Hospitality Properties Trust
CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
Quarter Ended Year Ended
December 31, December 31,
--------------------------------------
2004 2003 2004
2003
-------- --------- -------- ---------
Revenues:
Hotel operating revenues
(1)
$119,342 $ 68,801 $498,122 $ 209,299
Minimum rent
30,343 55,874 125,669 216,125
Percentage rent
2,803 1,128 2,803
1,128
FF&E reserve income (2)
4,147 4,203 18,390
18,335
Interest income
199 63
384 398
Gain on lease terminations
(3)
-- 107,516 --
107,516
-------- --------- -------- ---------
Total revenues
156,834 237,585 645,368 552,801
-------- --------- -------- ---------
Expenses:
Hotel operating expenses
(1) (4)
74,602 48,695 333,818 145,863
Interest (including
amortization of deferred
financing costs of $686,
$683, $2,744 and $2,536,
respectively)
12,618 12,626 50,393 44,536
Depreciation and
amortization
28,725 27,732 114,883 104,807
General and administrative
5,033 4,400 19,386
16,800
Loss on early
extinguishment of debt
(5) --
-- --
2,582
-------- --------- -------- ---------
Total expenses
120,978 93,453 518,480 314,588
-------- --------- -------- ---------
Income before gain on sale of
real estate
35,856 144,132 126,888 238,213
Gain on sale of real estate
-- --
203 --
-------- --------- -------- ---------
Net income
35,856 144,132 127,091 238,213
Preferred distributions
(1,914) (3,695) (9,674) (14,780)
Excess of liquidation preference
over carrying value of
preferred shares (6)
-- -- (2,793)
--
-------- --------- -------- ---------
Net income available for common
shareholders
$ 33,942 $140,437 $114,624 $ 223,433
======== ========= ======== =========
----------------------------------------------------------------------
Calculation of FFO (7):
Net income available for common
shareholders
$33,942 $140,437 $114,624 $ 223,433
Add: FF&E deposits not in net
income (2)
421 2,004 1,767
9,769
Depreciation and
amortization
28,725 27,732 114,883 104,807
Excess of liquidation
preference over carrying
value of preferred shares
(6)
-- -- 2,793
--
Loss on early extinguishment
of debt (5)
-- --
-- 2,582
Less:Gain on sale of real estate
-- --
(203) --
Gain on lease terminations
-- (107,516) -- (107,516)
Deferred percentage rent (8)
(2,167) (850) --
--
Deferred hotel operating
income (9)
(3,546) --
-- --
------- --------- -------- ---------
Funds from operations ("FFO") $57,375
$ 61,807 $233,864 $ 233,075
======= ========= ======== =========
----------------------------------------------------------------------
Weighted average common shares
outstanding
67,203 62,587 66,503 62,576
======= ========= ======== =========
Per common share amounts:
Net income available for
common shareholders
$ 0.51 $ 2.24 $ 1.72 $
3.57
FFO (7)
$ 0.85 $ 0.99 $ 3.52 $
3.72
Common distributions
declared
$ 0.72 $ 0.72 $ 2.88 $
2.88
----------------------------------------------------------------------
See Notes on page 4.
Hospitality Properties Trust
NOTES TO CONSOLIDATED STATEMENT OF INCOME AND
FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
(1) As of December 31, 2004, each of our 285 hotels was
included in
one of eight combinations of hotels
which are either leased to one
of our taxable REIT subsidiaries and
managed by an independent
hotel operating company, or are leased
to a third party. At
December 31, 2004, we had 177 managed
hotels and 108 leased
hotels. Our consolidated statement
of income includes hotel
operating revenues and expenses of
managed hotels, and only rental
income from our leased hotels. The
pro forma operating results for
all 177 of our managed hotels assuming
acquisition of the hotels
and commencement of the management
agreements as of January 1,
2003, are as follows (includes amounts
for periods prior to our
ownership of some of these hotels
and for periods when some of
these hotels were leased by us to
third parties different than the
current operators):
Quarter Ended
Year Ended
December 31,
December 31,
----------------- -------------------
2004 2003
2004 2003
------ ------ ------
------
Hotel operating revenues $119,342
$117,689 $510,124 $504,714
Hotel operating expenses
87,363 89,822 351,708
352,226
(2) Various percentages of total sales at most of our
hotels are
escrowed as reserves for future renovations
or refurbishment, or
FF&E Reserve escrows. We own the
FF&E Reserve escrows for all the
hotels leased to our taxable REIT
subsidiary and for most of the
hotels leased to third parties. We
have a security and remainder
interest in the FF&E Reserve escrows
for the remaining hotels
leased to third parties. When we own
the FF&E Reserve escrows at
hotels leased to third parties we
report payments into the escrow
as additional rent. When we have a
security and remainder interest
in the FF&E Reserve escrows, deposits
are not included in revenue
but are included in FFO. We do not
report the amounts which are
escrowed as FF&E reserves for
our managed hotels as FF&E reserve
income in our consolidated statement
of income.
