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 June 30, 1996
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 02158
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 [ ]
Class Shares outstanding
Common shares of beneficial at August 14, 1996
interest, $.01 par value per share 26,856,800
<PAGE>
HOSPITALITY PROPERTIES TRUST
FORM 10-Q
JUNE 30, 1996
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.
<TABLE>
<CAPTION>
INDEX
Page
<S> <C> <C>
PART I Financial Information (Unaudited)
Condensed Consolidated Balance Sheets - June 30, 1996 and
December 31, 1995...................................................... 3
Consolidated Statements of Income - Six Months Ended June 30, 1996 and
the period from February 7, 1995 (inception) to June 30, 1995 4
Consolidated Statements of Income - Three Months Ended June 30, 1996 and
June 30, 1995.......................................................... 5
Condensed Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1996 and the period February 7, 1995 (inception) to
June 30, 1995........................................................... 6
Notes to Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of Results of Operations and
Financial Condition..................................................... 11
PART II Other Information........................................................... 14
</TABLE>
2
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HOSPITALITY PROPERTIES TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
1996 1995
----------- ------------
(unaudited)
ASSETS
Real estate properties ................. $ 830,768 $ 332,572
Accumulated depreciation ............... (13,822) (5,820)
--------- ---------
816,946 326,752
Cash and cash equivalents .............. 8,179 2,135
FF&E reserve (restricted cash) ......... 9,768 5,342
Other assets ........................... 6,071 4,718
--------- ---------
$ 840,964 $ 338,947
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Credit facility ........................ $ 93,650 $ --
Security deposits ...................... 81,360 32,900
Other liabilities ...................... 4,028 8,096
Shareholders' equity
Common shares of beneficial interest 269 126
Additional paid-in capital ...... 656,122 297,962
Cumulative net income ........... 32,594 11,349
Dividends ....................... (27,059) (11,486)
--------- ---------
Total shareholders' equity .. 661,926 297,951
--------- ---------
$ 840,964 $ 338,947
========= =========
See accompanying notes
3
<PAGE>
<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
For the Period
For the Six February 7, 1995
Months Ended (inception) to
June 30, June 30,
1996 1995
------------- ----------------
<S> <C> <C>
Revenues
Rental income ............................................... $27,897 $ 4,874
FF&E reserve income ......................................... 4,820 893
Interest income ............................................. 628 23
------- -------
Total revenues .......................................... 33,345 5,790
------- -------
Expenses
Interest (including amortization of deferred finance costs of
$110 and $0, respectively) .............................. 1,962 3,196
Depreciation and amortization of real estate assets ......... 8,004 1,473
General and administrative .................................. 2,134 242
------- -------
Total expenses .......................................... 12,100 4,911
------- -------
Net income .................................................. $21,245 $ 879
======= =======
Weighted average shares outstanding ......................... 19,443
=======
Earnings per share......................................... $1.09
=======
</TABLE>
See accompanying notes
4
<PAGE>
<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
For the Quarter For the Quarter
Ended June 30, Ended June 30,
1996 1995
------------- ----------------
<S> <C> <C>
Revenues
Rental income ............................................... $19,226 $ 4,525
FF&E reserve income ......................................... 3,200 891
Interest income ............................................. 585 --
------- -------
Total revenues .......................................... 23,011 5,416
------- -------
Expenses
Interest (including amortization of deferred finance costs of
$65 and $0, respectively) ............................... 1,747 2,937
Depreciation and amortization of real estate assets ......... 5,267 1,320
General and administrative .................................. 1,374 225
------- -------
Total expenses .......................................... 8,388 4,482
------- -------
Net income .................................................. $14,623 $ 934
======= =======
Weighted average shares outstanding ......................... 26,285
=======
Earnings per share......................................... $0.56
=======
</TABLE>
See accompanying notes
5
<PAGE>
<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Period
For the Six February 7, 1995
Months Ended (inception) to
June 30, June 30,
1996 1995
-------------- ----------------
<S> <C> <C>
Cash flows from operating activities
Net income ...................................................... $ 21,245 $ 879
