First Quarter Comparable Hotel RevPAR Grows 4.4% Year Over Year
Normalized FFO for the First Quarter Increases 12% Year Over Year to $0.93 Per Share
NEWTON,Mass.- May 10, 2016 -Hospitality Properties Trust (NYSE: HPT) today announced its financial results for the quarter ended March 31, 2016, compared to the results for the prior year comparable period:
Three Months Ended March 31, 2016 2015
($ in thousands, except per share and RevPAR data)
Net income available for common shareholders $ 46,885 $ 36,415 Net income available for common shareholders per share (basic and diluted) $ 0.31 $ 0.24 Adjusted EBITDA (1) $ 187,963 $ 168,635 Normalized FFO available for common shareholders (1) $ 140,414 $ 125,989 Normalized FFO available for common shareholders per share (diluted) (1) $ 0.93 $ 0.83
Portfolio Performance
Comparable hotel RevPAR $ 90.10 $ 86.31 Comparable hotel RevPAR growth 4.4% – RevPAR (all hotels) $ 88.53 $ 86.21 RevPAR growth (all hotels) 2.7% – Coverage of HPT’s minimum returns and rents for hotels 0.95x 0.93x Coverage of HPT's minimum rents for travel centers 1.39x 1.92x
(1) Reconciliations of net income available for common shareholders determined in accordance with U.S. generally accepted accounting principles, or GAAP, to earnings before interest, taxes, depreciation and amortization, or EBITDA, and EBITDA as adjusted, or Adjusted EBITDA, and net income to funds from operations, or FFO, and Normalized FFO available for common shareholders, for the quarters ended March 31, 2016 and 2015 appear later in this press release.
John Murray, President and Chief Operating Officer of HPT, made the following statement regarding today’s announcement:
“We are pleased with the continued strong performance from our hotel and travel center portfolios which resulted in 12% FFO per share growth this quarter compared to last year. Our comparable hotel RevPAR growth remains above historic long term average growth levels and exceeded the hotel industry’s performance for the thirteenth consecutive quarter. Our results are especially noteworthy because they were achieved in the first calendar quarter which has historically produced weaker seasonal results at both our hotels and travel centers. This performance, coupled with our disciplined investment activity and favorable outlook gave HPT’s Board the confidence to recently increase HPT’s quarterly common dividend to $0.51 per share, or $2.04 per share per year.”
First Quarter Results and Recent Activities:
- Net Income Available for Common Shareholders: Net income available for common shareholders for the quarter ended March 31, 2016 was $46.9 million, or $0.31 per diluted share, compared to net income available for common shareholders of $36.4 million, or $0.24 per diluted share, for the quarter ended March 31, 2015. The weighted average number of diluted common shares outstanding was 151.4 million and 150.9 million for the quarters ended March 31, 2016 and 2015, respectively.
- Adjusted EBITDA: Adjusted EBITDA for the quarter ended March 31, 2016 compared to the same period in 2015 increased 11.5% to $188.0 million.
- Normalized FFO Available for Common Shareholders: Normalized FFO available for common shareholders for the quarter ended March 31, 2016 were $140.4 million, or $0.93 per diluted share, compared to Normalized FFO available for common shareholders of $126.0 million, or $0.83 per diluted share for the quarter ended March 31, 2015. The 12% increase in Normalized FFO per diluted share is due primarily to the impact of HPT’s hotel and travel center acquisitions since January 1, 2015, the increase in returns realized due to the improvement in operating results at certain of HPT’s hotels, and increases in FF&E reserve income and deposits under HPT’s hotel operating agreements.
- Comparable Hotel RevPAR: For the quarter ended March 31, 2016 compared to the same period in 2015 for HPT’s 291 hotels that it owned continuously since January 1, 2015: average daily rate, or ADR, increased 4.0% to $124.79; occupancy increased 0.3 percentage points to 72.2%; and revenue per available room, or RevPAR, increased 4.4% to $90.10.