(3) We recorded gains on lease termination in the 2003
fourth quarter
as a result of the termination of
our two leases with Wyndham
International, Inc. and our lease
with Candlewood Hotel Company,
Inc.
(4) Certain of our managed hotels had net operating results
that were
less than the minimum returns due
to us by $6,501 and $7,032 in
the fourth quarter of 2004 and 2003,
respectively, and $10,595 and
$6,922 during the fiscal year 2004
and 2003, respectively. These
amounts are included in our consolidated
statement of income as a
net reduction to hotel operating expenses
in each period because
the minimum returns were funded by
our managers.
(5) The loss on the early extinguishment of debt resulted
from the
write off of unamortized deferred
financing costs of that debt.
(6) On April 12, 2004, we redeemed all of our outstanding
9 1/2%
Series A Preferred Shares at their
liquidation preference of $25
per share, plus accumulated and unpaid
dividends. We deducted the
$2,793 excess of the liquidation preference
of the redeemed shares
over their carrying amount from net
income in determining net
income available to common shareholders
in the calculation of
earnings per share.
(7) We compute FFO as shown. Our calculation of FFO differs
from the
NAREIT definition because we include
FF&E deposits not included in
net income (see note 2), deferred
percentage rent (see note 8) and
deferred hotel operating income (see
note 9) and exclude the
excess of liquidation preference over
carrying value of redeemed
preferred shares (see note 6), the
loss on early extinguishment of
debt not settled in cash (see note
5) and gain on lease
terminations (see note 3). We consider
FFO to be an appropriate
measure of performance for a REIT,
along with net income and cash
flow from operating, investing and
financing activities. We
believe that FFO provides useful information
to investors because
by excluding the effects of certain
historical costs, such as
depreciation expense and losses on
early extinguishment of debt,
it may facilitate comparison of current
operating performance
among REITs. FFO does not represent
cash generated by operating
activities in accordance with GAAP
and should not be considered an
alternative to net income or cash
flow from operating activities
as a measure of financial performance
or liquidity. FFO is among
the important factors considered by
our board of trustees when
determining the amount of distributions
to shareholders. Other
important factors include, but are
not limited to, requirements to
maintain our status as a REIT, limitations
in our revolving bank
credit facility and public debt covenants,
the availability of
debt and equity capital to us and
our expectation of our future
performance.
(8) In calculating net income we recognize percentage
rental income
received for the first, second and
third quarters in the fourth
quarter when all contingencies are
met and the income is earned.
Although we defer recognition of this
revenue for purposes of
calculating net income, we include
these amounts in the
calculation of FFO during the first
three quarters of the year.
(9) Our rights to share in the operating results of our
managed hotels
in excess of the minimum returns due
to us are generally
determined based upon annual calculations.
For fiscal year 2004
our share of these operating results
was $1,397 and we recognized
this income in the fourth quarter
of 2004 when all contingencies
were met and the income was earned.
Although we deferred
recognition of this income for purposes
of calculating net income
during the first three quarters of
2004, the calculation of FFO
for these periods included our share
of operating results in
excess of minimum returns of $3,546.
Our share of these operating
results declined by $2,149 during
the fourth quarter of 2004 as
the operating results of certain of
our managed hotels were less
than the minimum returns due to us
for the quarter.
