Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|X| Preliminary proxy statement |_| Confidential, for use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HOSPITALITY PROPERTIES TRUST
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:__________________________________________
(2) Form, Schedule or Registration Statement No.:____________________
(3) Filing Party:____________________________________________________
(4) Date Filed:______________________________________________________
<PAGE>
HOSPITALITY PROPERTIES TRUST
400 Centre Street
Newton, Massachusetts 02158
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held May 20, 1997
To the Shareholders of
Hospitality Properties Trust
Notice is hereby given that the Annual Meeting of Shareholders of
Hospitality Properties Trust (the "Company") will be held at 9:30 A.M. on
Tuesday, May 20, 1997, at State Street Bank and Trust Company, 225 Franklin
Street, 33rd Floor, Boston, Massachusetts, for the following purposes:
1. To elect two Trustees in Group II of the Company's
Board of Trustees.
2. To consider and act upon a proposal to amend the
Declaration of Trust to allow the Board of Trustees
to increase or decrease the authorized capital stock
of the Company.
3. To consider and act upon such other matters as may
properly come before the meeting.
The Board of Trustees has fixed the close of business on March 24, 1997
as the record date for determination of the shareholders entitled to notice of
and to vote at the meeting.
By Order of the Board of Trustees,
JOHN G. MURRAY, Secretary
March __, 1997
WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, PLEASE SIGN, DATE
AND RETURN YOUR PROXY IN THE ENVELOPE ENCLOSED HEREWITH.
<PAGE>
HOSPITALITY PROPERTIES TRUST
400 Centre Street
Newton, Massachusetts 02158
---------------------
ANNUAL MEETING OF SHAREHOLDERS
To Be Held on Tuesday, May 20, 1997
INTRODUCTION
A Notice of the Annual Meeting of Shareholders (the "Meeting") of
Hospitality Properties Trust (the "Company") is set forth on the preceding page,
and there is enclosed herewith a form of proxy solicited by the Board of
Trustees of the Company. This proxy statement is being first sent to
shareholders on or about March ___, 1997, together with a copy of the Annual
Report to Shareholders for the year ended December 31, 1996 (including audited
financial statements of the Company).
Only shareholders of record as of the close of business on March 24,
1997 (the "Record Date") are entitled to notice of and to vote at the Meeting
and/or any adjournment thereof. The outstanding stock of the Company on the
Record Date entitled to vote consisted of 26,871,395 common shares of beneficial
interest, $.01 par value per share (the "Common Shares"). The holders of the
outstanding Common Shares are entitled to one vote per share.
All Common Shares represented by valid proxies received by the Company
prior to the Meeting will be counted for purposes of determining the presence of
a quorum and will be voted as specified in the proxies. If no specification is
made by the shareholder, the Common Shares will be voted FOR the proposals set
forth below. Proposals set forth below require the affirmative vote of a
majority of the Common Shares issued and outstanding. If a broker indicates on a
proxy that it does not have discretionary authority with respect to certain
Common Shares to vote on a proposal, those Common Shares will not be counted as
voting in favor of such proposal. A shareholder giving a proxy has the power to
revoke it any time prior to its exercise by delivering to the Secretary of the
Company a written revocation or a duly executed proxy bearing a later date, or
by attending the Meeting and voting his or her Common Shares in person. Adoption
of the proposals presented in this proxy statement does not give rise to
appraisal rights or other dissenter's rights under Maryland law.
The cost of this solicitation will be borne by the Company. In addition
to solicitation by mail, the Trustees and officers of the Company may solicit
proxies personally or by telephone or telegram. The Company has also engaged the
firm of Corporate Investor Communications, Inc. ("CIC") to assist in the
solicitation of proxies with respect to this Proxy Statement. The Company has
agreed to pay to CIC a fee of $5,000 and to reimburse it for certain expenses in
connection with such services. The Company has also agreed to indemnify CIC for
certain liabilities and other matters in connection with such services. The
Company and CIC may request record holders of the Company's Common Shares
beneficially owned by others to forward this supplemental material to the
beneficial owners of such Common Shares and may reimburse such record holders
for their reasonable expenses incurred in doing so.
Item 1. Election of Trustees in Group II of the Board of Trustees
The number of Trustees of the Company currently is fixed at five and
the Board of Trustees currently is divided into three groups with two Trustees
in Group I, two Trustees in Group II and one Trustee in Group III. Trustees in
each Group are elected to three-year terms.
The business of the Company is conducted under the general direction of
the Board of Trustees as provided by the Amended and Restated Declaration of
Trust (the "Declaration of Trust") and the By-Laws of the Company and the laws
of the State of Maryland.
The Declaration of Trust provides that a majority of the Board of
Trustees will be composed of Independent Trustees who are not affiliated with
HRPT Advisors, Inc., a Delaware corporation which is the Company's investment
advisor ("Advisors"), or with Health and Retirement Properties Trust ("HRP") and
who do not serve as officers of the
<PAGE>
Company. Messrs. John L. Harrington, Arthur G. Koumantzelis and William J.
Sheehan are the Company's Independent Trustees.
