NEWTON, Massachusetts--Hospitality Properties Trust announced its financial results for the quarter and six months ended June 30, 2011.
Results for the Quarter Ended June 30, 2011:
Normalized funds from operations, or Normalized FFO, for the quarter ended June 30, 2011 were $110.2 million, or $0.89 per share, compared to Normalized FFO for the quarter ended June 30, 2010 of $100.0 million, or $0.81 per share.
Net income available for common shareholders was $44.2 million, or $0.36 per share, for the quarter ended June 30, 2011, compared to $15.7 million, or $0.13 per share, for the same quarter last year. Net income available for common shareholders for the quarter ended June 30, 2011 includes a $7.3 million, or $0.06 per share, loss on asset impairment. Net income available for common shareholders for the quarter ended June 30, 2010 includes a $6.7 million, or $0.05 per share, loss on extinguishment of debt and a $16.4 million, or $0.13 per share, loss on asset impairment.
The weighted average number of common shares outstanding was 123.5 million and 123.4 million for the quarters ended June 30, 2011 and 2010, respectively.
A reconciliation of net income determined according to U.S. generally accepted accounting principles, or GAAP, to FFO and Normalized FFO for the quarters ended June 30, 2011 and 2010 appears later in this press release.
Results for the Six Months Ended June 30, 2011:
Normalized FFO for the six months ended June 30, 2011 were $212.7 million, or $1.72 per share, compared to Normalized FFO for the six months ended June 30, 2010 of $194.3 million, or $1.57 per share.
Net income available for common shareholders was $89.8 million, or $0.73 per share, for the six months ended June 30, 2011, compared to $49.1 million, or $0.40 per share, for the same period last year. Net income available for common shareholders for the six months ended June 30, 2011, includes a $7.3 million, or $0.06 per share, loss on asset impairment. Net income available for common shareholders for the six months ended June 30, 2010 includes a $6.7 million, or $0.05 per share, loss on extinguishment of debt and a $16.4 million, or a $0.13 per share, loss on asset impairment.
The weighted average number of common shares outstanding was 123.4 million for the six months ended June 30, 2011 and 2010.
A reconciliation of net income determined according to GAAP to FFO and Normalized FFO for the six months ended June 30, 2011 and 2010 appears later in this press release.
Hotel Portfolio Performance:
For the quarter ended June 30, 2011 compared to the same period in 2010: average daily rate, or ADR, increased 3.5% to $93.64; occupancy increased 3.3 percentage points to 76.2%; and, as a result, revenue per available room, or RevPAR, increased by 8.2% to $71.35.
For the six months ended June 30, 2011 compared to the same period in 2010: ADR increased 2.8% to $93.60; occupancy increased 3.3 percentage points to 71.9%; and, as a result, RevPAR increased by 7.8% to $67.30.
Tenants and Managers:
As previously announced, on June 14, 2011, HPT entered into an agreement to re-align and extend its Marriott No. 2, 3 and 4 contracts with Marriott International, Inc. (NYSE: MAR), or Marriott. The new agreement covering 71 hotels was effective retroactively to January 1, 2011. The combined minimum returns due to HPT under the new agreement remain unchanged at $98.4 million per year. Under the new agreement, HPT has agreed to fund approximately $102.0 million for general refurbishment of the hotels. As such funding is advanced by HPT, the amounts of its minimum returns will increase by 9% per annum of the amounts funded. Also, the security deposits under the historical contracts were combined and HPT will continue to utilize the security deposit to cover any shortfalls in the payment of the minimum amounts contractually required for all 71 hotels. If the security deposit becomes exhausted, Marriott has provided a limited guaranty of 90% of the minimum returns due to HPT. During the six months ended June 30, 2011, the net cash flows generated by the operations of these hotels were $15.4 million less than the minimum amounts contractually required. Also, during the period between June 30, 2011 and August 8, 2011, the amounts HPT received for this portfolio were $0.6 million less than the minimum returns due. HPT applied the available security deposit to cover these shortfalls. The retroactive effective date of the agreement had the net effect of increasing the amount of payment shortfalls during the six months ended June 30, 2011 that were covered by the security deposit by $4.1 million, or $0.03 per share. At August 8, 2011, the remaining balance of the security deposit for the new agreements held by HPT was $2.4 million.
