SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 5, 1999
HOSPITALITY PROPERTIES TRUST
(Exact name of registrant as specified in charter)
Maryland 1-11527 04-3262075
(State or other (Commission file (IRS employer
jurisdiction of number) identification no.)
incorporation)
400 Centre Street, Newton, Massachusetts 02458
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 617-964-8389
CERTAIN IMPORTANT FACTORS
This Current Report contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Those statements appear in a number of places in this Current Report and
include statements regarding the intent, belief or expectations of Hospitality
Properties Trust (the "Company"), its Trustees or its officers with respect to
the declaration or payment of dividends, the consummation of additional
acquisitions, policies and plans of the Company regarding investments,
dispositions, financings, conflicts of interest or other matters, the Company's
qualification and continued qualification as a real estate investment trust or
trends affecting the Company's or any hotel's financial condition or results of
operations. Readers are cautioned that any such 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 statements as a result of various factors. Such factors include, without
limitation, changes in financing terms, the Company's ability or inability to
complete acquisitions and financing transactions, results of operations of the
Company's hotels and general changes in economic conditions not presently
contemplated. The information contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1998, 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 such
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.
-1-
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(b) Pro Forma Financial Information.
Index to Unaudited Consolidated Pro Forma Financial Statements and Other Data
(see index on page F-1).
(c) Exhibits.
1.1 Underwriting Agreement, dated as of May 5, 1999, by and among
Hospitality Properties Trust and the several underwriters named
therein relating to 10,000,000 common shares of beneficial
interest.
8.1 Opinion of Sullivan & Worcester LLP re: tax matters.
23.1 Consent of Sullivan & Worcester LLP (contained in Exhibit 8.1).
2
HOSPITALITY PROPERTIES TRUST
Index to Unaudited Pro Forma Consolidated Financial Statements and Other Data
1. Introduction to Unaudited Pro Forma Consolidated Financial Statements
and Other Data.......................................................... F-2
2. Unaudited Pro Forma Consolidated Balance Sheet and Other Data as of
March 31, 1999.......................................................... F-3
3. Unaudited Pro Forma Consolidated Statements of Income and Other Data for
the Year Ended December 31, 1998 and the three months ended
March 31, 1999.......................................................... F-4
4. Notes to Unaudited Pro Forma Consolidated Financial Statements and
Other Data.............................................................. F-6
F-1
HOSPITALITY PROPERTIES TRUST
INTRODUCTION TO UNAUDITED ADJUSTED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated balance sheet at March 31,
1999 is intended to present the consolidated financial position of HPT as if
the transactions described in the notes hereto (the "Transactions") were
consummated at March 31, 1999. The following unaudited pro forma consolidated
statements of income for the year ended December 31, 1998 and three months
ended March 31, 1999 are intended to present the consolidated results of
operations of HPT as if the Transactions were consummated as of January 1,
1998. These unaudited pro forma consolidated financial statements should be
read in conjunction with, and are qualified in their entirety by reference
to, the separate consolidated financial statements of HPT, incorporated
herein by reference to our Annual Report on Form 10-K for the year ended
December 31, 1998 and our Current Report on Form 8-K dated April 30, 1999.
In addition to pro forma adjustments relating to operating hotel properties
acquired during 1998 and 1999, these unaudited adjusted pro forma
consolidated financial statements include adjustments for the results of
certain hotel properties which were under development during 1998 and 1999.
See Notes F and Q. HPT believes that presentation of combined pro forma
and adjusted financial data is meaningful and relevant to an understanding of
the effects of the Transactions on HPT. No assurance can be given that these
adjusted pro forma consolidated financial statements reflect the consolidated
financial results which would have been realized if the acquisition and
development of the relevant hotel properties was completed as of March 31,
1999 or January 1, 1998.
These unaudited adjusted pro forma consolidated financial statements are not
necessarily indicative of what the actual consolidated financial position or
results of operations of HPT would have been as of the date or for the period
indicated, nor do they purport to represent the expected consolidated financial
position or results of operations of HPT for any future period. Differences may
result from, among other considerations, future changes in HPT's portfolio of
investments, changes in interest rates, changes in the capital structure of HPT,
delays in the acquisition of certain properties or any determination not to
complete the acquisition of any hotel properties and changes in operating
expenses.