The entire Board of Trustees functions as an Executive Compensation
Committee to implement the Company's 1995 Incentive Share Award Plan (the
"Plan"). A subcommittee of the Executive Compensation Committee composed of the
Independent Trustees reviews the performance of Advisors under its advisory
agreement with the Company (the "Advisory Agreement") and the award of Common
Shares, other than awards of Common Shares to Independent Trustees described
below, under the Plan. See "Certain Relationships and Related Transactions --
Advisors and the Advisory Agreement" and "Other Information -- Incentive Share
Award Plan." The Executive Compensation Committee does not meet independently of
meetings of the Board of Trustees. The Company does not have a Nominating
Committee.
The Board of Trustees maintains an Audit Committee consisting of the
three Independent Trustees. The Audit Committee makes recommendations concerning
the engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, considers
the appropriateness of audit and nonaudit fees charged and reviews the adequacy
of the Company's internal accounting controls. The Audit Committee met four
times in 1996.
During 1996, the Board of Trustees held seven meetings. Each Trustee
attended 75% or more of the total number of meetings of the Board and any
Committee of which he was a member.
The Company pays its Independent Trustees an annual fee of $20,000 plus
a fee of $500 for each meeting attended and reimburses expenses incurred by its
Independent Trustees for attending meetings. Under the Plan, each Independent
Trustee automatically receives an annual grant of 300 Common Shares at the first
meeting of the Board of Trustees following each Annual Meeting of Shareholders.
See "Other Information -- Incentive Share Award Plan." In addition, the
Independent Trustee serving as Chairman of the Audit Committee, which position
rotates annually among the Independent Trustees, is paid $2,000 per year for
such service.
The present Trustees in Group II are Gerard M. Martin and William J.
Sheehan. If re-elected, Messrs. Martin and Sheehan will hold office until the
Company's 2000 Annual Meeting of Shareholders. To be elected, each nominee for
Trustee of the Company must receive the vote of a majority of the Common Shares
issued and outstanding. It is the intention of the persons authorized by the
enclosed proxy to nominate and elect Messrs. Martin and Sheehan as the Group II
Trustees. HRP and Advisors, which have voting control over an aggregate of
4,713,403 Common Shares (approximately 17.5% of Common Shares outstanding and
entitled to vote at the Meeting), intend to vote in favor of the election of
Messrs. Martin and Sheehan as the Group II Trustees.
The principal occupations for the past five years and age as of March
1, 1997 of Messrs. Martin and Sheehan are as follows:
GERARD M. MARTIN Age: 62
Mr. Martin is a Managing Trustee of the Company. Mr. Martin is a
private investor in real estate and has been a Managing Trustee of HRP since its
organization in 1986. From 1985 until the merger of Greenery Rehabilitation
Group, Inc. ("Greenery") into Horizon Healthcare Corporation (now known as
Horizon/CMS Healthcare Corporation) ("HHC") in February 1994 (the
"Horizon/Greenery Merger"), he served as the Chief Executive Officer and
Chairman of the Board of Directors of Greenery. Mr. Martin was a Director of HHC
prior to his resignation in July 1996. Mr. Martin is currently a Director and
50% shareholder of Advisors. Mr. Martin served as interim President of the
Company from the Company's formation through John G. Murray's election to such
office in March 1996. Mr. Martin has been active in the real estate industry for
more than 30 years.
2
<PAGE>
WILLIAM J. SHEEHAN Age: 52
Mr. Sheehan has been the Chief Financial Officer of Ian Schrager
Hotels, Inc. since May 1995. From 1993 through May 1995, Mr. Sheehan was a self
employed consultant on financial and operating matters to companies in the hotel
industry. From 1982 until 1993 he was employed by Omni Hotels, most recently as
Vice Chairman (1992 to 1993) and President and Chief Executive Officer (1988 to
1992). Prior to that time, he was a partner at Arthur Andersen & Co. (now Arthur
Andersen LLP). Mr. Sheehan is a certified hotel administrator, a Fellow of the
Educational Institute of the American Hotel and Motel Association and has been a
speaker at various hotel industry conferences .
In addition to Messrs. Martin and Sheehan, the following persons
currently serve on the Board of Trustees or serve as executive officers of the
Company. Their principal occupations for the last five years and their ages as
of March 1, 1997 are as follows:
JOHN L. HARRINGTON Age: 60
Mr. Harrington has been the Chief Executive Officer of the Boston Red
Sox Baseball Club for at least five years and is Executive Director and Trustee
of the Yawkey Foundation and a Trustee of the JRY Trust. Mr. Harrington is also
a director of a bank subsidiary of Fleet Financial Group, Inc. Mr. Harrington
was a Trustee of HRP from 1991 through August 1995. Mr. Harrington is a Group I
Trustee; his term will expire at the 1999 Annual Meeting of Shareholders.
ARTHUR G. KOUMANTZELIS Age: 66
Mr. Koumantzelis has been Senior Vice President and Chief Financial
Officer of Cumberland Farms, Inc. since July 1990. Cumberland Farms, Inc. is a
private company engaged in the convenience store business in the northeastern
United States and Florida and in the distribution and retail sale of gasoline in
the northeastern United States. Cumberland Farms, Inc. filed a voluntary
petition under Chapter 11 of the United States Bankruptcy Code in May 1992 and
subsequently emerged from bankruptcy proceedings in December 1993. Mr.