Adjustments to reconcile to cash provided by operating activities
Depreciation and amortization of real estate assets ..... 8,004 1,473
Amortization of deferred finance costs as interest ...... 110 --
Funding of FF&E reserve ................................. (4,820) (893)
Change in assets and liabilities ........................ 2,553 1,543
--------- ---------
Cash provided by operating activities .............. 27,092 3,002
--------- ---------
Cash flows from investing activities
Real estate acquisitions .................................... (491,304) (178,708)
Increase in security deposits ............................... 48,460 17,940
Purchase of FF&E reserve .................................... (5,500) (2,539)
Payments for purchase option ................................ (2,500) (3,000)
--------- ---------
Cash used for investing activities ................. (450,844) (166,307)
--------- ---------
Cash flows from financing activities
Draws on credit facility .................................... 115,650 --
Repayments of credit facility ............................... (22,000) --
Dividends paid .............................................. (22,503) --
Proceeds from issuance of common shares ..................... 358,649 46
Borrowings and advances from HRP ............................ -- 163,259
--------- ---------
Cash provided by financing activities ............... 429,796 163,305
--------- ---------
Increase in cash and equivalents ................................ $ 6,044 $ --
========= =========
Supplemental cash flow information
Interest paid ............................................... $ 1,750 $ --
Non-cash investing activities
Property managers' deposits in FF&E reserve ................. 4,645 893
Purchases of fixed assets with FF&E reserve ................. 5,789 208
See accompanying notes
6
<PAGE>
HOSPITALITY PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
(dollars amounts in thousands, except per share amounts)
(unaudited)
1. The accompanying condensed consolidated financial statements of
Hospitality Properties Trust (the "Company") 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. The
Company believes 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 included in the Company's Annual Report on
Form 10-K for the period from February 7, 1995 (inception) to December
31, 1995. Operating results for interim periods are not necessarily
indicative of the results that may be expected for the full year.
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 the Company and its subsidiaries have been eliminated.
2. The Company was incorporated on February 7, 1995. The Company was a
100% owned subsidiary of Health and Retirement Properties Trust ("HRP")
from its inception through August 22, 1995 when it completed its
initial public offering of common shares of beneficial interest. The
Company commenced operations on March 24, 1995 with the acquisition of
21 hotels.
3. Earnings per share is computed by dividing net income by the weighted
average number of outstanding common shares of beneficial interest.
In April 1996 the Company completed an offering of 14,250,000 common
shares of beneficial interest (the "Follow-on Offering") and raised net
proceeds of approximately $359,000.
In May 1996, the Company paid a $0.58 per share dividend to
shareholders for the quarter ended March 31, 1996. On July 15, 1996,
the Trustees declared a dividend of $0.58 per share to be paid to
shareholders of record as of July 22, 1996, which will be distributed
on or about August 22, 1996.
4. The properties of the Company and its subsidiaries are leased pursuant
to long term leases. Each lease requires the lessee to pay minimum
rent, percentage rent (a percentage of increases in total hotel sales
over total hotel sales in a base year), and all operating costs
associated with the hotels. In addition, 5% of hotel sales related to
each lease are paid by the Company's hotel operators into an escrow
account to fund certain capital improvements and ongoing renovations
necessary to maintain the quality of the properties. In the case of
certain leases, this escrow account is maintained by the Company or a
subsidiary.
5. In the first quarter of 1996, the Company acquired five Residence Inn
by Marriott(R) hotels and three Courtyard by Marriott(R) hotels from
Host Marriott Corporation. In the second quarter of 1996, the Company
acquired eleven Wyndham Garden(R) hotels from an affiliate of the
Wyndham Hotel Corporation, and an additional 13 Residence Inn by
Marriott(R) and an additional 13 Courtyard by Marriott(R) hotels from
Host Marriott Corporation. All the acquired properties are leased to
affiliates of the sellers under long-term leases. The 45 additional
hotels acquired in 1996 were acquired and are owned by three
wholly-owned subsidiaries of the Company. The subsidiaries were
capitalized with equity contributions from the Company.
6. As of June 30, 1996, the Company had $93,650 outstanding under its
$200,000 revolving acquisition credit facility (the "Credit Facility")
which provides for borrowings at one month LIBOR plus 150 basis points.
