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): December 4, 1998
HOSPITALITY PROPERTIES TRUST
(Exact name of registrant as specified in charter)
Maryland 1-11527 04-3262075
(State or other (Commission file (IRS employer
jurisdiction of number) identification no.)
incorporation)
400 Centre Street, Newton, Massachusetts 02458
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 617-964-8389
<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 Hospitality
Properties Trust (the "Company"), its Trustees or its officers with respect to
the declaration or payment of dividends, the consummation of additional
acquisitions, policies and plans of the Company regarding investments,
dispositions, financings, conflicts of interest or other matters, the Company's
qualification and continued qualification as a real estate investment trust or
trends affecting the Company's or any hotel's financial condition or results of
operations. Readers are cautioned that any such forward looking statements are
not guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those contained in the forward
looking statements as a result of various factors. Such factors include, without
limitation, changes in financing terms, the Company's ability or inability to
complete acquisitions and financing transactions, results of operations of the
Company's hotels and general changes in economic conditions not presently
contemplated. The information contained in the Company's 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,
1997, including under the captions "Items 1. and 2. Business and Properties",
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.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(b) Pro Forma Financial Information.
Index to Unaudited Consolidated Pro Forma Financial Statements and
Other Data (see index on page F-1).
(c) Exhibits.
12 Computation of Pro Forma Ratio of Earnings to Fixed Charges
23 Consent of Arthur Andersen LLP.
-2-
<PAGE>
HOSPITALITY PROPERTIES TRUST
Index to Unaudited Pro Forma Consolidated Financial Statements and Other Data
<TABLE>
<S> <C>
1. Introduction to Unaudited Pro Forma Consolidated Financial
Statements and Other Data............................................F-2
2. Unaudited Pro Forma Consolidated Balance Sheet and Other Data
as of September 30, 1998 ............................................F-3
3. Unaudited Pro Forma Consolidated Statement of Income and Other Data
for the Nine Months Ended September 30, 1998.........................F-4
4. Unaudited Pro Forma Consolidated Statement of Income and Other Data
for the Year Ended December 31, 1997.................................F-5
5. Notes to Unaudited Pro Forma Consolidated Financial Statements
and Other Data.......................................................F-6
</TABLE>
F-1
<PAGE>
HOSPITALITY PROPERTIES TRUST
Introduction to Unaudited Pro Forma Consolidated Financial Statements
and Other Data
The following unaudited pro forma consolidated balance sheet at September
30, 1998 is intended to present the consolidated financial position of the
Company as if the transactions described in the notes hereto (the
"Transactions") were consummated at September 30, 1998. The following unaudited
pro forma consolidated statements of income are intended to present the
consolidated results of operations of the Company as if the Transactions were
consummated as of the beginning of the fiscal year presented. These unaudited
pro forma consolidated financial statements should be read in conjunction with,
and are qualified in their entirety by reference to, the separate consolidated
financial statements of the Company for the year ended December 31, 1997 and of
certain hotel properties the Company has acquired for the year ended January 2,
1998, incorporated herein by reference to the Company's Current Reports on Form
8-K dated February 11, 1998 and April 15, 1998 and to the Company's Annual
Report on Form 10-K for its year ended December 31, 1997; and the Company's
unaudited consolidated financial statements for the quarter ended September 30,
1998, incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998. These unaudited adjusted pro
forma consolidated financial statements are not necessarily indicative of what
the actual consolidated financial position or results of operations of the
Company would have been as of the date or for the period indicated, nor do they
purport to represent the expected consolidated financial position or results of
operations of the Company for any future period. Differences may 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 or any determination
not to complete the acquisition of any hotel properties and changes in operating
expenses.
The following unaudited pro forma consolidated balance sheet and
unaudited pro forma consolidated statements of income were prepared pursuant to
the Securities and Exchange Commission's rules for the presentation of pro forma
data. The pro forma and adjusted pro forma other data give effect to the
consummation by the Company of the Transactions. Certain properties expected to
be acquired by the Company are currently under construction or development by
the sellers. Other properties were under construction during the 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 September 30, 1998 are
likewise not reflected in the pro forma balance sheet. Rather, the effect of
completion of construction of these properties is presented separately from the
pro forma information as described in the accompanying notes. The Company
believes that a display of such adjusted pro forma data is meaningful and
relevant to the understanding of the Transactions and, accordingly has presented
such data in the final two columns, labeled "Other Data," on the accompanying
pages.
