NEWTON, Mass.--(BUSINESS WIRE)--Hospitality Properties Trust (Nasdaq: HPT) today announced its financial results for the quarter and six months ended June 30, 2018:

John Murray, President and Chief Executive Officer of HPT, made the following statement:

“HPT’s second quarter 2018 comparable hotel RevPAR grew 2.0% compared to the prior year period despite competition from new room supply growth and disruption from hotel renovations. Eleven comparable hotels were under renovation for all or part of the second quarter. Coverage of hotel minimum rents and returns for the second quarter 2018 was 1.22 times.

Our TA properties generated improved performance for the second quarter of 2018. Total gross margin was up $9.7 million, or 3.1%, versus the same period last year and our travel centers’ rent coverage improved to 1.69 times.”

Results for the Three and Six Months Ended June 30, 2018 and Recent Activities:

• Net Income Available for Common Shareholders: Net income available for common shareholders for the quarter ended June 30, 2018 was $97.3 million, or $0.59 per diluted share, compared to net income available for common shareholders of $60.7 million, or $0.37 per diluted share, for the quarter ended June 30, 2017. Net income available for common shareholders for the quarter ended June 30, 2018 includes $20.9 million, or $0.13 per diluted share, of net unrealized gains and losses on equity securities. Net income available for common shareholders for the quarter ended June 30, 2017 includes $17.8 million, or $0.11 per diluted share, of estimated business management incentive fee expense. The weighted average number of diluted common shares outstanding was 164.2 million for each of the quarters ended June 30, 2018 and 2017.

  Net income available for common shareholders for the six months ended June 30, 2018 was $177.5 million, or $1.08 per diluted share, compared to net income available for common shareholders of $86.5 million, or $0.53 per diluted share, for the six months ended June 30, 2017. Net income available for common shareholders for the six months ended June 30, 2018 includes $45.9 million, or $0.28 per diluted share, of net unrealized gains and losses on equity securities. Net income available for common shareholders for the six months ended June 30, 2017 includes $37.4 million, or $0.23 per diluted share, of estimated business management incentive fee expense and was reduced by $9.9 million, or $0.06 per diluted share, for the amount by which the liquidation preference for HPT's 7.125% Series D cumulative redeemable preferred shares that were redeemed during the period exceeded the carrying value of those preferred shares as of the date of the redemption. The weighted average number of diluted common shares outstanding was 164.2 million for each of the six months ended June 30, 2018 and 2017.

• Adjusted EBITDA: Adjusted EBITDA for the quarter ended June 30, 2018 compared to the same period in 2017 increased 3.0% to $226.9 million.

  Adjusted EBITDA for the six months ended June 30, 2018 compared to the same period in 2017 increased 3.6% to $429.9 million.

• Normalized FFO Available for Common Shareholders: Normalized FFO available for common shareholders for the quarter ended June 30, 2018 were $176.2 million, or $1.07 per diluted share, compared to Normalized FFO available for common shareholders of $173.6 million, or $1.06 per diluted share, for the quarter ended June 30, 2017.

  Normalized FFO available for common shareholders for the six months ended June 30, 2018 were $331.1 million, or $2.02 per diluted share, compared to Normalized FFO available for common shareholders of $322.4 million, or $1.96 per diluted share, for the six months ended June 30, 2017.

• Hotel RevPAR (comparable hotels): For the quarter ended June 30, 2018 compared to the same period in 2017 for HPT’s 305 hotels that were owned continuously since April 1, 2017: average daily rate, or ADR, increased 2.5% to $132.89; occupancy decreased 0.4 percentage points to 79.7%; and revenue per available room, or RevPAR, increased 2.0% to $105.91.

  For the six months ended June 30, 2018 compared to the same period in 2017 for HPT’s 303 hotels that were owned continuously since January 1, 2017: ADR increased 2.1% to $129.79; occupancy decreased 0.2 percentage points to 75.6%; and RevPAR increased 1.9% to $98.12.