Borrowings may be repaid and reborrowed as necessary until December 31,
1998, at which time the outstanding balance may, at the Company's
option and with lender approval, be either repaid or converted into a
10-year loan.
7
<PAGE>
HOSPITALITY PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
(dollars amounts in thousands, except per share amounts)
7. At June 30, 1996, all of the 53 Courtyard by Marriott(R) properties of
the Company and its subsidiary were leased to a special purpose
subsidiary of Host Marriott Corporation and managed by a subsidiary of
Marriott International, Inc. The results of operations from the period
from the later of January 1, 1996 or the date of acquisition by the
Company or a subsidiary to June 14, 1996 and summarized balance sheet
data of the Host Marriott Corporation subsidiary to which the Courtyard
by Marriott(R) hotels are leased are as follows:
Twelve weeks Twenty-four weeks
ended ended
June 14, 1996 June 14, 1996
---------------------------------------
(unaudited) (unaudited)
Revenues................................. $ 24,188 $39,701
Investment expenses
Base and percentage rent............ 11,973 19,706
FF&E contribution................... 2,237 3,792
Management fees..................... 4,171 7,177
Other............................... 2,092 3,768
-------------------------------------
Total investment expenses....... 20,473 34,443
-------------------------------------
Income before taxes...................... 3,715 5,258
Provision for income taxes............... 1,607 2,103
-------------------------------------
Net income...................... $ 2,108 $ 3,155
=====================================
June 14, 1996
------------------------------
(unaudited)
Assets.......................... $ 59,618
Liabilities..................... 36,123
Equity.......................... 23,495
Revenues in the statement of income above represent house profit. House profit
represents total hotel sales less property level expenses excluding depreciation
and amortization, system fees, real and personal property taxes, ground rent,
insurance and management fees. The system fees (included in other investment
expenses) and management fees presented above, and the expenses detailed below
represent all the costs incurred directly, allocated or charged to the
properties by their management. The detail of total hotel sales and a
reconciliation to revenues from the period from the later of January 1, 1996 or
the date of acquisition by the Company or a subsidiary to June 14, 1996 follows:
</TABLE>
<TABLE>
<CAPTION>
Twelve weeks ended Twenty-four weeks
June 14, 1996 ended June 14, 1996
------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C>
Total hotel sales
Rooms................................ $ 38,359 $ 64,881
Food and beverage.................... 3,146 5,642
Other................................ 1,702 2,985
--------------------------------------------
Total hotel sales................ 43,207 73,508
--------------------------------------------
Departmental Expenses
Rooms................................ 7,760 13,634
Food and beverage.................... 2,646 4,696
Other operating departments.......... 404 832
General and administrative........... 4,241 7,541
Utilities............................ 1,437 2,742
Repairs, maintenance and accidents... 482 835
Marketing and sales.................. 463 843
Chain services....................... 1,586 2,684
--------------------------------------------
Total departmental expenses...... 19,019 33,807
--------------------------------------------
Revenues...................................... $ 24,188 $ 39,701
============================================
</TABLE>
8
<PAGE>
HOSPITALITY PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
(dollars amounts in thousands, except per share amounts)
8. At June 30, 1996, all of the 18 Residence Inn by Marriott(R) properties
of the Company's subsidiary were leased to a special purpose subsidiary
of Host Marriott Corporation and managed by a subsidiary of Marriott
International, Inc. The results of operations from the period from the
date of acquisition by the Company or a subsidiary to June 14, 1996 and
summarized balance sheet data of the Host Marriott Corporation
subsidiary to which the Residence Inn by Marriott(R) hotels are leased
are as follows:
Twelve weeks ended
June 14, 1996
-----------------------------
(unaudited)
Revenues...................................... $ 7,529
Investment expenses
Base and percentage rent................. 3,091
FF&E contribution........................ 686
Management fees.......................... 1,834
Other.................................... 490
-----------------------------
Total investment expenses............ 6,101
-----------------------------
Income before taxes........................... 1,428
Provision for income taxes.................... 571
-----------------------------
Net income........................... $ 857
=============================
June 14, 1996
------------------------
(unaudited)
Assets...................................... $ 20,527
Liabilities................................. 15,590