The following unaudited pro forma consolidated balance sheet and unaudited
pro forma consolidated statements of income were prepared pursuant to the
Securities and Exchange Commission's rules for the presentation of pro forma
data. The pro forma and adjusted pro forma other data give effect to the
consummation by the Company of the Transactions. Certain properties expected
to be acquired by the Company are currently under construction or development
by the sellers. Other properties were under construction during the period
presented when they were owned or under development by the sellers. The
accompanying pro forma information does not give further effect to the
completion of construction or the related lease commencement for any period
prior thereto. Construction projects not completed by March 31, 1999 are
likewise not reflected in the pro forma balance sheet. Rather, the effect of
completion of construction of these properties is presented separately from
the pro forma information as described in the accompanying notes. The Company
believes that a display of such adjusted pro forma data is meaningful and
relevant to the understanding of the Transactions and, accordingly has
presented such data in the final two columns, labeled "Other Data," on the
accompanying pages.
F-2
HOSPITALITY PROPERTIES TRUST
Unaudited Pro Forma Consolidated Balance Sheet and Other Data
As of March 31, 1999
(amounts in thousands)
Pro Forma Other Data
--------- ----------
Pro Forma Other Adjusted Pro
Historical (A) Adjustments Pro Forma Adjustments Forma
-------------- ----------- --------- ----------- -----
Assets
Real estate properties $2,113,258 $ -- $2,113,258 $75,324(F) $2,188,582
Accumulated depreciation (130,195) -- (130,195) -- (130,195)
---------- -------- ---------- ------- ----------
1,983,063 -- 1,983,063 75,324 2,058,387
Cash and cash equivalents 6,536 154,363(B) 160,899 (67,477)(G) 93,422
Restricted cash (FF&E Reserve) 24,407 -- 24,407 -- 24,407
Other assets, net 14,668 -- 14,668 -- 14,668
---------- -------- ---------- ------- ----------
$2,028,674 $154,363 $2,183,037 $ 7,847 $2,190,884
---------- -------- ---------- ------- ----------
---------- -------- ---------- ------- ----------
Liabilities and Shareholders' Equity
Senior notes, net of discount $414,759 $ -- $414,759 $ -- $ 414,759
Revolving debt 172,000 (172,000)(C) -- -- --
Security and other deposits 231,114 -- 231,114 7,847(H) 238,961
Other liabilities 13,209 -- 13,209 -- 13,209
Shareholders' equity:
9-1/2% Series A Cumulative Redeemable Preferred Shares -- 72,438(D) 72,438 -- 72,438
Common shares of beneficial interest 456 100(E) 556 -- 556
Additional paid-in capital 1,231,688 253,825(E) 1,485,513 -- 1,485,513
Cumulative net income 226,403 -- 226,403 -- 226,403
Dividends (260,955) -- (260,955) -- (260,955)
---------- -------- ---------- ------- ----------
Total shareholders' equity 1,197,592 326,363 1,523,955 -- 1,523,955
---------- -------- ---------- ------- ----------
$2,028,674 $154,363 $2,183,037 $ 7,847 $2,190,884
---------- -------- ---------- ------- ----------
---------- -------- ---------- ------- ----------
See accompanying notes to unaudited pro forma consolidated financial statements
and other data.
F-3
HOSPITALITY PROPERTIES TRUST
Unaudited Pro Forma Consolidated Statement of Income and Other Data
For the Year Ended December 31, 1998
(amounts in thousands, except per share amounts)
Pro Forma Other Data
--------- ----------
Pro Forma Other Adjusted Pro
Historical (I) Adjustments Pro Forma Adjustments Forma
-------------- ----------- --------- ----------- -----
Revenues:
Rental income $157,223 $32,603 (J) $189,826 $26,718(Q) $216,544
FF&E reserve income 16,108 1,104 (K) 17,212 -- 17,212
Interest income 1,630 -- 1,630 -- 1,630
-------- ------- -------- ------- --------
Total revenues 174,961 33,707 208,668 26,718 235,386
-------- ------- -------- ------- --------
Expenses:
Depreciation and amortization 54,757 9,965 (L) 64,722 8,614(R) 73,336
Interest 21,751 13,220 (M) 34,971 -- 34,971
General and administrative 10,471 1,508 (N) 11,979 1,304(S) 13,283
------- ------- -------- ------- --------
Total expenses 86,979 24,693 111,672 9,918 121,590
------- ------- -------- ------- --------
Net income 87,982 9,014 96,996 16,800 113,796
------- ------- -------- ------- --------
9-1/2% Series A preferred share dividends -- 7,125 (O) 7,125 -- 7,125
------- ------- -------- ------- --------
Net income available
for common shareholders $87,982 $ 1,889 $ 89,871 $16,800 $106,671
------- ------- -------- ------- --------
------- ------- -------- ------- --------
Weighted average common shares outstanding 42,317 13,291 (P) 55,608 -- 55,608
------- ------- -------- ------- --------
------- ------- -------- ------- --------
Net Income available for common
shareholders per share $2.08 $1.62 $1.92
------- -------- --------
------- -------- --------
See accompanying notes to unaudited pro forma consolidated financial statements
and other data.