Also as previously announced, on July 25, 2011, HPT entered into an agreement to revise and extend its four contracts with InterContinental Hotels Group, plc (LON: IHG; NYSE: IHG (ADRs)), or InterContinental. The new agreement covering 130 hotels was effective July 1, 2011. The combined minimum returns and rents due to HPT under the new agreement remain unchanged at $153.1 million per year. Under the new agreement, HPT has agreed to a renovation program for all the hotels included in the contract pursuant to which HPT expects to invest approximately $300.0 million. As HPT funds these renovations, the amounts of its minimum returns will increase by 8% per annum of the amounts funded. Also, the security deposit HPT holds for the historical contracts will continue to secure payments to HPT under the new agreement. In addition, InterContinental has provided $37.0 million to HPT to supplement this security deposit. During the six months ended June 30, 2011, the net cash flows generated by the operations of these hotels were $9.3 million less than the minimum amounts contractually required. Also, during the period between June 30, 2011 and August 8, 2011, the amounts HPT received for this portfolio were $0.3 million more than the minimum returns and rents due. HPT increased the available security deposit by the additional amounts received. At August 8, 2011, the remaining balance of the security deposit for the new agreement held by HPT was $64.9 million.
As of August 8, 2011, all other payments due to HPT from its managers and tenants under its operating agreements are current.
Acquisitions and Dispositions:
As part of the agreement to re-align and extend HPT's contracts with Marriott, 21 hotels will be offered for sale. The 21 hotels include nine TownPlace Suites hotels, six Residence Inn hotels, five Courtyard hotels and one Marriott hotel. As of June 30, 2011, the net book value, after impairment writedowns, for these hotels was approximately $131.4 million. HPT has begun the sales process for these 21 hotels and expects to complete the sales by year end 2011. HPT will retain the net sales proceeds from any hotels sold and the amount of minimum returns due from Marriott will be reduced by 9% per annum of the net sales proceeds. The sale of these hotels is subject to various contingencies; accordingly, HPT cannot provide any assurance that it will sell any of these 21 hotels.
As part of the agreement to revise and extend HPT's contracts with InterContinental, 42 hotels may be rebranded or offered for sale. As of June 30, 2011, the net book value, after impairment writedowns, for these hotels was approximately $332.1 million. HPT will retain the net sales proceeds from any hotels sold and the amount of minimum returns due from InterContinental will be reduced by 8% per annum of the net sales proceeds. HPT cannot provide any assurance that it will sell any hotels it decides to offer for sale, if any. In July 2011, HPT sold a Holiday Inn in Memphis, TN which was previously managed by InterContinental. HPT received net sales proceeds of approximately $6.9 million and HPT's minimum returns due from InterContinental were reduced by 8% per annum of the net sales proceeds.
During the quarter ended June 30, 2011, HPT incurred approximately $0.8 million of acquisition related costs for a potential acquisition of hotel properties. HPT is continuing to work towards this potential acquisition, but there can be no assurance any agreement will be reached to acquire any hotel properties.
Conference Call:
On Tuesday, August 9, 2011, at 1:00 p.m. Eastern Daylight Time, John Murray, President and Chief Operating Officer, and Mark Kleifges, Treasurer and Chief Financial Officer, will host a conference call to discuss the results for the quarter and six months ended June 30, 2011. The conference call telephone number is (800) 230-1074. Participants calling from outside the United States and Canada should dial (612) 288-0329. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through Tuesday, August 16, 2011. To hear the replay, dial (320) 365-3844. The replay pass code is 179302.
A live audio webcast of the conference call will also be available in a listen only mode on the company's website, which is located at www.hptreit.com. Participants wanting to access the webcast should visit the company's website about five minutes before the call. The archived webcast will be available for replay on HPT's website for about one week after the call. The recording and retransmission in any way of HPT's second quarter conference call is strictly prohibited without the prior written consent of HPT.
Supplemental Data:
A copy of HPT's Second Quarter 2011 Supplemental Operating and Financial Data is available for download at HPT's website, www.hptreit.com. HPT's website is not incorporated as part of this press release.
Hospitality Properties Trust is a real estate investment trust, or REIT, which owns 288 hotels and 185 travel centers located in 44 states, Puerto Rico and Canada. HPT is headquartered in Newton, MA.