Equity...................................... 4,937
Revenues in the statement of income above represent house profit. House profit
represents total hotel sales less property level expenses excluding depreciation
and amortization, system fees, real and personal property taxes, ground rent,
insurance and management fees. The system fees (included in other investment
expenses) and management fees presented above, and the expenses detailed below
represent all the costs incurred directly, allocated or charged to the
properties by their management. The detail of total hotel sales and a
reconciliation to revenues from the period from the date of acquisition by the
Company or a subsidiary to June 14, 1996 follows:
Twelve
weeks ended June 14, 1996
-------------------------------
(unaudited)
Total hotel sales
Rooms................................... $ 13,090
Other................................... 699
-------------------------------
Total hotel sales................... 13,789
-------------------------------
Departmental Expenses
Rooms................................... 2,608
Other operating departments............. 147
General and administrative.............. 1,139
Utilities............................... 554
Repairs, maintenance and accidents...... 792
Marketing and sales..................... 786
Chain services.......................... 234
-------------------------------
Total departmental expenses......... 6,260
-------------------------------
Revenues......................................... $ 7,529
===============================
9
<PAGE>
HOSPITALITY PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
(dollars amounts in thousands, except per share amounts)
9. The following unaudited pro forma consolidated income statement gives
effect to the completion of the Company's Follow-on Offering and the
acquisition of 45 additional hotels as described above, as though such
transactions occurred on January 1, 1996. In the opinion of management,
all adjustments necessary to reflect the effects of the transactions
discussed above have been reflected in the pro forma data. The
following unaudited pro forma consolidated income statement data is not
necessarily indicative of what the actual consolidated results of
operations for the Company would have been for the periods indicated,
nor does it purport to represent the consolidated results of operations
for the Company for future periods.
<TABLE>
<CAPTION>
Quarter Ended Six Months
June 30, 1996 Ended June 30,
1996
---------------- ---------------
<S> <C> <C>
Revenues
Rental income............................................ $ 20,776 $ 41,407
FF&E reserve income...................................... 2,828 5,994
Interest income.......................................... 47 90
---------------- ---------------
Total revenues....................................... 23,651 47,491
---------------- ---------------
Expenses
Interest expense (including $65 and $131 of amortization
of deferred finance costs, respectively) 1,717 3,362
Depreciation expense..................................... 5,918 12,404
General and administrative .............................. 1,401 2,814
---------------- ---------------
Total expenses....................................... 9,036 18,580
---------------- ---------------
Net income.................................................... $ 14,615 $ 28,911
================ ===============
Weighted average shares outstanding 26,851 26,851
================ ===============
Net income per share.......................................... $0.54 $1.08
================ ===============
</TABLE>
10
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Overview
Hospitality Properties Trust (the "Company") was formed in 1995 to acquire, own
and lease hotel properties to unaffiliated hotel operators. The Company has
owned 37 Courtyard by Marriott(R) hotels (the "Initial Hotels") since August of
1995. In 1996, wholly-owned subsidiaries of the Company acquired 11 Wyndham
Garden(R) hotels, 18 Residence Inn by Marriott(R) and an additional 16 Courtyard
by Marriott(R) hotels.
The Company's 53 Courtyard by Marriott(R) hotels are all leased to a subsidiary
of Host Marriott Corporation ("Host Marriott") and managed by a subsidiary of
Marriott International, Inc. ("Marriott International"). Annual base rent on
these 53 properties totals $50.5 million and percentage rent equals 5% of
increases in total hotel sales over a base year level. The 53 hotels have a
total of 7,610 guest rooms and are located in 23 states. During the first half
of 1996 (which includes periods prior to the acquisition of certain of these
properties by the Company) the 53-property pool had average occupancy, Average
Daily Rate ("ADR") and room revenue per available room ("RevPAR") of 80.4%,
$77.22 and $62.09, respectively.
The Company's 18 Residence Inn by Marriott(R) properties are all leased to a
subsidiary of Host Marriott and managed by a subsidiary of Marriott
International. Annual base rent on these 18 properties totals $17.2 million and
percentage rent equals 7.5% of increases in total hotel sales over 1996 levels.