F-2
<PAGE>
HOSPITALITY PROPERTIES TRUST
Unaudited Pro Forma Consolidated Balance Sheet and Other Data
As of September 30, 1998
(amounts in thousands)
<TABLE>
<CAPTION>
Pro Forma Other Data
--------------------------- ---------------------------
Pro Forma Other Adjusted Pro
Historical (A) Adjustments Pro Forma Adjustments Forma
------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Real estate properties $1,744,675 $ 8,543 (B) $1,753,218 $ 63,198(I) $1,816,416
Accumulated depreciation (97,784) -- (97,784) -- (97,784)
---------- -------- ---------- -------- ----------
1,646,891 8,543 1,655,434 63,198 1,718,632
Cash and cash equivalents 1,421 39,807 (C) 41,228 (40,910)(J) 318
Restricted cash (FF&E Reserve) 16,588 -- 16,588 -- 16,588
Other assets, net 8,029 4,823 (D) 12,852 -- 12,852
---------- -------- ---------- -------- ----------
$1,672,929 $ 53,173 $1,726,102 $ 22,288 $1,748,390
========== ======== ========== ======== ==========
Liabilities and Shareholders' Equity
Senior notes due 2005 and 2008, net of discount $ 149,746 $115,000 (E) $ 264,746 $ -- $ 264,746
__% Monthly income senior notes due 2009 - 50,000 (F) 50,000 -- 50,000
Revolving debt 182,000 (182,000)(G) -- 16,000(K) 16,000
Security and other deposits 191,250 850 (B) 192,100 6,288(L) 198,388
Other liabilities 10,183 -- 10,183 -- 10,183
Shareholder's equity:
Common shares of beneficial interest 428 28 (H) 456 -- 456
Additional paid-in capital 1,161,567 69,295 (H) 1,230,862 -- 1,230,862
Cumulative net income 179,883 -- 179,883 -- 179,883
Dividends (202,128) -- (202,128) -- (202,128)
---------- -------- ---------- -------- ----------
Total shareholders' equity 1,139,750 69,323 1,209,073 -- 1,209,073
---------- -------- ---------- -------- ----------
$1,672,929 $ 53,173 $1,726,102 $ 22,288 $1,748,390
========== ======== ========== ======== ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements
and other data.
F-3
<PAGE>
HOSPITALITY PROPERTIES TRUST
Unaudited Pro Forma Consolidated Statement of Income and Other Data
For the Nine Months Ended September 30, 1998
(amounts in thousands, except per share and ratio amounts)
<TABLE>
<CAPTION>
Pro Forma Other Data
--------------------------- ---------------------------
Pro Forma Other Adjusted Pro
Historical (M) Adjustments Pro Forma Adjustments Forma
------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income $113,702 $8,589(N) $122,291 $9,647(S) $131,938
FF&E reserve income 11,683 -- 11,683 -- 11,683
Interest income 1,354 -- 1,354 -- 1,354
------- ------ ------- ------ -------
Total revenues 126,739 8,589 135,328 9,647 144,975
------- ------ ------- ------ -------
Expenses:
Depreciation and amortization of
real estate assets 39,617 2,787(O) 42,404 3,329(T) 45,733
Interest 15,178 3,591(P) 18,769 1,519(U) 20,288
General and administrative 7,608 422(Q) 8,030 504(V) 8,534
------- ------ ------- ------ -------
Total expenses 62,403 6,800 69,203 5,352 74,555
------- ------ ------- ------ -------
Income before extraordinary item $64,336 $1,789 $66,125 $4,295 $70,420
======= ====== ======= ====== =======
Weighted average shares outstanding 41,685 3,911(R) 45,596 -- 45,596
======= ====== ======= ====== =======
Income before extraordinary item per Share $ 1.54 $ 1.45 $ 1.54
======= ======= =======
Earnings to Fixed Charges 5.2x 4.5x 4.5x
======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements
and other data.