F-4
HOSPITALITY PROPERTIES TRUST
Unaudited Pro Forma Consolidated Statement of Income and Other Data
For the Three Months Ended March 31, 1999
(amounts in thousands, except per share amounts)
Pro Forma Other Data
--------- ----------
Pro Forma Other Adjusted Pro
Historical (I) Adjustments Pro Forma Adjustments Forma
-------------- ----------- --------- ----------- -----
Revenues:
Rental income $49,042 $ 2,748 (J) $ 51,790 $2,417(Q) $ 54,207
FF&E reserve income 4,114 603 (K) 4,717 -- 4,717
Interest income 117 -- 117 -- 117
-------- ------- -------- ------- --------
Total revenues 53,273 3,351 56,624 2,417 59,041
-------- ------- -------- ------- -------
Expenses:
Depreciation and amortization 17,271 830 (L) 18,101 763(R) 18,864
Interest 9,935 (1,192)(M) 8,743 -- 8,743
General and administrative 3,171 126 (N) 3,297 115(S) 3,412
------- ------- -------- ------- --------
Total expenses 30,377 (236) 30,141 878 31,019
------- ------- -------- ------- --------
Net income 22,896 3,587 26,483 1,539 28,022
------- ------- -------- ------- --------
9-1/2% Series A preferred share dividends -- 1,781 (O) 1,781 -- 1,781
------- ------- -------- ------- --------
Net income available for common shareholders $22,896 $ 1,806 $ 24,702 $ 1,539 $26,241
------- ------- -------- ------- --------
------- ------- -------- ------- --------
Weighted average common shares outstanding 45,614 10,000 (P) 55,614 -- 55,614
------- ------- -------- ------- --------
------- ------- -------- ------- --------
Net income available for common
shareholders per share $0.50 $0.44 $0.47
------- -------- --------
------- -------- --------
See accompanying notes to unaudited pro forma consolidated financial statements
and other data.
F-5
HOSPITALITY PROPERTIES TRUST
Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data
(dollars in thousands)
Pro Forma Consolidated Balance Sheet Adjustments
A. Represents the unaudited historical consolidated balance sheet of the
Company at March 31, 1999.
B. Represents pro forma impact on cash as follows:
Cash transactions:
Net proceeds from the Proposed Offering (defined in Note C) $253,925
Net proceeds from issuance of the 9-1/2% Series A
Cumulative Redeemable Preferred Shares in April 1999 72,438
Repayments of outstanding borrowings under HPT's
credit facility (172,000)
----------
Net impact on cash $154,363
----------
----------
C. Represents pro forma amounts repaid under the credit facility after
completion of the proposed issuance of ten million common shares of
beneficial interest (the "Proposed Offering") and the issuance of the
9-1/2% Series A Cumulative Redeemable Preferred Shares.
D. Represents the proceeds from the issuance of the 9-1/2% Series A
Cumulative Redeemable Preferred Shares in April 1999 net of transaction
costs of $2,562.
E. Represents the following:
Gross proceeds from the Proposed Offering
(10,000,000 shares at $26-13/16 per share) $268,125
Estimated expenses of the Proposed Offering (14,200)
----------
Net proceeds of the Proposed Offering 253,925
Par value ($.01) of 10,000,000 shares (100)
----------
Additional paid-in capital $253,825
----------
----------
Other Data
Consolidated Balance Sheet Adjustments
F. Represents the purchase of 7 hotels acquired or to be acquired, but not open
as of March 31, 1999:
Cash purchase prices:
Three Courtyard by Marriott(R) hotels $29,716
Two Residence Inn by Marriott(R) hotels 20,957
Two TownePlace Suites by Marriott(R) hotels 16,429
Purchase price withheld as security deposits 7,847
Closing costs 375
-------
Total $75,324
-------
-------
G. Represents the net cash required to buy the 7 hotels described in F.
F-6
H. Represents security deposits held by the Company as a result of purchasing
and leasing the following hotels which were not open as of March 31, 1999:
Three Courtyard by Marriott(R)hotels $ 3,475
Two Residence Inn by Marriott(R)hotels 2,451
Two TownePlace Suites by Marriott(R)hotels 1,921
--------
Total $ 7,847
--------
--------
F-7
HOSPITALITY PROPERTIES TRUST
Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data -
continued
(dollars in thousands)
Pro Forma Consolidated Income Statement Adjustments
I. Represents the historical consolidated statement of income for the
period presented excluding an extraordinary loss related to the early
extinguishment of debt in 1998 of $6,641.