Koumantzelis was a Trustee of HRP from 1992 through August 1995. Mr.
Koumantzelis is a Group III Trustee; his term will expire at the 1998 Annual
Meeting of Shareholders.
BARRY M. PORTNOY Age: 51
Mr. Portnoy has been a partner in the law firm of Sullivan & Worcester
LLP, counsel to the Company, since 1978. Mr. Portnoy has been a Managing Trustee
of the Company since its organization on May 12, 1995 and has been a Trustee of
HRP since its organization in 1986. Mr. Portnoy was a Director of HHC prior to
his resignation in July 1996. Mr. Portnoy is currently a Director and 50%
shareholder of Advisors. Mr. Portnoy has been actively involved in real estate
and real estate finance activities for approximately 20 years. Mr. Portnoy is a
Group I Trustee; his term will expire at the 1999 Annual Meeting of
Shareholders.
JOHN G. MURRAY Age: 36
Mr. Murray is the President, Chief Operating Officer and Secretary of
the Company. Mr. Murray is also Executive Vice President and Chief Financial
Officer of Advisors. Prior to his election to the office of President and Chief
Operating Officer in March 1996, Mr. Murray also served as Treasurer and Chief
Financial Officer of the Company. Mr. Murray served in various capacities for
HRP from 1993 through August 1995 and for Advisors since 1993. Mr. Murray served
as Director of Finance, Business Analysis and Planning at Fidelity Brokerage
Services, Inc. from 1992 to 1993 and served as Director of Acquisitions from
1990 through 1991. Prior to 1990, Mr. Murray was a senior manager at the
accounting firm of Arthur Young & Company (now Ernst & Young LLP). Mr. Murray is
a certified public accountant.
3
<PAGE>
THOMAS M. O'BRIEN Age: 30
Mr. O'Brien is the Treasurer and Chief Financial Officer of the
Company. Mr. O'Brien is also a Vice President and employee of Advisors. Prior to
his election to such office in March 1996, Mr. O'Brien was employed by Arthur
Andersen LLP for more than five years. Mr. O'Brien is a certified public
accountant.
Item 2. Proposal to Amend the Declaration of Trust to Allow the Board of
Trustees to Increase or Decrease the Authorized Capital Stock of the
Company.
On February 5, 1997, in response to a recent change in Maryland law,
the Board of Trustees approved and recommended for shareholder approval, an
amendment to the Declaration of Trust (the "Proposed Amendment") which would
allow the Board of Trustees to amend the Declaration of Trust to increase or
decrease the authorized capital stock of the Company without the requirement of
shareholder approval. The Board of Trustees recommends a vote "FOR" the Proposed
Amendment. The full text of the Proposed Amendment to Section 5.1 of the
Declaration of Trust is included as Appendix A to this Proxy Statement. If
approved by the shareholders, the Proposed Amendment will become effective upon
the filing of an amendment to the Declaration of Trust with the State Department
of Assessments and Taxation of Maryland, which will occur as soon as reasonably
practicable.
Purpose and Effect of the Proposed Amendment
The Proposed Amendment is in response to a change in Maryland law,
effective October 1, 1995, which allows a declaration of trust of a Maryland
real estate investment trust to provide that "the board of trustees may amend
the declaration of trust to increase or decrease the aggregate number of shares
or the number of shares of any class that the trust has authority to issue." The
Board of Trustees believes that the Company's ability to finance its growth
through acquisitions of properties, merger or otherwise is dependent in part
upon ready access to the public equity markets. In order to respond quickly and
on an ongoing basis to opportunities for favorable access to the public markets,
the Company must be able to issue Shares (as defined below) quickly, as the
Board of Trustees deems advisable. In addition, the Company may in the future
acquire properties for a purchase price payable, in whole or in part, in Shares.
The Proposed Amendment will facilitate the Company's ability to enter into such
transactions. The time and expense of repeated solicitation of proxies to
increase the number of authorized Shares may have a material negative impact on
the Company's ability to do so in the future. As of March 4, 1997, the Company
had issued 26.9% of its authorized Common Shares. Although the remaining
authorized Common Shares as of March 1, 1996, 73,128,605, may be adequate in the
near term, it is the belief of the Board of Trustees that the flexibility
provided by the Proposed Amendment is in the best interests of the Company and
its shareholders.
The Company has no present intention, agreement or understanding to
authorize or issue Shares in excess of those currently authorized nor does it
have any present intention, agreement or understanding to decrease the number of
Shares authorized. Assuming adoption of the Proposed Amendment, Shares of the
Company may be authorized and issued or the number of Shares authorized
decreased without further action by the shareholders.
As with any issuance of equity, the issuance of additional Shares now
or in the future could have some dilutive effect upon the earnings per share of
the Company and voting rights of the existing shareholders. Such dilution may be
greater or lesser depending upon whether such additional Shares are Common or
Preferred Shares (as defined below) and, if Preferred Shares, the terms of such
Preferred Shares which may be set by the Board of Trustees in its sole
discretion.
The Proposed Amendment is not intended to have an anti-takeover effect.