Hospitality Properties Trust
Key Balance Sheet Data
----------------------
(in thousands)
Dec. 31, Dec. 31,
2004 2003
---------- ----------
Cash
$ 15,894 $ 6,428
========== ==========
Restricted cash (FF&E Reserve escrow)
$ 38,511 $ 55,755
========== ==========
Real Estate, at cost
$3,180,990 $3,179,507
========== ==========
Debt, net of discounts
Floating rate - Credit Facility,
due 2005 $ 72,000 $ 201,000
Fixed rate - 7.00% Senior Notes,
due 2008 149,914 149,888
Fixed rate - 9.125% Senior Notes,
due 2010 49,966 49,960
Fixed rate - 8.3% Mortgage payable,
due
2011
3,826 3,881
Fixed rate - 6.85% Senior Notes,
due 2012 124,330 124,240
Fixed rate - 6.75% Senior Notes,
due 2013 297,469 297,157
---------- ----------
Total Debt
$ 697,505 $ 826,126
========== ==========
Equity
9.5% Series A Preferred (none
and 3,000,000
shares outstanding)
$ -- $ 72,207
8.875% Series B Preferred (3,450,000
shares
outstanding)
83,306 83,306
Common (67,203,228 and 62,587,079
shares
outstanding)
1,602,567 1,490,015
---------- ----------
Total Equity
$1,685,873 $1,645,528
========== ==========
======================================================================
Additional Data
(in thousands except percentages)
----------------------------------------------------------------------
Dec. 31, Dec. 31,
2004 2003
----------- ----------
Leverage Ratios
---------------
Total Debt / Total Assets
25.9% 29.9%
Total Debt / Real Estate, at cost
21.9% 26.0%
Total Debt / Total Book Capitalization
29.3% 33.4%
Variable Rate Debt / Total Book Capitalization
3.0% 8.1%
Year Ended Year Ended
Dec. 31, Dec. 31,
2004 2003
---------- ----------
Cash Flow Data
--------------
Cash flow provided by (used in):
Operating activities
$ 223,119 $ 219,405
Investing activities
$ (2,462) $ (371,610)
Financing activities
$ (211,191) $ 151,296
Hospitality Properties Trust
Hotel Revenue Data
------------------
The following tables summarize the hotel operating statistics
reported
to us by our third party tenants and managers for our
285 hotels.
Quarter Ended
No. of December 31,
Lease/
No. of Rooms/ ------------------------
Management Agreement
Hotels Suites 2004(1) 2003(1) Change
--------------------
------- ------- ------- -------- -------
ADR
---
Host (no. 1)
53 7,610 $101.24 $ 94.76 6.8%
Host (no. 2)
18 2,178 96.60 92.99 3.9%
Marriott
35 5,382 93.69 88.63 5.7%
Barcelo Crestline
19 2,756 94.94 87.45 8.6%
InterContinental (no. 1) (2)(3) 30
3,694 88.73 87.78 1.1%
InterContinental (no. 2) (2)(3) 76
9,220 55.77 53.80 3.7%
Prime (3)(4)
36 5,250 70.70 70.38 0.5%
Homestead
18 2,399 51.16 47.08 8.7%
------------- ------------------------
Total/Average
285 38,489 $ 81.84 $ 77.65 5.4%
OCCUPANCY
---------
Host (no. 1)
53 7,610 68.4% 63.1% 5.3
pt
Host (no. 2)
18 2,178 77.8% 73.9% 3.9
pt
Marriott
35 5,382 73.3% 70.9% 2.4
pt
Barcelo Crestline
19 2,756 69.6% 68.5% 1.1
pt
InterContinental (no. 1) (2)(3) 30
3,694 69.8% 66.9% 2.9 pt
InterContinental (no. 2) (2)(3) 76
9,220 70.9% 68.6% 2.3 pt
Prime (3)(4)
36 5,250 54.3% 60.5% -6.2 pt
Homestead
18 2,399 75.3% 73.6% 1.7
pt
------------- ------------------------
Total/Average
285 38,489 69.1% 67.2% 1.9 pt
RevPAR
------
Host (no. 1)
53 7,610 $ 69.25 $ 59.79 15.8%
Host (no. 2)
18 2,178 75.15 68.72 9.4%
Marriott
35 5,382 68.67 62.84 9.3%
Barcelo Crestline
19 2,756 66.08 59.90 10.3%
InterContinental (no. 1) (2)(3) 30
3,694 61.93 58.72 5.5%
InterContinental (no. 2) (2)(3) 76
9,220 39.54 36.91 7.1%
Prime (3)(4)
