SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 13, 1998
HOSPITALITY PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 1-11527 04-3262075
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
400 Centre Street, Newton, MA 02158
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-964-8389
<PAGE>
CERTAIN IMPORTANT FACTORS
This Current Report contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Those statements appear in a number of places in this Current Report and
include statements regarding the intent, belief or expectations of the Company,
its Trustees or its officers with respect to the declaration or payment of
dividends, the consummation of additional acquisitions, policies and plans of
the Company regarding investments, dispositions, financings, conflicts of
interest or other matters, the Company's qualification and continued
qualification as a real estate investment trust or trends affecting the
Company's or any hotel's financial condition or results of operations. Readers
are cautioned that any such forward looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual results
may differ materially from those contained in the forward looking statement as a
result of various factors. Such factors include without limitation changes in
financing terms, the Company's ability or inability to complete acquisitions and
financing transactions, results of operations of the Company's hotels and
general changes in economic conditions not presently contemplated. The
information contained in the Company's Form 8-K dated February 11, 1998,
including the information under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations", and in the Company's
Annual Report on Form 10-K for its fiscal year ended December 31, 1996,
including under the captions "Item 5 Business and Properties" and in Exhibit 99
thereof, identifies other important factors that could cause such differences.
THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE COMPANY, DATED AUGUST 21,
1995 A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE
STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF THE TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE TRUST. ALL PERSONS
DEALING WITH THE TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE TRUST
FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
2
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(b) Index to Pro Forma Financial Statements and Other Data
(see index on page P-1).
(c) List of Exhibits.
12 Pro Forma Ratio of Earnings to Fixed Charges and Other Data.
3
<PAGE>
INDEX OF UNAUDITED PRO FORMA
FINANCIAL STATEMENTS AND OTHER DATA
Introduction to Unaudited Pro Forma Financial Statements
and Other Data....................................................... P-2
Unaudited Pro Forma Balance Sheet and Other Data..................... P-3
Unaudited Pro Forma Income Statement and Other Data.................. P-4
Notes to Unaudited Pro Forma Financial Statements and
Other Data........................................................... P-5
P-1
<PAGE>
HOSPITALITY PROPERTIES TRUST
Unaudited Pro Forma Financial Statements and Other Data
The following unaudited adjusted pro forma balance sheet at December 31,
1997 is intended to present the financial position of the Company as if the
transactions described in the notes hereto (the "Transactions") were consummated
at December 31, 1997. The following unaudited adjusted pro forma statement of
income for the year ended December 31, 1997 is intended to present the results
of operations of the Company as if the Transactions were consummated on January
1, 1997. These unaudited adjusted pro forma financial statements should be read
in conjunction with, and are qualified in their entirety by reference to, the
separate financial statements of the Company and certain of the acquired hotel
properties each included elsewhere herein or in the Company's Current Reports on
Form 8-K dated November 21, 1997, December 9, 1997 and February 11, 1998.
These unaudited adjusted pro forma financial statements are not necessarily
indicative of the expected financial position or results of operations of the
Company for any future period. Differences would result from, among other
considerations, future changes in the Company's portfolio of investments,
changes in interest rates, changes in the capital structure of the Company,
delays in the acquisition of certain properties and changes in the Company's
operating expenses.
The following unaudited pro forma balance sheet and unaudited pro forma
statement of income were prepared pursuant to the Securities and Exchange
Commission's rules for the presentation of pro forma data. The pro forma and
adjusted pro forma other data give effect to the consummation by the Company of
the Transactions. Certain properties expected to be acquired by the Company are
currently under construction or development by the sellers. Other properties
were under construction during the periods presented when they were owned or
under development by the sellers. The accompanying pro forma information does
not give further effect to the completion of construction or the related lease
commencement for any period prior thereto. Construction projects not completed
by December 31, 1997 are likewise not reflected in the pro forma balance sheet.
Rather, the effect of completion of construction of these properties is
presented separately from the pro forma information as described in the
accompanying notes. The Company believes that a display of such adjusted pro
forma data is meaningful and relevant to the understanding of the Transactions
and, accordingly has presented such data in the final two columns, labeled
"Other Data," on the accompanying pages.
