Maryland | 04-3262075 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458 |
(Address of Principal Executive Offices) (Zip Code) |
Large accelerated filer ☒ | Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company ☐ | |
Emerging growth company ☐ |
Title of Each Class | Trading Symbol | Name of each Exchange on which Registered | ||
Common Shares of Beneficial Interest | HPT | The Nasdaq Stock Market LLC |
Page | ||
March 31, | December 31, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Real estate properties: | ||||||||
Land | $ | 1,671,210 | $ | 1,626,239 | ||||
Buildings, improvements and equipment | 7,962,010 | 7,896,734 | ||||||
Total real estate properties, gross | 9,633,220 | 9,522,973 | ||||||
Accumulated depreciation | (2,979,795 | ) | (2,973,384 | ) | ||||
Total real estate properties, net | 6,653,425 | 6,549,589 | ||||||
Cash and cash equivalents | 23,675 | 25,966 | ||||||
Restricted cash | 75,129 | 50,037 | ||||||
Due from related persons | 79,710 | 91,212 | ||||||
Other assets, net | 423,865 | 460,275 | ||||||
Total assets | $ | 7,255,804 | $ | 7,177,079 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Unsecured revolving credit facility | $ | 141,000 | $ | 177,000 | ||||
Unsecured term loan, net | 397,442 | 397,292 | ||||||
Senior unsecured notes, net | 3,600,314 | 3,598,295 | ||||||
Security deposits | 116,448 | 132,816 | ||||||
Accounts payable and other liabilities | 250,925 | 211,332 | ||||||
Due to related persons | 13,109 | 62,913 | ||||||
Total liabilities | 4,519,238 | 4,579,648 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity: | ||||||||
Common shares of beneficial interest, $.01 par value; 200,000,000 shares authorized; 164,441,709 shares issued and outstanding | 1,644 | 1,644 | ||||||
Additional paid in capital | 4,545,917 | 4,545,481 | ||||||
Cumulative other comprehensive loss | (200 | ) | (266 | ) | ||||
Cumulative net income available for common shareholders | 3,457,682 | 3,231,895 | ||||||
Cumulative common distributions | (5,268,477 | ) | (5,181,323 | ) | ||||
Total shareholders’ equity | 2,736,566 | 2,597,431 | ||||||
Total liabilities and shareholders’ equity | $ | 7,255,804 | $ | 7,177,079 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Revenues: | ||||||||
Hotel operating revenues | $ | 455,385 | $ | 445,276 | ||||
Rental income | 68,151 | 81,993 | ||||||
FF&E reserve income | 1,372 | 1,364 | ||||||
Total revenues | 524,908 | 528,633 | ||||||
Expenses: | ||||||||
Hotel operating expenses | 319,125 | 314,982 | ||||||
Depreciation and amortization | 99,365 | 99,617 | ||||||
General and administrative | 12,235 | 11,734 | ||||||
Total expenses | 430,725 | 426,333 | ||||||
Gain on sale of real estate | 159,535 | — | ||||||
Dividend income | 876 | 626 | ||||||
Unrealized gains and losses on equity securities, net | 20,977 | 24,955 | ||||||
Interest income | 637 | 292 | ||||||
Interest expense (including amortization of debt issuance costs and debt discounts and premiums of $2,570 and $2,478, respectively) | (49,766 | ) | (47,540 | ) | ||||
Income before income taxes and equity in earnings of an investee | 226,442 | 80,633 | ||||||
Income tax expense | (1,059 | ) | (471 | ) | ||||
Equity in earnings of an investee | 404 | 44 | ||||||
Net income | 225,787 | 80,206 | ||||||
Other comprehensive income (loss): | ||||||||
Equity interest in investee's unrealized gains (losses) | 66 | (93 | ) | |||||
Other comprehensive income (loss) | 66 | (93 | ) | |||||
Comprehensive income | $ | 225,853 | $ | 80,113 | ||||
Weighted average common shares outstanding (basic) | 164,278 | 164,199 | ||||||
Weighted average common shares outstanding (diluted) | 164,322 | 164,219 | ||||||
Net income per common share (basic and diluted) | $ | 1.37 | $ | 0.49 |
Common Shares | Additional Paid in Capital | Cumulative Net Income Available for Common Shareholders | Cumulative Other Comprehensive Income (Loss) | |||||||||||||||||||||||