The Proposed Amendment is not being recommended in response to any specific
effort of which the Company is aware to obtain control of the Company. The
Company is not aware of any existing or planned effort on the part of any person
to accumulate significant amounts of its Shares, or to acquire control of the
Company by means of a merger, tender offer, proxy solicitation in opposition to
management or otherwise.
4
<PAGE>
For the Company to qualify as a real estate investment trust ("REIT")
under the Internal Revenue Code of 1986, as amended (the "Code"), in any taxable
year, not more than 50% in value of its outstanding Shares may be owned,
directly or indirectly by five or fewer individuals during the last six months
of such year, and the Shares must be owned by 100 or more persons during at
least 335 days of a taxable year or a proportionate part of a taxable year less
than 12 months. In connection with the foregoing, if the Trustees shall, at any
time and in good faith, be of the opinion that direct or indirect ownership of
Shares representing more than 9.8% in number, value or voting power of the total
Shares outstanding has or may become concentrated in the hands of one beneficial
owner, other than Excepted Persons (as defined in the Declaration of Trust), the
Trustees shall have the power to redeem or prohibit the transfer of all or a
part of the affected Shares. Further the Declaration of Trust provides that
transfers or purported acquisitions, directly, indirectly or by attribution, of
Shares, or securities convertible into Shares, that could result in
disqualification of the Company as a REIT are null and void and permits the
Trustees to repurchase Shares or other securities to the extent necessary to
maintain the Company's status as a REIT.
The Declaration of Trust does not contain a special voting provision
relating to business combinations and the Company has elected not to be governed
by the provisions of Subtitle 6 and 7 of Title 3 of the Corporations and
Associations Article of the Annotated Code of Maryland regarding business
combinations.
The Board of Trustees also has under active consideration and has voted
to proceed to implement a shareholder rights plan. The plan, if finally approved
by the Board of Trustees, would operate in general as follows. Each shareholder
would receive one right (a "Right") for each Common Share held. Each Right would
entitle the holder to buy a specified percentage of a share of a newly created
series of preferred shares of beneficial interest for an exercise price to be
set forth in the plan. As a general matter, Rights would be exercisable at a
specified time after a person or group acquired beneficial ownership of a
specified percentage of the Common Shares or began a tender or exchange offer
for such specified percentage or more of the Common Shares or if the Company
were involved in certain mergers or business combinations. As a general matter,
each Right would entitle its holder, other than the acquiring person or group or
certain related parties, to purchase Common Shares (or, in some cases, cash,
property or other securities of the Company) having twice the value of the
exercise price. Under certain circumstances, the Company would retain the right
to redeem Rights at a nominal price. The plan would be subject to amendment from
time to time by the Board of Trustees. Rights would be nonvoting and would
expire after a period of time. The plan is not currently in effect and may be
abandoned prior to the implementation, and any such plan, if implemented, may be
modified from the proposal described above.
The provisions of the Declaration of Trust, the grouping of the
Company's Board of Trustees into three groups with staggered terms of office and
the shareholder rights plan described in the paragraph above, when and if
adopted, may have the effect of discouraging unilateral tender offers or other
takeover proposals or proxy contests which certain shareholders might deem in
their interests or pursuant to which they might receive a substantial premium
for their Shares. While not proposed for that purpose, the Proposed Amendment
will grant to the Board of Trustees greater authority to authorize and issue
Shares of any series or class. Such authority could be used in order to
discourage, and the existence of such authority could also discourage, such
tender offers, proposals or contests. The provisions discussed above and the
Proposed Amendment could also have the effect of insulating current management
against the possibility of removal and could, by possibly reducing temporary
fluctuations in market price caused by accumulations of Shares, deprive
shareholders of opportunities to sell at a temporarily higher market price.
Capital Stock of the Company
The Declaration of Trust currently authorizes the Company to issue an
aggregate of 200,000,000 shares of beneficial interest ("Shares") in the
Company, including (i) 100,000,000 Common Shares, par value $.01 per share, and
(ii) 100,000,000 Preferred Shares, par value $.01 per share (the "Preferred
Shares"). As of March 4, 1997, there were 26,871,395 Shares outstanding, all of
which were Common Shares. The Declaration currently authorizes the Board of
Trustees to cause the issuance, without shareholder approval, of classes or
series of Preferred Shares from time to time and to set (or change, if the class
or series has been previously established) the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms and conditions of redemption of such Preferred Shares that are not
prohibited by the Declaration of Trust or applicable law.
5
<PAGE>
Except as otherwise determined by the Board of Trustees with respect to
any class or series of Preferred Shares, all Shares: (i) will participate
equally in dividends payable to shareholders when, as and if declared by the
Trustees and ratably in net assets available for distribution to shareholders on
liquidation or dissolution; (ii) will have one vote per share on all matters
submitted to a vote of the shareholders; (iii) will not have cumulative voting
rights in the election of Trustees; and (iv) will have no preference,
conversion, exchange, sinking fund, redemption rights or preemptive or similar
rights.
Upon issuance in accordance with the Declaration of Trust and
applicable law the Company's Shares are fully paid and nonassessable. The
holders of Shares do not have preemptive rights with respect to the issuance of
additional Shares or other securities of the Company. The authorized but
unissued Shares are available for issuance from time to time by the Company at
the sole discretion of its Board of Trustees without further action by the
Company's shareholders, except as may be required by applicable law or the rules
of the New York Stock Exchange or any other stock exchange or national
securities association trading system on which the securities may be listed or
traded, for any proper trust purpose, which could include raising capital,
providing compensation or benefits to employees and others, paying stock
dividends or acquiring companies, businesses or properties.