P-2
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<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
UNAUDITED PRO FORMA BALANCE SHEET AND OTHER DATA
As of December 31, 1997
-----------------------------------------------------------------------------------------------
Pro Forma Other Data
------------------------------------- -------------------------------------
Pro Forma Other Adjusted
Historical [A] Adjustments Pro Forma Adjustments Pro Forma
--------------- ----------------- ---------------- ---------------- ----------------
(in thousands)
Assets
<S> <C> <C> <C> <C> <C>
Real estate properties $1,266,035 $ 56,915 [B] $1,322,950 $ 99,018 [G] $ 1,421,968
Accumulated depreciation (58,167) - (58,167) - (58,167)
--------------- ----------------- ---------------- ---------------- ----------------
1,207,868 56,915 1,264,783 99,018 1,363,801
Cash and cash equivalents 81,728 (27,401)[C] 54,327 (52,599)[H] 1,728
FF&E reserve (restricted cash) 11,165 - 11,165 - 11,165
Rent Receivable 1,623 - 1,623 - 1,623
Other assets 10,872 (2,900)[D} 7,972 184 [I] 8,156
--------------- ----------------- ---------------- ---------------- ----------------
$ 1,313,256 $ 26,614 $ 1,339,870 $ 46,603 $ 1,386,473
=============== ================= ================ ================ ================
Liabilities and
Shareholders' Equity
Term Debt $125,000 $ 150,000 [E] $ 150,000 $ - $150,000
(125,000)[F]
Revolving Debt - - - 36,701 [I] 36,701
Security deposits 146,662 5,614 [B] 152,276 9,902 [J] 162,178
Other liabilities 33,701 - 33,701 - 33,701
Shareholders' equity
Common shares of beneficial
interest 389 - 389 - 389
Additional paid-in capital 1,033,073 - 1,033,073 - 1,033,073
Cumulative net income 122,166 (4,000)[D] 118,166 - 118,166
Dividends (147,735) - (147,735) - (147,735)
--------------- ----------------- ---------------- ---------------- ----------------
Total shareholders' equity 1,007,893 (4,000) 1,003,893 - 1,003,893
--------------- ----------------- ---------------- ---------------- ----------------
$ 1,313,256 $ 26,614 $ 1,339,870 $ 46,603 $ 1,386,473
=============== ================= ================ ================ ================
</TABLE>
P-3
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<TABLE>
<CAPTION>
HOSPITALITY PROPERTIES TRUST
UNAUDITED PRO FORMA INCOME STATEMENT AND OTHER DATA
Year Ended December 31, 1997
--------------------------------------------------------------------------------------------
Pro Forma Other Data
------------------------------------- ---------------------------------
Pro Forma Other Adjusted
Historical [K] Adjustments Pro Forma Adjustments Pro Forma
---------------- ----------------- ---------------- --------------- ---------------
(in thousands, except per Share data)
<S> <C> <C> <C> <C> <C>
Revenues
Rental Revenue $98,561 $19,616 [L] $118,177 $20,096 [Q] $138,273
FF&E Reserve Income 14,643 - 14,643 - 14,643
Other Income 928 - 928 - 928
---------------- ----------------- ---------------- --------------- --------------
Total Revenue 114,132 19,616 133,748 20,096 153,844
---------------- ----------------- ---------------- --------------- --------------
Expenses
Depreciation and Amortization 31,949 8,083 [M] 40,032 6,198 [R] 46,230
Interest 15,534 (12,138)[N] 3,396 9,975 [S] 13,371
Terminated acquisition costs 713 - 713 - 713
General and Administrative 6,783 498 [O] 7,281 1,806 [T] 9,087
---------------- ----------------- ---------------- --------------- --------------
Total Expenses 54,979 (3,557) 51,422 17,979 69,401
---------------- ----------------- ---------------- --------------- --------------
Net Income $59,153 $23,173 $82,326 $ 2,117 $84,443
================ ================= ================ =============== ==============
Weighted Average Shares Outstanding 27,530 11,348 [P] 38,878 - 38,878
================ ================= ================ =============== ==============
Net Income Per Share $2.15 $2.12 $2.17
================ ================ ==============
Ratio of Earnings to Fixed Charges 4.8x 25.2x 7.3x
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P-4
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Hospitality Properties Trust
Notes to Unaudited Pro Forma Financial Statements and Other Data
(in thousands)
Pro Forma Balance Sheet Adjustments
A. Represents the historical balance sheet of the Company at December 31, 1997.
B. Represents the purchase of the 9 Candlewood[RegTM] hotels open but not
acquired as of December 31, 1997 for a cash price of $50,525, net of purchase
price withheld for security deposits of $5,614, plus closing costs.
C. Represents the net effect of the pro forma adjustments on cash.
D. Represents the write off of deferred financing costs related to the secured
term debt and the recording of the deferred finance costs in connection with
the proposed offering of $150,000 of senior notes (the "Offering"). The
accompanying pro forma income statement excludes the extraordinary loss and
other non-recurring charges of $4,000 related to the expected early
extinguishment of secured term debt.
E. Represents prepayment of the $125,000 of secured term debt.
F. Represents issuance of the senior notes expected to be issued in the
Offering.