- RevPAR (all hotels): For the quarter ended March 31, 2016 compared to the same period in 2015 for HPT’s 305 hotels: ADR increased 3.6% to $124.16; occupancy decreased 0.6 percentage points to 71.3%; and RevPAR increased 2.7% to $88.53. Some of the hotels recently acquired are currently undergoing renovations.
- Coverage of Minimum Returns and Rents: For the quarter ended March 31, 2016, the aggregate coverage ratio of (x) total hotel revenues minus all hotel expenses and FF&E reserve escrows which are not subordinated to minimum returns and minimum rent payments to HPT to (y) HPT’s minimum returns and rents due from hotels increased to 0.95x from 0.93x for the quarter ended March 31, 2015. For the quarter ended March 31, 2016, the aggregate coverage ratio of (x) total travel center revenues less travel center expenses to (y) HPT’s minimum rent due from leased travel centers decreased to 1.39x from 1.92x for the quarter ended March 31, 2015. As of March 31, 2016, approximately 79% of HPT’s aggregate annual minimum returns and rents were secured by guarantees or security deposits from HPT’s managers and tenants pursuant to the terms of HPT’s operating agreements.
- Recent Property Acquisition Activities: As previously disclosed, on February 1, 2016, HPT acquired two extended stay hotels with 262 combined suites located in Cleveland and Westlake, OH for an aggregate purchase price of $12.0 million, excluding acquisition related costs. HPT converted these hotels to the Sonesta ES Suites® hotel brand and added them to its management agreement with Sonesta International Hotels Corporation, or Sonesta. On March 16, 2016, HPT acquired the Kimpton Hotel Monaco, a full service lifestyle hotel with 221 rooms located in Portland, OR for a purchase price of $114.0 million, excluding acquisition related costs. HPT added this hotel to its management agreement with InterContinental Hotels Group, plc (LON: IHG; NYSE: IHG (ADRs)), or InterContinental. On March 31, 2016, HPT acquired from TravelCenters of America LLC (NYSE: TA), or TA, a newly developed travel center in Hillsboro, TX for $19.7 million, excluding acquisition related costs. HPT added this TA branded travel center to its TA No. 4 lease.
- Recent Financing Activities: As previously disclosed, on February 3, 2016, HPT issued $750.0 million aggregate principal amount of unsecured senior notes in underwritten public offerings, which included: $400.0 million aggregate principal amount of 4.25% unsecured senior notes due 2021 and $350.0 million aggregate principal amount of 5.25% unsecured senior notes due 2026. Net proceeds from these offerings of $731.5 million after original issue discounts and offering expenses were used to repay amounts outstanding under HPT’s unsecured revolving credit facility and for general business purposes. On March 11, 2016, HPT redeemed at par plus accrued interest all $275.0 million of its 6.30% senior notes due 2016.
Tenants and Managers: As of March 31, 2016, HPT had nine operating agreements with seven hotel operating companies for 305 hotels with 46,347 rooms, which represented 66% of HPT’s total annual minimum returns and rents.
- Marriott Agreements: During the three months ended March 31, 2016, 122 of HPT’s hotels were operated by subsidiaries of Marriott International, Inc. (NASDAQ: MAR), or Marriott, under three agreements. HPT’s Marriott No. 1 agreement includes 53 hotels, and provides for annual minimum return payments to HPT of $68.4 million as of March 31, 2016 (approximately $17.1 million per quarter). Because there is no guarantee or security deposit for this agreement, the minimum returns HPT receives under this agreement may be limited to available hotel cash flow after payment of operating expenses and funding of the FF&E reserve. During the three months ended March 31, 2016, HPT realized returns under its Marriott No. 1 agreement of $17.9 million. HPT’s Marriott No. 234 agreement includes 68 hotels and requires annual minimum returns to HPT of $106.2 million as of March 31, 2016 (approximately $26.6 million per quarter). During the three months ended March 31, 2016, HPT realized returns under its Marriott No. 234 agreement of $26.6 million. HPT’s Marriott No. 234 agreement is partially secured by a security deposit and a limited guarantee from Marriott; during the three months ended March 31, 2016, HPT replenished the available security deposit by $0.8 million from a share of hotel cash flows in excess of the minimum returns due for the period. At March 31, 2016, the available security deposit from Marriott for the Marriott No. 234 agreement was $7.0 million and there was $30.7 million remaining under Marriott’s guaranty for up to 90% of the minimum returns due to HPT to cover future payment shortfalls after the available security deposit is depleted. HPT’s Marriott No. 5 agreement includes one resort hotel in Kauai, HI which is leased to Marriott on a full recourse basis. The contractual rent due to HPT for this hotel for the three months ended March 31, 2016 of $2.5 million was paid to HPT.
