only at a premium to face value. These prepayment rights may afford
us the opportunity to mitigate the risk of refinancing at maturity at higher
rates by refinancing prior to maturity.
Our line of credit bears interest at floating rates and matures in 2002. As of
March 31, 2000, there was zero outstanding and $300,000 was available for
drawing under our revolving credit facility. Our revolving credit facility is
available to finance our commitments and for general business purposes. Although
we regularly have new investment opportunities in various stages of discussion,
negotiation or diligence, as of March 31, 2000, we had no acquisition
commitments. Repayments under the revolving credit facility may be made at any
time without penalty. Our exposure to fluctuations in interest rates may in the
future increase if we incur debt to fund future acquisitions or otherwise.
14
HOSPITALITY PROPERTIES TRUST
CERTAIN IMPORTANT FACTORS
This quarterly report on Form 10-Q contains statements which constitute forward
looking statements within the meaning of the Securities Exchange Act of 1934, as
amended. Those statements appear in a number of places in this Form 10-Q and
include statements regarding our intent, belief or expectations, actions,
possible actions or inaction by our Trustees or officers with respect to the
declaration or payment of distributions and or the timing thereof, our policies
and plans regarding investments, financings, payment of obligations, taxation or
other matters, the effect of inflation and possible changes in financial
markets, including but not limited to changes in interest rates, our
qualification and continued qualification as a real estate investment trust or
trends affecting us or our hotels' financial condition or results of operations.
Readers are cautioned that forward looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual results
may differ materially from those contained in the forward looking statement as a
result of various factors. These factors include, without limitation, changes in
financing terms or methods, our ability or inability to complete new
investments, to refinance existing debt and complete new financing transactions,
results of operations of our tenants and hotels, changes to our business plan or
our policies and general changes in economic conditions not presently expected.
The accompanying information contained in this Form 10-Q and information in our
Annual Report on Form 10-K, including the information under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," identifies other important factors that could cause these
differences.
THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE COMPANY, DATED AUGUST 21,
1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE
STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF THE TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE TRUST. ALL PERSONS
DEALING WITH THE TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE TRUST
FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
PART II Other Information
Item 2. Changes in Securities
In February 2000, we issued 12,869 common shares in payment of an incentive fee
of $236,545 for services rendered by REIT Management & Research, Inc. during
1999 based upon a per common share price of $18.381. These restricted securities
were issued pursuant to the exemption from registration provided under Section
4(2) of the Securities Act of 1933, as amended.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) Reports on Form 8-K
None
HOSPITALITY PROPERTIES TRUST
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOSPITALITY PROPERTIES TRUST
/S/Thomas M. O'Brien
Thomas M. O'Brien
Treasurer and Chief Financial Officer
(authorized officer and principal financial officer)
Dated: May 9, 2000
16