Vote Required for Approval
The affirmative vote of the holders of a majority of the issued and
outstanding Common Shares is required to adopt the Proposed Amendment.
The Board of Trustees Recommends That the Shareholders Vote FOR the Proposed
Amendment to the Declaration of Trust.
OTHER INFORMATION
Compensation of Executive Officers
The Company does not have any employees; services which otherwise would
be provided by employees are performed by Advisors pursuant to the Advisory
Agreement and by the Managing Trustees and officers of the Company. Payments by
the Company to Advisors are described in "Certain Relationships and Related
Transactions -- Advisors and the Advisory Agreement."
The following table provides summary compensation information for
executive officers of the Company since the Company's formation in 1995:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation(1) Long-Term Compensation
--------------------------------------- ---------------------------------------------------------
Restricted Securities
Other Annual Stock Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Awards(2) Options/SARs LTIP Payouts Compensation
- --------------------------- ---- ------ ----- ------------ --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John G. Murray, President &
Chief Operating Officer (chief
executive officer).......... 1996 None None None $ 53,250 None None None
1995 None None None None None None None
Thomas M. O'Brien, Treasurer
& Chief Financial Officer... 1996 None None None $ 39,938 None None None
1995 None None None None None None None
6
<PAGE>
Adam D. Portnoy, Vice
President(3)................ 1996 None None None $ 26,625 None None None
Gerard M. Martin(4)......... 1996 None None None None None None None
1995 None None None None None None None
<FN>
(1) Except with respect to incentive share awards, the Company has not paid
and has no current plans to pay compensation to its executive officers.
Advisors, which conducts the day-to-day operations of the Company,
compensated Messrs. Murray, O'Brien and Portnoy in connection with
their services to Advisors and to the Company.
(2) All incentive share awards have been granted pursuant to the Plan and,
except as otherwise described in Note 3 below, each provides that one
third of each annual incentive share award vests immediately upon grant
and one third vests on each of the first and second anniversaries of
the grant. In the event any executive officer who has been granted an
incentive share award ceases to perform the duties of an executive
officer of the Company during the vesting period of such award, that
executive officer will only be entitled to retain the number of Shares
which have vested up to the date of his departure, unless vesting of
Shares is accelerated by the Board of Trustees. At December 31, 1996,
Messrs. Murray, O'Brien and Portnoy held 2,000, 1,500 and 1,000 of
Common Shares granted under annual incentive share awards,
respectively, having a value of $58,000, $43,500 and $29,000
respectively, based upon a $29 per share closing price for the Common
Shares as reported on the New York Stock Exchange on December 31, 1996.
Common Shares are entitled to dividends as declared by the Company. The
dollar amounts shown in the table represent the number of restricted
Shares which have vested or continue to be subject to vesting
multiplied by the closing price for the Common Shares on the New York
Stock Exchange on the date of grant.
(3) Mr. Adam Portnoy, the son of Barry M. Portnoy, served as Vice President
during a portion of 1996 until January of 1997. The 1,000 Common Shares
held by him under the Plan became fully vested in 1997.
(4) Mr. Martin served as interim President of the Company from the
Company's formation through John G. Murray's election to such office in
March 1996. He received no compensation in such capacity.
</FN>
</TABLE>
Incentive Share Award Plan
The Company adopted the Plan prior to its initial public offering of
Common Shares and has reserved 100,000 Common Shares for grant thereunder to
Independent Trustees and officers of, and consultants (other than Advisors) to,
the Company. The officers of the Company are employees of Advisors and not of
the Company and therefore receive their salary compensation from Advisors. The
Company has established the Plan in order to provide it with a vehicle with
which to foster a continuing identity of interest among the Company's officers
and Independent Trustees and the Company's shareholders. In addition, the Plan
permits the Company to compensate its officers for the performance of certain
duties which fall outside the scope of services covered by the Advisory
Agreement. The Company currently has three Independent Trustees and two officers
eligible for grants under the Plan.
The Plan is administered by a subcommittee of the Executive
Compensation Committee comprised of the Independent Trustees. Except for
automatic grants to the Independent Trustees, each award must be approved by a
majority of the Independent Trustees. In connection with any such award, the
Independent Trustees are authorized to determine the amount and timing of the
award and the extent to which vesting restrictions, if any, apply to the granted
Common Shares. 4,500 Common Shares were granted under the Plan during 1996 to
officers of the Company in addition to the automatic awards to the Independent
Trustees described below.
7
<PAGE>
The Independent Trustees automatically receive grants of 300 Common
Shares per year as part of their annual compensation. The Independent Trustees
are ineligible for other grants of Common Shares under the Plan. On May 21, 1996
each of the Independent Trustees received an award of 300 Common Shares, having
an aggregate value of $23,288 (based on the $257/8 closing price of Common
Shares on the New York Stock Exchange on the date of issuance of such Common
Shares).