F-4
<PAGE>
HOSPITALITY PROPERTIES TRUST
Unaudited Pro Forma Consolidated Statement of Income and Other Data
For the Year Ended December 31, 1997
(amounts in thousands, except per share and ratio amounts)
<TABLE>
<CAPTION>
Pro Forma Other Data
(unaudited) (unaudited)
--------------------------- ---------------------------
Historical(M) Pro Forma Other Adjusted Pro
(audited) Adjustments Pro Forma Adjustments Forma
------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income $ 98,561 $40,460(N) $139,021 $36,712(S) $175,733
FF&E reserve income 14,643 -- 14,643 -- 14,643
Interest income 928 -- 928 -- 928
-------- ------- -------- ------- --------
Total revenues 114,132 40,460 154,592 36,712 191,304
-------- ------- -------- ------- --------
Expenses:
Depreciation and amortization of
real estate assets 31,949 13,541(O) 45,490 12,558(T) 58,048
Interest 15,534 9,492(P) 25,026 2,038(U) 27,064
Terminated acquisition cost 713 -- 713 -- 713
General and administrative 6,783 2,049(Q) 8,832 1,901(V) 10,733
-------- ------- -------- ------- --------
Total expenses 54,979 25,082 80,061 16,497 96,558
-------- ------- -------- ------- --------
Net income $59,153 $15,378 $ 74,531 $20,215 $94,746
======== ======= ======== ======= ========
Weighted average shares outstanding 27,530 18,066(R) 45,596 -- 45,596
======== ======= ======== ======= ========
Net income per Share $ 2.15 $ 1.63 $ 2.08
======== ======== ========
Earnings to Fixed Charges 4.8x 4.0x 4.5x
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements
and other data.
F-5
<PAGE>
HOSPITALITY PROPERTIES TRUST
Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data
(dollars in thousands)
Pro Forma Consolidated Balance Sheet Adjustments
A. Represents the historical unaudited consolidated balance sheet of the
Company at September 30, 1998.
B. Represents the purchase of one Candlewood(R) hotel in November 1998 open
but not acquired as of September 30, 1998 for a cash price of $7,693
(including closing costs), net of purchase price withheld for security
deposit of $850.
C. Represents the net effect of the pro forma adjustments on cash.
D. Represents the recording of the deferred finance costs in connection with
the issuance of $115 million of senior notes due 2005 and the issuance of
$50 million of __% Monthly Income Senior Notes due 2009 (the "Proposed
Offering").
E. Represents issuance of senior notes due 2005 in November 1998.
F. Represents issuance of the Proposed Offering.
G. Represents repayment of amounts borrowed under the credit facility after
completion of the Proposed Offering, the transaction described in Note E
above, the issuance of 2.75 million common shares of beneficial interest in
November 1998 and the purchase of one Candlewood(R) hotel acquired in
November 1998.
H. Represents issuance of 2.75 million common shares of beneficial interest
in November 1998.
Other Data
Consolidated Balance Sheet Adjustments
I. Represents the purchase of 7 hotels acquired or to be acquired, but not
open as of September 30, 1998:
<TABLE>
<S> <C>
Cash purchase prices:
One Courtyard by Marriott(R) hotel $ 8,806
Six Candlewood(R) hotels 47,790
Purchase price withheld as security deposits 6,288
Closing costs 314
---------
Total $ 63,198
=========
</TABLE>
Included in the above are certain hotel properties the Company has
purchased or expects to purchase from sellers upon completion of
construction, of which four have been purchased by the Company in
November 1998 and December 1998 for an aggregate purchase price of
$34,084.
J. Represents the net effect of the other adjustments on cash.
K. Represents other net borrowings by the Company under its credit facility to
complete the planned acquisition of hotels still under development as of
September 30, 1998.
L. Represents security deposits held by the Company as a result of purchasing
and leasing the following hotels:
<TABLE>
<S> <C>
One Courtyard by Marriott(R) hotel $ 978
Six Candlewood(R) hotels 5,310
-------
Total $ 6,288
=======
</TABLE>
Pro Forma Consolidated Income Statement Adjustments
M. Represents the historical income statement of the Company for the periods
presented.
F-6
<PAGE>
HOSPITALITY PROPERTIES TRUST
Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data -
continued
(dollars in thousands)
Pro Forma Consolidated Income Statement Adjustments - continued
N. Represents the pro forma effect of leases entered and to be entered for
hotels open during the periods presented. This pro forma effect is derived
as follows:
<TABLE>
<CAPTION>
Nine Months Year Ended
Ended September 30, December 31,
1998 1997
------------------- ------------
<S> <C> <C>
Pro forma Minimum Rent $120,310 $136,493
Pro forma Percentage Rent 1,981 2,528
Amounts included in historical Minimum Rent (111,721) (96,033)
Amounts included in historical Percentage Rent (1,981) (2,528)
-------- --------
$ 8,589 $ 40,460
======== ========
</TABLE>
Certain of the hotels owned by the Company as of September 30, 1998 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
September 30, 1998 were acquired as of their completion date.
O. Represents the impact of the pro forma transactions on depreciation expense
for the entire periods presented.