• Hotel RevPAR (all hotels): For the quarter ended June 30, 2018 compared to the same period in 2017 for HPT’s 325 hotels that were owned as of June 30, 2018: ADR increased 2.4% to $132.78; occupancy decreased 2.0 percentage points to 78.0%; and RevPAR decreased 0.1% to $103.57.

  For the six months ended June 30, 2018 compared to the same period in 2017 for HPT’s 325 hotels that were owned as of June 30, 2018: ADR increased 2.2% to $130.52; occupancy decreased 1.4 percentage points to 74.2%; and RevPAR increased 0.3% to $96.85.

• Coverage of Minimum Returns and Rents: For the quarter ended June 30, 2018, the aggregate coverage ratio of (x) total hotel revenues minus all hotel expenses and FF&E reserve escrows which are not subordinated to minimum returns or rents due to HPT to (y) HPT’s minimum returns or rents due from hotels decreased to 1.22x from 1.26x for the quarter ended June 30, 2017.

  For the six months ended June 30, 2018, the aggregate coverage ratio of (x) total hotel revenues minus all hotel expenses and FF&E reserve escrows which are not subordinated to minimum returns or rents due to HPT to (y) HPT’s minimum returns or rents due from hotels decreased to 1.02x from 1.07x for the six months ended June 30, 2017.

  For the quarter ended June 30, 2018, the aggregate coverage ratio of (x) total travel center revenues less travel center expenses to (y) HPT’s minimum rent due from leased travel centers increased to 1.69x from 1.60x for the quarter ended June 30, 2017.

  For the six months ended June 30, 2018, the aggregate coverage ratio of (x) total travel center revenues less travel center expenses to (y) HPT’s minimum rent due from leased travel centers increased to 1.62x from 1.40x for the six months ended June 30, 2017.

  As of June 30, 2018, approximately 74% of HPT’s aggregate annual minimum returns and rents were secured by guarantees or security deposits from HPT’s managers and tenants pursuant to the terms of HPT’s operating agreements.

• Recent Property Acquisition Activities: In June 2018, HPT acquired the 360 room Radisson Blu® hotel located in Minneapolis, MN for a purchase price of $75.0 million, excluding acquisition related costs. HPT added this hotel to its management agreement with Radisson Hospitality, Inc., or Radisson.

  Also in June 2018, HPT acquired the 117 suite Staybridge Suites® hotel located at Louisiana State University in Baton Rouge, LA for a purchase price of $15.8 million, excluding acquisition related costs. HPT added this hotel to its management agreement with InterContinental Hotels Group, plc (LON: IHG; NYSE: IHG (ADRs)), or InterContinental.

• Financing Activities: In May 2018, HPT amended and restated the agreement governing its $1.0 billion unsecured revolving credit facility and $400.0 million unsecured term loan. As a result of the amendment, the interest rate payable on borrowings under HPT's revolving credit facility was reduced from a rate of LIBOR plus a premium of 110 basis points per annum to a rate of LIBOR plus a premium of 100 basis points per annum and the facility fee remained unchanged at 20 basis points per annum on the total amount of lending commitments under this facility. Both the interest rate premium and facility fee are subject to change based upon changes to our credit ratings. Also as a result of the amendment, the interest rate payable on borrowings under HPT's term loan was reduced from a rate of LIBOR plus a premium of 120 basis points per annum to a rate of LIBOR plus a premium of 110 basis points per annum, subject to adjustment based on changes to our credit ratings. In addition, as a result of the amendment, the stated maturity date of HPT's revolving credit facility was extended from July 15, 2018 to July 15, 2022 and the stated maturity date of HPT's term loan was extended from April 15, 2019 to July 15, 2023. Subject to the payment of an extension fee and meeting certain other conditions, HPT also has an option to further extend the stated maturity date of its revolving credit facility by two additional six month periods.