Compensation Committee Interlocks and Insider Participation
The Company has an Executive Compensation Committee comprised of the
entire Board of Trustees. A subcommittee of the Executive Compensation Committee
composed of the Independent Trustees (Messrs. Harrington, Koumantzelis and
Sheehan) makes recommendations for grants of shares under the Plan and such
recommendations are acted upon by the full Board of Trustees. Gerard M. Martin,
a member of the Board of Trustees, was the President of the Company prior to Mr.
Murray's election in March 1996 and Barry M. Portnoy, another member of the
Board of Trustees, is a partner in the firm of Sullivan & Worcester LLP, counsel
of the Company.
Performance Graph--Comparison of Cumulative Total Return
The graph below shows, for the periods indicated, the Company's
cumulative total shareholder return on its Common Shares (assuming a $100
investment on August 31, 1995, the first day following the beginning of public
trading in the Company's Common Shares on the New York Stock Exchange for which
all information set forth below is available) as compared with (a) the Standard
& Poor's 500 Index and (b) the National Association of Real Estate Investment
Trust, Inc.'s index of all tax-qualified real estate investment trusts listed on
the New York Stock Exchange, the American Stock Exchange and the NASDAQ/National
Market System (NAREIT). The comparison assumes all dividends are reinvested.
Measurement Period HPT NAREIT S&P 500 Index
------------------ --- ------ -------------
August 31, 1995 100 100 100
December 31, 1995 110 106 110
December 31, 1996 131 143 136
8
<PAGE>
Executive Compensation Report
Hospitality Properties Trust (the "Company") developed and implemented
its 1995 Incentive Share Award Plan (the "Plan") in recognition of the following
circumstances. First, the Company's Common Shares are primarily a yield vehicle
for shareholders and do not appreciate in value in the same manner as other
equity securities. Therefore, a conventional stock option plan would not provide
appropriate incentives for the Company's management. Second, because the
executive officers of the Company are employees of HRPT Advisors, Inc.
("Advisors"), the Company's advisor, and not of the Company, and receive their
salary compensation from Advisors, the Trustees wished to establish a vehicle
which would, among other things, (a) foster a continuing identity of interest
between management of the Company and its shareholders, and (b) recognize that
the Company's executive officers perform certain duties on behalf of the
Company, primarily with regard to shareholder relations and investor
communications, which fall outside of the services covered by the Advisory
Agreement. In granting incentive share awards, the Trustees consider factors
such as the amount and terms of restricted Common Shares previously granted to
executive officers and the amount of time spent and complexity of the duties
performed by executive officers on behalf of the Company, speaking at Company
conferences, road shows and making additional presentations, interfacing with
analysts and preparing and distributing shareholder reports, materials,
statements and other information. The Trustees may impose vesting restrictions
or other conditions on the granted Common Shares, which may further promote
continuity of management.
In 1996, John G. Murray, President and Chief Operating Officer of the
Company, received a grant of 2,000 Common Shares under the Plan, 667 Common
Shares of which vested immediately upon grant, 667 of which will vest on the
first anniversary of the grant and 666 of which will vest on the second
anniversary of the date of grant. In 1996, Mr. O'Brien, the Treasurer and Chief
Financial Officer of the Company, received a grant of 1,500 Common Shares under
the Plan, 500 of which vested immediately upon the grant and 500 of which will
vest on each of the first and second anniversaries of the grant. In 1996, Mr.
Adam Portnoy, the Vice President of the Company, received a grant of 1,000
Common Shares under the Plan, 333 of which vested immediately upon the grant.
Mr. Portnoy resigned his position with the Company in January of 1997, and the
Board of Trustees voted to accelerate fully the vesting of his Common Shares.
The determination of the number of Common Shares granted to Messrs. Murray,
O'Brien and Portnoy and the acceleration of the vesting schedule for Mr.
Portnoy's Common Shares were not specifically based on an estimate of the
Company's performance but instead was based on the relationship of the fair
market value of the Common Shares so granted, on the number of Common Shares
previously granted to each such individual, and on the Board's opinion as to the
value of the "outside" services to the Company, as discussed above, performed by
each of Messrs. Murray, O'Brien and Portnoy during the year preceding the grant.
BOARD OF TRUSTEES
John L. Harrington
Arthur G. Koumantzelis
Gerard M. Martin
Barry M. Portnoy
William J. Sheehan
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<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of the Common Shares by (i) each person known by the
Company to own beneficially more than 5% of the outstanding Common Shares, (ii)
each of the company's Trustees and (iii) all Trustees and executive officers of
the Company as a group. Unless otherwise indicated, each person or entity named
below has sole voting and investment power with respect to all Shares shown to
the beneficially owned by such person or entity, subject to the matters set
forth in the footnotes to the table below.
The table sets forth information regarding beneficial ownership of
Common Shares as of March 4, 1997.