J. Represents the pro forma effect of leases entered and to be entered for
hotels open during the periods presented. This pro forma effect is derived
as follows:
Year Ended Three Months
December 31, Ended March 31,
1998 1999
----------- ---------------
Pro forma Minimum Rent $ 186,390 $ 50,851
Pro forma Percentage Rent 3,436 939
Amounts included in historical Minimum Rent (153,787) (48,103)
Amounts included in historical Percentage Rent (3,436) (939)
--------- ---------
$ 32,603 $ 2,748
--------- ---------
--------- ---------
Certain of the hotels owned by the Company as of March 31, 1999 were
under development and others are currently under development by the
sellers of these properties. The Company is not contractually obligated
to acquire these hotels until they are completed. The foregoing pro
forma income statements assume the hotels, which were completed prior to
December 31, 1998 and March 31, 1999 were acquired as of their
completion date. Percentage rent, which is based upon a percentage of
gross revenue increases, cannot be calculated for unopened hotels under
development, and no such amounts are included.
K. FF&E Reserve escrow accounts for all of HPT's Marriott(R) brand hotels are
owned by HPT and periodic payments into these escrow accounts are recorded
as additional rent under generally accepted accounting principles ("GAAP").
A pro forma adjustment to record additional rent relating to FF&E escrow
contributions of $1,104 has been made for four hotels acquired in December
1998 which were open and operating throughout 1998. A pro forma adjustment
to record additional rent relating to FF&E escrow contributions of $603
has been made for the three months ended March 31, 1999 for ten hotels
owned or acquired and operating through March 31, 1999. No pro forma
adjustment for the FF&E Reserve income related to newly constructed hotels
purchased and to be purchased by HPT from Marriott has been made, as this
amount cannot be calculated. The FF&E Reserves for HPT's Wyndham(R),
Sumner Suites(R), Candlewood Suites(R), Summerfield Suites(R) and
Homestead Village(R) hotels remain the property of the respective tenants
during the lease term. HPT has a security interest in these escrow
accounts and at the end of the lease term, any remaining funds in these
FF&E Reserves must be paid to HPT. Under GAAP, the FF&E Reserve for the
leases relating to these hotels is not recorded as income by HPT.
L. Represents the impact of the pro forma transactions on depreciation expense
for the entire period presented.
M. Represents the following adjustments to interest expense:
- Eliminate 1998 interest expense recognized on the $125 million of
mortgage notes repaid in February 1998 including amortization of
deferred financing costs.
- Eliminate interest on credit facility borrowings for the
period presented repaid with the proceeds from the Proposed
Offering, the senior notes, the 6.7 million common shares issued
during 1998 and the preferred shares issued in April 1999.
- Add interest, including amortization of deferred financing costs,
on the $415 million of senior notes issued during 1998 for the year
ended December 31, 1998.
- Add amortization of deferred financing costs related to the
Company's $300 million credit facility for the entire year ended
December 31, 1998.
N. Represents the estimated impact of the Transactions on general and
administrative expenses of the Company for the periods presented.
O. Represents preferred dividends on the 9-1/2% Series A Cumulative
Redeemable Preferred Shares for the period presented.
P. Represents the weighted average impact of the Proposed Offering and
6.7 million common shares of beneficial interest issued by the Company
during 1998.
F-8
HOSPITALITY PROPERTIES TRUST
Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data -
continued
(dollars in thousands)
Other Data
Consolidated Income Statement Adjustments
Q. Represents the effect of leases entered and to be entered for the
transactions described in Note F above, since the beginning of the periods
presented. The effect of these leases is derived as follows:
Year Ended Three Months
December 31, Ended March 31,
1998 1999
------------ ---------------
Adjusted pro forma Minimum Rent $213,108 $ 53,268
Adjusted pro forma Percentage Rent 3,436 939
Amounts included in pro forma Minimum Rent (186,390) (50,851)
Amounts included in pro forma Percentage Rent (3,436) (939)
-------- --------
$ 26,718 $ 2,417
-------- --------
-------- --------
R. Represents the impact of the transactions described in Note F above, on
depreciation expense for the entire period presented.
S. Represents the estimated impact of the transactions described in Note F
above, on general and administrative expenses of the Company.
F-9
SIGNATURES
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
By: /s/ Thomas M. O'Brien
-------------------------------
Thomas M. O'Brien, Treasurer
Date: May 5, 1999