- InterContinental Agreement: During the three months ended March 31, 2016, HPT realized returns and rents of $38.5 million under its agreement with subsidiaries of InterContinental which includes 94 hotels and requires annual minimum returns/rent to HPT of $160.3 million as of March 31, 2016 (approximately $40.1 million per quarter). During the three months ended March 31, 2016, HPT replenished the available security deposit by $0.5 million from a share of hotel cash flows in excess of the returns and rents due for the period. In connection with the acquisition of the Kimpton Hotel Monaco described above, InterContinental provided HPT $9.0 million of cash to supplement the existing security deposit. At March 31, 2016, the available InterContinental security deposit which HPT held to pay future payment shortfalls was $56.7 million.
- Wyndham Agreement: As of March 31, 2016, 22 of HPT’s hotels were operated under a management agreement with a subsidiary of Wyndham Worldwide Corporation (NYSE: WYN), or Wyndham, requiring annual minimum returns of $26.7 million as of March 31, 2016 (approximately $6.7 million per quarter). HPT also leases 48 vacation units in one of the hotels to Wyndham Vacation Resorts, Inc., a subsidiary of Wyndham, which requires annual minimum rent of $1.4 million (approximately $0.4 million per quarter). The guarantee provided by Wyndham with respect to the lease is unlimited. The guarantee provided by Wyndham with respect to the management agreement is limited to $35.7 million and as of December 31, 2015, $4.0 million remained available to cover payment shortfalls of HPT’s minimum returns due under the management agreement. During the three months ended March 31, 2016, the hotels under this agreement generated cash flows that were less than the minimum returns due to HPT and the remaining guaranty was depleted. HPT currently expects that for the year ending December 31, 2016, the hotels under this agreement will produce cash flows in excess of the minimum returns due to HPT under the management agreement. As of May 9, 2016, all amounts due to HPT under the management agreement and the lease have been paid to HPT.
- Other Hotel Agreements: As of March 31, 2016, HPT’s remaining 67 hotels are operated under four agreements: one management agreement with Sonesta (33 hotels), requiring annual minimum returns of $84.0 million as of March 31, 2016 (approximately $21.0 million per quarter); one management agreement with a subsidiary of Hyatt Hotels Corporation (NYSE: H), or Hyatt (22 hotels), requiring annual minimum returns of $22.0 million as of March 31, 2016 (approximately $5.5 million per quarter); one management agreement with a subsidiary of Carlson Hotels Worldwide, or Carlson (11 hotels), requiring annual minimum returns of $12.9 million as of March 31, 2016 (approximately $3.2 million per quarter); and one lease with a subsidiary of Morgans Hotel Group Co. (NASDAQ: MHGC) (1 hotel) requiring annual minimum rent of $7.6 million as of March 31, 2016 (approximately $1.9 million per quarter). Minimum returns and rents due to HPT are partially guaranteed under the Hyatt and Carlson agreements. There is no guarantee or security deposit for the Sonesta agreement and the minimum returns HPT receives under that agreement are limited to available hotel cash flow after payment of operating expenses. The payments due to HPT under these agreements for the three months ended March 31, 2016 were paid to HPT.
- Travel Center Agreements: As of March 31, 2016, HPT had five leases with TA for 194 travel centers located along the U.S. Interstate Highway system requiring aggregate annual minimum rents of $261.1 million (approximately $65.3 million per quarter), which represent 34% of HPT’s total annual minimum returns and rents. As of March 31, 2016, all payments due to HPT from TA under these leases were current.
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