The 18 properties have a total of 2,178 guest suites and are located in 14
states. During the first half of 1996 (which includes periods prior to the
acquisition of these properties by the Company) the 18-property pool had average
occupancy, ADR and RevPar of 86.0%, $89.29 and $76.79, respectively.
The Company's 11 Wyndham Garden(R) hotels are all leased to and operated by
subsidiaries of the Wyndham Hotel Corporation. Annual base rent on these 11
properties totals $13.6 million and percentage rent equals 8% of increases in
total hotel sales over 1996 levels. The 11 properties have a total of 1,940
guest rooms and are located in seven states. During the first half of 1996
(which includes periods prior to the acquisition of these properties) the
11-property pool had average occupancy, ADR and RevPAR of 77.3%, $85.74 and
$66.28, respectively.
All of the Company's leases require 5% of total hotel sales to be escrowed by
the tenant or operator as a reserve for renovations and refurbishment ("FF&E").
References below to the Company and to items comprising the Company's results of
operations are collective references to the Company and its subsidiaries and to
consolidated items of the Company's consolidated results of operations.
Results of Operations
The Company was organized on February 7, 1995, commenced operations on March 24,
1995 with the acquisition of the first 21 of the Initial Hotels, and completed
its initial public offering of shares of beneficial interest on August 22, 1995.
The Company has been recently formed and accordingly has limited historical
financial data available.
The Company was a wholly owned subsidiary of Health and Retirement Properties
Trust from the date of inception until August 22, 1995, the date of the
Company's initial public offering, and was initially capitalized with $1 million
of equity and $163.3 million of debt. The debt was provided by HRP at rates
which were lower than the market rates which the Company would have paid on a
stand alone basis. Accordingly, the Company does not believe that its results of
operations while it was a wholly owned subsidiary of HRP are comparable to
subsequent periods.
Quarter Ended June 30, 1996 - Historical Results (dollar amounts in thousands
except per share amounts)
Total revenue for the quarter ended June 30, 1996 was $23,011 of which base and
percentage rent comprised $19,226 and FF&E reserve rent was $3,200. Total
11
<PAGE>
expenses for the quarter were $8,388 which consisted of interest expense of
$1,747, general and administrative expenses of $1,374 and depreciation of real
estate assets of $5,267. Net income was $14,623 ($.56 per share). Funds from
operations (defined as net income plus depreciation on real estate assets) and
cash available for distribution (defined as funds from operations less FF&E
reserve income plus amortization of deferred financing costs and other non-cash
charges) related to the quarter were $19,890 ($.76 per share) and $16,889 ($.64
per share), respectively. Cash flows provided by (used for) operating, investing
and financing activities for the quarter ended June 30, 1996 were $18,943,
($339,890) and $321,076, respectively.
The Company's tenants reported a 6.9% increase in combined RevPAR for the
quarter over the 1995 period, comprised primarily of a 6.4% increase in ADR.
Six Months Ended June 30, 1996 - Historical Results (dollar amounts in thousands
except per share amounts)
Total revenue for the six months ended June 30, 1996 was $33,345 of which base
and percentage rent comprised $27,897 and FF&E reserve rent was $4,820. Total
expenses for the six-month period were $12,100 which consisted of interest
expense of $1,962, general and administrative expenses of $2,134 and
depreciation of real estate assets of $8,004. Net income was $21,245 ($1.09 per
share). Funds from operations and cash available for distribution related to the
six-month period were $29,249 ($1.50 per share) and $24,736 ($1.27 per share),
respectively. Cash flows provided by (used for) operating, investing and
financing activities were $27,092, ($450,844) and $429,796, respectively, for
the six months ended June 30, 1996.
The Company's tenants reported a 7.0% increase in combined RevPAR for the first
half 1996 over the 1995 period, comprised primarily of a 6.6% increase in ADR.
Liquidity and Capital Resources (dollar amounts in thousands except per share
amounts)
In April 1996 the Company raised net proceeds of approximately $359,000 from the
Follow-on Offering. Proceeds were used to acquire hotel properties through
subsidiaries and pay related acquisition costs and to repay certain indebtedness
under the Credit Facility.