<TABLE>
<CAPTION>
Beneficial Ownership
-------------------------
Number
Name and Address(1) of Shares Percent
--------- -------
<S> <C> <C>
Health and Retirement Properties Trust........................ 4,000,000 14.9%
HRPT Advisors, Inc.(2)........................................ 4,264,595 15.9%
Barry M. Portnoy(3).......................................... 4,264,595 15.9%
Gerard M. Martin(3).......................................... 4,264,595 15.9%
John L. Harrington(4)(5)..................................... 613 *
William J. Sheehan(4)(5)..................................... 609 *
Arthur G. Koumantzelis(4)(5)................................. 613 *
John G. Murray(6)............................................ 2,000 *
Thomas M. O'Brien(6)......................................... 1,500 *
Adam D. Portnoy(7)........................................... 1,000 *
All Trustees and executive officers as a
group (eight persons)(2)(3).................................. 4,270,930 15.9%
Neuberger & Berman LLC(8)..................................... 1,584,400 5.9%
<FN>
- -------------------
* Less than 1%
(1) The address of HRP is 400 Centre Street, Newton, MA 02158. The address
of each other named person or entity is c/o Hospitality Properties
Trust, 400 Centre Street, Newton, MA 02158 or as reported below.
(2) Advisors owns 264,595 Common Shares directly and may be deemed to
beneficially own 4,000,000 Common Shares owned by HRP by virtue of
being an investment advisor to HRP.
(3) Neither Mr. Portnoy nor Mr. Martin owns Common Shares directly. HRP, of
which Messrs. Portnoy and Martin are Managing Trustees, owns 4,000,000
Common Shares and Advisors, which is owned by Messrs. Portnoy and
Martin, owns 264,595 Common Shares. Messrs. Portnoy and Martin may be
deemed to have beneficial ownership of these Common Shares.
10
<PAGE>
(4) Each of the Independent Trustees receives a grant of 300 Common Shares
per annum as part of their annual compensation. See "--Incentive Share
Award Plan."
(5) Includes shares acquired under the Company's Dividend Reinvestment
Plan.
(6) One-third of these Common Shares is vested; the rest will vest in two
equal installments over the next two years.
(7) Mr. Adam Portnoy's address is 56 Kissling Street, San Francisco, CA
94103.
(8) Neuberger & Bergman LLC. ("NBLLC") has reported in an amendment to
Schedule 13G filed under the Securities Exchange Act of 1934, as
amended, that it is deemed to be the beneficial owner of 1,584,400
Common Shares since it has power to make decisions whether to retain or
dispose of such Common Shares held by many unrelated clients. NBLLC
reported that it holds sole power to vote or to direct the vote of
1,000 Common Shares and shared power to vote or to direct the vote of
an additional 1,576,200 Common Shares, and that it holds shared power
to dispose or to direct the disposition of 1,584,400 Common Shares, all
of which were reported to be owned by clients of NBLLC. Such shared
powers in respect of 1,576,200 Common Shares were reported to be held
by NBLLC together with Neuberger & Berman Management, Inc., as
subadvisor and investment manager, respectively, of Neuberger &
Berman's various funds. The 1,584,400 Common Shares do not include
3,000 Common Shares which NBLLC reported were owned by principals of
NBLCC in their personal securities accounts, as to which NBLLC
disclaims beneficial ownership. The principal place of business of
NBLLC was reported as 605 Third Avenue, New York, New York 10158.
</FN>
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the Advisory Agreement, Advisors has agreed to provide investment,
management and administrative services to the Company. Advisors is owned by
Messrs. Martin and Portnoy. The Advisory Agreement provides for an annual
advisory fee equal to 0.70% of the Company's Average Invested Capital (as
defined in the Advisory Agreement) up to $250 million, and 0.50% of Average
Invested Capital equal to or exceeding $250 million, and for an annual incentive
fee calculated on the basis of annual increases in the Company's cash flow
available for distribution per share. Starting in 1996 the incentive fee payable
to Advisors is 15% of annual increases in cash flow available for distribution
per share (but in no event more than $.02 per share), times the weighted average
number of shares outstanding in such year. Any incentive fees will be paid in
Common Shares. Aggregate fees paid to Advisors for services during 1996 were
$3.9 million, including $.5 million, based upon a per share price of $31.75,
payable in 14,595 Common Shares as an incentive fee.
In January 1997 Advisors provided funding for short term working
capital to the Company in the form of a demand loan in the amount of $7 million,
of which approximately $4 million remained outstanding at March 4, 1997, at a
floating interest rate equal to the brokers' call rate as published in the Wall
Street Journal plus 50 basis points. [The transaction was approved by the
Independent Trustees,] and the Company believes that the terms of such loan are
similar to or better than those the Company could expect in a similar arms'
length transaction.
In the ordinary course of its business Advisors is occasionally
involved in litigation, including the following matters to which the Company is
not a party. Early in 1995, HRP commenced a foreclosure action to enforce
indemnities given in connection with the surrender of certain leaseholds to, and
the purchase of certain properties by, HRP in 1992. In May 1995, the defendants
in the foreclosure action and parties related to HRP's former tenants and
sellers asserted cross claims against HRP, Advisors, Messrs. Martin and Portnoy
and others, including Sullivan & Worcester LLP, which acts as counsel to HRP,
Advisors and the Company. The same cross-claim defendants were served in late
February 1996 in an additional action in a federal court. The cross claims and
separate claims allege, among other things, fraud (including violations of
federal securities laws), conflicts of interest, breach of fiduciary duties,
legal malpractice, civil conspiracy and violations of 18 U.S.C. ss.1962 (RICO)
in connection with the leasehold surrenders, the transactions and indemnities
underlying the foreclosure action and certain related transactions, and that the
foreclosure defendants and third party plaintiffs suffered substantial damages
as a result. HRP, Advisors and other parties to this dispute have sought
arbitration of all arbitrable claims arising from this dispute pursuant to the
contract under which the dispute originated, and an arbitration proceeding is
now underway. The Company has been informed that additional related actions have
been brought against HRP, Advisors and the other defendants in the original
cross
11
<PAGE>
claims. The Company has been informed that HRP, Advisors and the other
crossclaim defendants intend to defend themselves in the actions or otherwise to
pursue such claims and rights which they may have. The outcome of these pending
claims and proceedings cannot be predicted.