Tenants and Managers: As of June 30, 2018, HPT had eight operating agreements with six hotel operating companies for 325 hotels with 50,379 rooms, which represented 67% of HPT’s total annual minimum returns and rents, and five lease agreements with one travel center operating company for 199 travel centers, which represented 33% of HPT’s total annual minimum returns and rents.

• Marriott Agreements: As of June 30, 2018, 122 of HPT’s hotels were operated by subsidiaries of Marriott International, Inc. (Nasdaq: MAR), or Marriott, under three agreements. HPT’s Marriott No. 1 agreement includes 53 hotels, and provides for annual minimum return payments to HPT of $69.3 million as of June 30, 2018 (approximately $17.3 million per quarter). During the three months ended June 30, 2018, HPT realized returns under its Marriott No. 1 agreement of $21.1 million, of which $2.5 million represents HPT's share of hotel cash flows in excess of the minimum returns due to HPT for the period. Because there is no guarantee or security deposit for this agreement, the minimum returns HPT receives under this agreement are limited to available hotel cash flows after payment of operating expenses and funding of a FF&E reserve. HPT’s Marriott No. 234 agreement includes 68 hotels and requires annual minimum returns to HPT of $106.9 million as of June 30, 2018 (approximately $26.7 million per quarter). During the three months ended June 30, 2018, HPT realized returns under its Marriott No. 234 agreement of $26.7 million. HPT’s Marriott No. 234 agreement is partially secured by a security deposit and a limited guarantee from Marriott; during the three months ended June 30, 2018, the available security deposit was replenished by $5.8 million from a share of hotel cash flows in excess of the minimum returns due to HPT during the period. At June 30, 2018, the available security deposit from Marriott for the Marriott No. 234 agreement was $31.0 million and there was $30.7 million available under Marriott’s guaranty for up to 90% of the minimum returns due to HPT to cover future payment shortfalls if and after the available security deposit is depleted. HPT's Marriott No. 5 agreement includes one resort hotel in Kauai, HI which is leased to Marriott on a full recourse basis. The contractual rent due to HPT for this hotel for the three months ended June 30, 2018 of $2.6 million was paid to HPT.
• InterContinental Agreement: As of June 30, 2018, 100 of HPT’s hotels were operated by subsidiaries of InterContinental under one agreement requiring annual minimum returns and rents to HPT of $190.5 million as of June 30, 2018 (approximately $47.6 million per quarter). During the three months ended June 30, 2018, HPT realized returns and rents under its InterContinental agreement of $49.1 million, of which $1.7 million represents HPT's share of hotel cash flows in excess of the minimum returns due to HPT for the period. HPT's InterContinental agreement is partially secured by a security deposit. During the three months ended June 30, 2018, the available security deposit was replenished by $5.9 million from a share of hotel cash flows in excess of the minimum returns due to HPT for the period. At June 30, 2018, the available InterContinental security deposit which HPT held to pay future payment shortfalls was at the contractually capped amount of $100.0 million.
• Sonesta Agreement: As of June 30, 2018, 50 of HPT’s hotels were operated under a management agreement with Sonesta International Hotels Corporation, or Sonesta, requiring annual minimum returns of $121.5 million as of June 30, 2018 (approximately $30.4 million per quarter). During the three months ended June 30, 2018, HPT realized returns under its Sonesta agreement of $27.9 million. Because there is no guarantee or security deposit for this agreement, the minimum returns HPT receives under this agreement are limited to available hotel cash flows after payment of operating expenses including management and related fees.
• Morgans Agreement: On May 8, 2018, pursuant to a settlement agreement with Morgans Hotel Group Co., or Morgans, HPT's lease with Morgans for one hotel was terminated and Morgans surrendered possession of that hotel to HPT. The contractual rent due to HPT under the Morgans lease through May 8, 2018 was paid to HPT. HPT rebranded this hotel to the Royal Sonesta® brand and added it to its management agreement with Sonesta.