P. Represents the following adjustments to interest expense:
o Elimination of interest on the $125 million CMBS Notes repaid upon the
issuance of the 7% Senior Notes in February 1998 including
amortization of deferred financing costs.
o Elimination of interest on $182 million of the Company's $300 million
credit facility repaid with the net proceeds of the senior notes due
2005 and of the __% Monthly Income Senior Notes due 2009 and proceeds
from HPT's November 1998 equity offering.
o Record interest, including amortization of deferred financing costs,
on the senior notes due 2005.
o Record interest, including amortization of deferred financing costs,
of $3.3 million and $4.4 million, respectively, for the nine months
ended September 30, 1998 and the year ended December 31, 1997, on the
proposed $50 million offering of __% Monthly Income Senior Notes due
2009 at an assumed interest rate of 8.5%.
o Record interest, including amortization of deferred financing costs,
on borrowings under the Company's $300 million credit facility to
complete the Transactions.
Q. Represents the estimated impact of the pro forma transactions on general
and administrative expenses of the Company for the periods presented.
R. Represents the impact of additional common shares of beneficial interest
issued in the periods presented including the 2.75 million shares
issued in November 1998.
Other Data
Consolidated Income Statement Adjustments
S. Represents the effect of leases entered and to be entered for the
transactions described in Note I above, since the beginning of the periods
presented. The effect of these leases is derived as follows:
<TABLE>
<CAPTION>
Nine Months Year Ended
Ended September 30, December 31,
1998 1997
------------------ --------------
<S> <C> <C>
Adjusted Pro forma Minimum Rent $129,957 $ 173,205
Adjusted Pro forma Percentage Rent 1,981 2,528
Amounts included in pro forma Minimum Rent (120,310) (136,493)
Amounts included in pro forma Percentage Rent (1,981) (2,528)
-------- ---------
$ 9,647 $ 36,712
======== =========
</TABLE>
T. Represents the impact of the transactions described in Note I above, on
depreciation expense for the entire periods presented.
F-7
<PAGE>
HOSPITALITY PROPERTIES TRUST
Notes to Unaudited Pro Forma Consolidated Financial Statements and Other Data -
continued
(dollars in thousands)
Other Data
Consolidated Income Statement Adjustments - continued
U. Represents interest on the credit line borrowings to be made in connection
with the transactions described in Note I above, at LIBOR plus contractual
spreads for the entire periods presented. The average applicable LIBOR rate
was 5.7% for the year ended December 31, 1997 and 5.6% for the nine months
ended September 30, 1998.
V. Represents the estimated impact of the transactions described in Note I
above, on general and administrative expenses of the Company.
F-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOSPITALITY PROPERTIES TRUST
By: /s/ Thomas M. O'Brien
-----------------------------
Thomas M. O'Brien, Treasurer and
Chief Financial Officer
Date: December 4, 1998
Hospitality Properties Trust
Computation of Pro Forma Ratio of Earnings to Fixed Charges
(amounts in thousands, except ratio amounts)
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 1998 For the Year Ended December 31, 1997
----------------------------------------------- ---------------------------------------
Adjusted Adjusted
Historical Pro Forma Pro Forma Historical Pro Forma Pro Forma
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary item $64,336 $66,125 $70,420 $59,153 $74,531 $ 94,746
Fixed charges 15,178 18,769 20,288 15,534 25,026 27,064
------- ------- ------- ------- ------- --------
Adjusted earnings $79,514 $84,894 $90,708 $74,687 $99,557 $121,810
======= ======= ======= ======= ======= ========
Fixed charges:
Interest on indebtedness and
amortization of deferred
finance costs $15,178 $18,769 $20,288 $15,534 $25,026 $ 27,064
------- ------- ------- ------- ------- --------
Total fixed charges $15,178 $18,769 $20,288 $15,534 $25,026 $ 27,064
======= ======= ======= ======= ======= ========
Ratio of earnings to fixed charges 5.2x 4.5x 4.5x 4.8x 4.0x 4.5x
======= ======= ======= ======= ======= ========
</TABLE>
Exhibit 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our
report dated January 16, 1998 included in this registration statement (File No.
333-43573) and prospectus supplement and to the incorporation by reference in
this registration statement and prospectus supplement of our reports dated
January 16, 1998 included in Hospitality Properties Trust's Form 8-K dated
February 11, 1998 and our report dated February 27, 1998 included in Hospitality
Property Trust's Form 10-K for the year ended December 31, 1997, and to all
references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Washington, D.C.
December 4, 1998