As of June 30, 1996 total assets of the Company were $840,964. This consists
primarily of net real estate assets of $816,946 of which approximately $400
million were acquired in the quarter ended June 30, 1996 with proceeds from the
Follow-on Offering and draws on the credit facility ("Credit Facility").
At June 30, 1996, the Company had $8,179 of cash and cash equivalents, and the
ability to borrow up to an additional $106,350 under its credit facility. The
Company believes it will have access to various types of financing in addition
to or in place of the Credit Facility, including debt or equity securities with
which to complete future acquisitions and to otherwise meet its long term
funding requirements.
Pursuant to the terms of the lease and management agreements, the Company's
tenants and operators are required to fund an FF&E reserve account in amounts
equal to 5% of total hotel sales. Funds escrowed in the FF&E reserve account are
used for capitalized improvements, replacements and refurbishment of the hotels.
The Company believes that these funds will be adequate to maintain the
competitiveness of its hotels.
The Company continues to actively pursue acquisition opportunities to diversify
and expand its portfolio of hotel properties and expects to utilize
undistributed cash generated from operations and funds available under its
acquisition line or other borrowings, to complete such acquisitions. The Company
intends to balance the use of debt and equity in such a manner that the long
term cost of funds used to acquire facilities is appropriately matched, to the
extent practicable, to the terms of the investments made with such funding.
Current expenses and dividends are provided for by operations. To maintain its
status as a real estate investment trust ("REIT") under the Internal Revenue
Code of 1986, as amended, the Company must meet certain requirements including
the distribution of at least 95% of its taxable income to its shareholders. As a
REIT, the Company expects not to be subject to federal income taxes.
Dividends are based principally on cash available for distribution which may not
equal cash provided by operating activities because the cash flow of the Company
is affected by other factors not included in the cash available for distribution
calculation.
12
<PAGE>
Seasonality
Most of the Company's hotels experience seasonal variation in operating results
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 presently expected to cause fluctuations in the Company's
rental income because the Company believes that the revenues generated by its
hotels will be sufficient to pay rents on a regular basis notwithstanding
seasonal fluctuations.
Certain Important Factors
The Company's Quarterly Report on Form 10-Q contains statements which constitute
forward looking statements. Those statements appear in a number of places in
this Form 10-Q and include statements regarding the intent, belief or
expectations of the Company, its Trustees or its officers with respect to the
declaration or payment of dividends, the adequacy of reserves, the consummation
of additional acquisitions, policies and plans of the Company regarding
investments, financings or other matters, the Company's qualification and
continued qualification as a real estate investment trust or trends affecting
the Company's or its hotels' financial condition or results of operations.
Readers are cautioned that its 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, seasonality, 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 this Form 10-Q and the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
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.
13
<PAGE>
PART II Other Information
Item 4. Submission of Matters to a Vote of Shareholders
At the Company's regular annual meeting of shareholders held on May 21, 1996,
Barry M. Portnoy was re-elected Trustee of the Company (11,369,901 voted for,
votes with respect to 44,262 shares withheld and 1,100 shares present but not
voted) and John L. Harrington was re-elected as a Trustee of the Company
(11,367,901 shares voted for, votes with respect to 46,262 shares withheld and
1,100 shares present but not voted). The terms of Messrs. Portnoy and Harrington
will extend until the Company's 1999 annual meeting of shareholders. Messrs.
Gerard M. Martin, William J. Sheehan and Arthur G. Koumantzelis continue to
serve as Trustees with terms expiring in 1997, 1997 and 1998, respectively.
Item 6. Exhibit
27. Financial Data Schedule
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: August 14, 1996
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements of Hospitality Properties Trust for the
six months ended June 30, 1996 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 8,179
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,839
<PP&E> 830,768
<DEPRECIATION> 13,822
<TOTAL-ASSETS> 840,964
<CURRENT-LIABILITIES> 179,038
<BONDS> 0
0
0
<COMMON> 661,926
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 840,964
<SALES> 32,717
<TOTAL-REVENUES> 33,345
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,138
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,962
<INCOME-PRETAX> 21,245
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,245
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,245
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 0
</TABLE>