COMPLIANCE WITH SECTION 16(a) OF EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Trustees and executive officers, and persons who own more than 10% of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of securities with the Securities and
Exchange Commission and the New York Stock Exchange. Executive officers,
Trustees and greater than 10% shareholders are required to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on review of the
copies of such reports furnished to the Company, the Company believes that,
during the 1996 fiscal year, all filing requirements applicable to its executive
officers, Trustees and greater than 10% shareholders were met.
AUDITORS
The Company is not required to submit the selection of its auditor to a
vote of shareholders. The Company's independent auditor since its organization
in 1995 has been Arthur Andersen LLP.
A representative of Arthur Andersen LLP is expected to be present at
the Meeting, with the opportunity to make a statement if desired, and is
expected to be available to respond to appropriate questions from shareholders
who are present at the Meeting.
SHAREHOLDER PROPOSALS
The Company's 1998 Annual Meeting of Shareholders is presently expected
to be held on or about May 19, 1998. Proposals of shareholders intended to be
present at the 1998 Annual Meeting must be received not later than February 19,
1998 nor earlier than January 20, 1998 for inclusion in the Company's proxy
statement and proxy for that meeting.
The Company's Bylaws establish an advance notice procedure with regard
to the nomination, other than by the Board, of candidates for election as
Trustees (the "Nomination Procedure"). The Nomination Procedure provides that
only persons who are nominated by or at the direction of the Board of Trustees,
or by a shareholder of record on the date of the giving of the notice who has
given timely prior written notice to the Secretary of the Company prior to the
meeting at which Trustees are to be elected, will be eligible for election as
Trustees. To be timely, notice of a shareholder's nominee in the case of an
annual meeting, must be received by the Company not less than 90 days nor more
than 120 days prior to the anniversary date of the immediately preceding annual
meeting (i.e. not later than February 19, 1998, nor earlier than January 20,
1998, with respect to the 1998 Annual Meeting of Shareholders).
12
<PAGE>
OTHER MATTERS
As of this time, the Board of Trustees knows of no other matters to be
brought before the Meeting. However, if other matters properly come before the
Meeting or any adjournment thereof, and if discretionary authority to vote with
respect thereto has been conferred by the enclosed proxy, the persons named in
the proxy will vote the proxy in accordance with their best judgment as to such
matters.
By Order of the Board of Trustees
John G. Murray, Secretary
Newton, Massachusetts
April __, 1997
13
<PAGE>
APPENDIX A
HOSPITALITY PROPERTIES TRUST
Proposed Amendment to Section 5.1
of the Amended and Restated Declaration of Trust
Section 5.1 of the Amended and Restated Declaration of Trust is hereby
amended to add the following sentence at the end of the first paragraph thereof.
"The Trustees are hereby expressly authorized at any time, and from
time to time, without Shareholder approval, to amend this Declaration
to increase or decrease the aggregate number of Shares or the number of
Shares of any class that the Trust has the authority to issue."
<PAGE>
[FRONT]
HOSPITALITY PROPERTIES TRUST
400 Centre Street, Newton, Massachusetts 02158
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints GERARD M. MARTIN, BARRY M. PORTNOY, and
JOHN G. MURRAY, and each of them, as Proxies of the undersigned, each with the
power to appoint his substitute, and hereby authorizes a majority of them, or
any one if only one be present, to represent and to vote, as designated below,
all the Common Shares of Beneficial Interest of Hospitality Properties Trust
held of record by the undersigned or with respect to which the undersigned is
entitled to vote or act, at the Annual Meeting of Shareholders to be held on May
20, 1997 or any adjournment or postponement thereof.
This proxy when properly executed will be voted in the manner directed here by
the undersigned shareholders. If no direction is made, this proxy will be voted
FOR Proposals 1 and 2.
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
Address Change/Comments:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[REVERSE]
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
1.) Election of Trustees in Group II:
For Against For All Except
/ / / / / /
Gerard M. Martin and William J. Sheehan
If you do not wish your shares voted "For" a particular nominee, mark
the "For All Except" box and strike a line through the nominee(s) name. Your
shares will be voted for the remaining nominee(s).
2.) Amendment to the Declaration to allow the Trustees to increase or
decrease the authorized capital stock of the Company .
For Against Abstain
/ / / / / /
<PAGE>
3.) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Mark box at right if comments or address changes are noted on
the reverse side of this card. / /
Please be sure to sign and date this Proxy.
DATE: ________________ RECORD DATE SHARES:
- --------------------------------- ---------------------------------
Shareholder Sign Here Co-owner Sign Here