• Wyndham Agreement: As of June 30, 2018, 22 of HPT’s hotels were operated under a management agreement with a subsidiary of Wyndham Hotels & Resorts, Inc. (NYSE: WH), or Wyndham, requiring annual minimum returns of $27.6 million as of June 30, 2018 (approximately $6.9 million per quarter). HPT also leases 48 vacation units in one of the hotels to a subsidiary of Wyndham Destinations, Inc. (NYSE: WYND), or Destinations, which requires annual minimum rent of $1.4 million (approximately $0.4 million per quarter). The guarantee provided by Destinations with respect to the lease is unlimited. The guarantee provided by Wyndham with respect to the management agreement was limited to $35.7 million and was depleted during 2017. HPT's agreement with the Wyndham subsidiary provides that if the hotels' cash flows available after payment of hotel operating expenses are less than the minimum returns due to HPT and if the guaranty is depleted, to avoid default Wyndham is required to pay HPT the greater of the available hotel cash flows after payment of hotel operating expenses and 85% of the contractual minimum amount due. During the three months ended June 30, 2018, HPT realized returns under its Wyndham agreement of $5.9 million, which represents 85% of the minimum returns due for the period. The contractual rent due to HPT under the lease for Destinations' 48 vacation units during the three months ended June 30, 2018 was paid to HPT.
• Hyatt Agreement: As of June 30, 2018, 22 of HPT’s hotels were operated under a management agreement with a subsidiary of Hyatt Hotels Corporation (NYSE: H), or Hyatt, requiring annual minimum returns of $22.0 million as of June 30, 2018 (approximately $5.5 million per quarter). During the three months ended June 30, 2018, HPT realized returns under its Hyatt agreement of $5.5 million. HPT’s Hyatt agreement is partially secured by a limited guaranty from Hyatt. During the three months ended June 30, 2018, the available guaranty was replenished by $2.4 million from a share of hotel cash flows in excess of the minimum returns due to HPT during the period. At June 30, 2018, there was $23.8 million available under Hyatt's guaranty.
• Radisson Agreement: As of June 30, 2018, nine of HPT’s hotels were operated under a management agreement with a subsidiary of Radisson requiring annual minimum returns of $18.9 million as of June 30, 2018 (approximately $4.7 million per quarter). During the three months ended June 30, 2018, HPT realized returns under its Radisson agreement of $3.5 million. The $3.5 million of returns realized by HPT during the three months ended June 30, 2018 equals the total amount due from Radisson during the period. The required annual minimum returns increased by $6.0 million as of June 30, 2018 as a result of HPT's acquisition of the Radisson Blu Hotel in Minneapolis, MN in June 2018. HPT’s Radisson agreement is partially secured by a limited guaranty from Radisson. During the three months ended June 30, 2018, the available guaranty was replenished by $1.7 million from a share of hotel cash flows in excess of the minimum returns due to HPT during the period. In connection with HPT's acquisition of the Radisson Blu hotel described above, the available balance of the guaranty under HPT's Radisson agreement was increased by $6.0 million and the guaranty cap was increased to $46.0 million. At June 30, 2018, there was $42.0 million available under Radisson's guaranty.
• Travel Center Agreements: As of June 30, 2018, HPT’s 199 travel centers located along the U.S. Interstate Highway system were leased to TravelCenters of America LLC (Nasdaq: TA), or TA, under five lease agreements, which require aggregate annual minimum rents of $286.9 million (approximately $71.7 million per quarter). As of June 30, 2018, all payments due to HPT from TA under these leases were current.

Hospitality Properties Trust is a real estate investment trust, or REIT, which owns a diverse portfolio of hotels and travel centers located in 45 states, Puerto Rico and Canada. HPT’s properties are operated under long term management or lease agreements. HPT is managed by the operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), an alternative asset management company that is headquartered in Newton, Massachusetts.