36 5,250 38.39 42.58 -9.8%
Homestead
18 2,399 38.52 34.65 11.2%
------------- ------------------------
Total/Average
285 38,489 $ 56.55 $ 52.18 8.4%
Year Ended
No. of December 31,
Lease/
No. of Rooms/ ------------------------
Management Agreement
Hotels Suites 2004(1) 2003(1) Change
--------------------
------- ------- ------- -------- -------
ADR
---
Host (no. 1)
53 7,610 $100.38 $ 95.51 5.1%
Host (no. 2)
18 2,178 94.86 93.32 1.7%
Marriott
35 5,382 94.71 91.19 3.9%
Barcelo Crestline
19 2,756 92.26 88.44 4.3%
InterContinental (no. 1) (2)(3) 30
3,694 89.65 89.99 -0.4%
InterContinental (no. 2) (2)(3) 76
9,220 55.97 54.77 2.2%
Prime (3)(4)
36 5,250 73.49 70.13 4.8%
Homestead
18 2,399 50.14 47.72 5.1%
------------- ------------------------
Total/Average
285 38,489 $ 80.42 $ 77.20 4.2%
OCCUPANCY
---------
Host (no. 1)
53 7,610 71.3% 64.0% 7.3
pt
Host (no. 2)
18 2,178 79.3% 76.6% 2.7
pt
Marriott
35 5,382 76.3% 73.9% 2.4
pt
Barcelo Crestline
19 2,756 73.8% 69.0% 4.8
pt
InterContinental (no. 1) (2)(3) 30
3,694 75.3% 74.2% 1.1 pt
InterContinental (no. 2) (2)(3) 76
9,220 71.2% 72.0% -0.8 pt
Prime (3)(4)
36 5,250 61.5% 67.9% -6.4 pt
Homestead
18 2,399 79.2% 75.9% 3.3
pt
------------- ------- ----------------
Total/Average
285 38,489 72.1% 70.6% 1.5 pt
RevPAR
------
Host (no. 1)
53 7,610 $ 71.57 $ 61.13 17.1%
Host (no. 2)
18 2,178 75.22 71.48 5.2%
Marriott
35 5,382 72.26 67.39 7.2%
Barcelo Crestline
19 2,756 68.09 61.02 11.6%
InterContinental (no. 1) (2)(3) 30
3,694 67.51 66.77 1.1%
InterContinental (no. 2) (2)(3) 76
9,220 39.85 39.43 1.1%
Prime (3)(4)
36 5,250 45.20 47.62 -5.1%
Homestead
18 2,399 39.71 36.22 9.6%
------------- ------- ---------------
Total/Average
285 38,489 $ 57.98 $ 54.50 6.4%
(1) Includes data for the calendar periods indicated,
except for our
Courtyard by Marriott(R), Residence
Inn by Marriott(R), Marriott
Hotels Resorts and Suites(R), TownePlace
Suites by Marriott(R),
and SpringHill Suites by Marriott(R)
branded hotels, which include
data for comparable fiscal periods.
(2) 2003 includes data for periods prior to our ownership
of some
hotels.
(3) 2003 includes data for periods some hotels were operated
by a
different manager than in 2004.
(4) Prime transferred its management agreement to a subsidiary
of
Hyatt Corporation in January 2005.
Rent/Return Coverage Data(1)
---------------------------
Quarter ended Year ended Year ended
Lease/Management Agreement
12/31/04 12/31/04 12/31/03
--------------------------- -------------
------------ ------------
Host (no. 1)
1.2x 1.3x
1.0x
Host (no. 2)
1.1x 1.0x
1.0x
Marriott
0.8x 0.9x
0.8x
Barcelo Crestline
0.8x 0.9x
0.7x
InterContinental (no. 1)
0.5x 0.8x
0.7x
InterContinental (no. 2)
0.8x 0.8x
0.8x
Prime (2)
0.7x 1.1x
1.0x
Homestead
1.2x 1.2x
1.1x
-------------- ------------ ------------
Range (all agreements)
0.5x-1.2x 0.8x-1.3x 0.7x-1.1x
(1) We define coverage as combined total hotel sales minus
all
expenses which are not subordinated
to minimum payments to us and
the required FF&E Reserve contributions
(which data is provided to
us by our tenants or operators), divided
by the minimum rent or
fixed amount return payments due to
us. For some combinations,
amounts have been calculated using
data for periods prior to our
ownership of some hotels and prior
to commencement of operating
agreements.
(2) Prime transferred its management agreement to a subsidiary
of
Hyatt Corporation in January 2005.
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