Other Data
Balance Sheet Adjustments
G. Represents the purchase of the 7 hotels to be acquired but not open as of
December 31, 1997:
Cash purchase prices:
4 Courtyard by Marriott[RegTM] hotels $ 42,647
2 Residence Inn by Marriott[RegTM] hotels 39,357
One Candlewood[RegTM] hotel 7,112
Purchase price withheld as security deposits 9,902
----------
Total $ 99,018
==========
The above hotels are properties the Company expects to purchase from
sellers upon completion of construction.
H. Represents net effect of the pro forma adjustments on cash.
I. Represents pro forma net borrowings by the Company under its credit facility
to complete planned hotel acquisitions, including $184 of draw fees.
P-5
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Hospitality Properties Trust
Notes to Unaudited Pro Forma Financial Statements and Other Data
(in thousands)
J. Represents security deposits held by the Company as a result of purchasing
and leasing the following hotels:
4 Courtyard by Marriott[RegTM] hotels $ 4,739
2 Residence Inn by Marriott[RegTM] hotels 4,373
One Candlewood[RegTM] hotel 790
-------
Total $ 9,902
=======
Pro Forma Income Statement Adjustments
K. Represents the historical income statement of the Company for the year ended
December 31, 1997.
L. Represents the pro forma effect of leases entered and to be entered for
hotels open during the period presented. This pro forma effect is derived as
follows:
Year Ended
December 31,
1997
Pro forma Minimum Rent $ 115,649
Pro forma Percentage Rent 2,528
Amounts included in historical
Minimum Rent (96,033)
Amounts included in historical
Percentage Rent (2,528)
----------
$ 19,616
==========
Certain of the hotels owned by the Company as of December 31, 1997 were under
development and others are currently under development by the sellers of
these properties. The Company is not contractually obligated to acquire these
hotels until they are substantially completed. The foregoing pro forma income
statement assumes the hotels, which were completed prior to December 31, 1997
were acquired as of their completion date.
M. Represents the impact of the pro forma transactions on depreciation expense
for the entire period presented.
N. Represents the elimination of interest on the secured term debt ($125,000) at
LIBOR plus the contractual spreads for the entire period presented, plus
amortization of deferred financing costs offset by the pro forma interest
expense of the proposed issuance of the senior notes. The average applicable
LIBOR rate was 5.60% for the year ended December 31, 1997.
O. Represents the estimated impact of the pro forma transactions on general and
administrative expenses of the Company for the period presented.
P. Represents the impact of additional Shares issued in 1997.
P-6
<PAGE>
Hospitality Properties Trust
Notes to Unaudited Pro Forma Financial Statements and Other Data
(in thousands)
Other Data
Income Statement Adjustments
Q. Represents the adjusted pro forma effect of leases entered and to be entered
for the transactions described in Note G, above, since January 1, 1997. This
adjusted pro forma effect is derived as follows:
Year Ended
December 31,
1997
Adjusted Pro forma Minimum Rent $ 135,745
Adjusted Pro forma Percentage Rent 2,528
Amounts included in pro forma Minimum Rent (115,649)
Amounts included in pro forma Percentage Rent (2,528)
-------------
$ 20,096
=============
R. Represents the impact of the transactions described in Note G, above, on
depreciation expense for the entire period presented.
S. Represents interest on the credit line borrowings to be made in connection
with the transactions described in Note G, above, at LIBOR plus contractual
spreads for the entire period presented. The average applicable LIBOR rate
was 5.60% for the year ended December 31, 1997.
T. Represents the estimated impact of the transactions described in Note G,
above, on general and administrative expenses of the Company.
P-7
<PAGE>
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
By: /s/Thomas M. O'Brien
--------------------------------------
Thomas M. O'Brien, Treasurer and Chief
Financial Officer
Date: February 13, 1998
Exhibit 12
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Hospitality Properties Trust
Computation of Pro Forma Ratio to Fixed Charges and Other Data
(in thousands, except ratio amounts)
For the Year
ended
December 31, 1997
Adjusted
Historical Pro Forma Pro Forma
<S> <C> <C> <C>
Income $59,153 $82,326 $84,443
Fixed Charges 15,534 3,396 13,371
------- ------- -------
Adjusted Earnings $74,687 $85,722 $97,814
======= ======= =======
Fixed Charges:
Interest on indebtedness and
amortization of
deferred finance cost $15,534 $3,396 $13,371
------- ------ -------
Total Fixed Charges $15,534 $3,396 $13,371
======= ====== =======
Ratio of Earnings to Fixed Charges 4.8x 25.2x 7.3x
======= ====== =======
</TABLE>
This computation should be read in conjunction with the Unaudited Pro Forma
Financial Statements and Other Data contained elsewhere in this Form 8-K.