Number of Shares | Common Shares | Cumulative Common Distributions | ||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||
Balance at December 31, 2018 | 164,441,709 | $ | 1,644 | $ | (5,181,323 | ) | $ | 4,545,481 | $ | 3,231,895 | $ | (266 | ) | $ | 2,597,431 | |||||||||||
Net income | — | — | — | — | 225,787 | — | 225,787 | |||||||||||||||||||
Equity interest in investee’s unrealized gains | — | — | — | — | — | 66 | 66 | |||||||||||||||||||
Common share grants | — | — | — | 436 | — | — | 436 | |||||||||||||||||||
Distributions | — | — | (87,154 | ) | — | — | — | (87,154 | ) | |||||||||||||||||
Balance at March 31, 2019 | 164,441,709 | $ | 1,644 | $ | (5,268,477 | ) | $ | 4,545,917 | $ | 3,457,682 | $ | (200 | ) | $ | 2,736,566 | |||||||||||
Balance at December 31, 2017 | 164,349,141 | $ | 1,643 | $ | (4,834,491 | ) | $ | 4,542,307 | $ | 2,966,605 | $ | 79,358 | $ | 2,755,422 | ||||||||||||
Cumulative effect of accounting change | — | — | — | — | 79,556 | (79,556 | ) | — | ||||||||||||||||||
Net income | — | — | — | — | 80,206 | — | 80,206 | |||||||||||||||||||
Equity interest in investee’s unrealized losses | — | — | — | — | — | (93 | ) | (93 | ) | |||||||||||||||||
Common share repurchases | (3,394 | ) | — | — | (101 | ) | — | — | (101 | ) | ||||||||||||||||
Distributions | — | — | (85,460 | ) | — | — | — | (85,460 | ) | |||||||||||||||||
Balance at March 31, 2018 | 164,345,747 | $ | 1,643 | $ | (4,919,951 | ) | $ | 4,542,206 | $ | 3,126,367 | $ | (291 | ) | $ | 2,749,974 |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 225,787 | $ | 80,206 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 99,365 | 99,617 | ||||||
Amortization of debt issuance costs and debt discounts and premiums as interest | 2,570 | 2,478 | ||||||
Straight line rental income | 1,132 | (3,079 | ) | |||||
Security deposits utilized | (16,368 | ) | (6,724 | ) | ||||
Unrealized gains and losses on equity securities, net | (20,977 | ) | (24,955 | ) | ||||
Equity in earnings of an investee | (404 | ) | (44 | ) | ||||
Gain on sale of real estate | (159,535 | ) | — | |||||
Other non-cash (income) expense, net | (330 | ) | (1,399 | ) | ||||
Changes in assets and liabilities: | ||||||||
Due from related persons | 2,895 | (716 | ) | |||||
Other assets | (8,642 | ) | (4,058 | ) | ||||
Accounts payable and other liabilities | (28,233 | ) | (16,785 | ) | ||||
Due to related persons | (53,395 | ) | (74,856 | ) | ||||
Net cash provided by operating activities | 43,865 | 49,685 | ||||||
Cash flows from investing activities: | ||||||||
Real estate acquisitions and deposits | (148,011 | ) | — | |||||
Real estate improvements | (11,738 | ) | (26,483 | ) | ||||
Hotel managers’ purchases with restricted cash | (46,361 | ) | (33,226 | ) | ||||
Net proceeds from sale of real estate | 308,200 | — | ||||||
Net cash provided by (used in) investing activities | 102,090 | (59,709 | ) | |||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of senior unsecured notes, after discounts and premiums | — | 389,976 | ||||||
Borrowings under unsecured revolving credit facility | 94,000 | 155,000 | ||||||
Repayments of unsecured revolving credit facility | (130,000 | ) | (467,000 | ) | ||||
Deferred financing costs | — | (3,522 | ) | |||||
Repurchase of common shares | — | (101 | ) | |||||
Distributions to common shareholders | (87,154 | ) | (85,460 | ) | ||||
Net cash used in financing activities | (123,154 | ) | (11,107 | ) | ||||
Increase (decrease) in cash and cash equivalents and restricted cash | 22,801 | (21,131 | ) | |||||
Cash and cash equivalents and restricted cash at beginning of period | 76,003 | 97,496 | ||||||
Cash and cash equivalents and restricted cash at end of period | $ | 98,804 | $ | 76,365 | ||||
Supplemental disclosure of cash and cash equivalents and restricted cash: | ||||||||
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amount shown in the condensed consolidated statements of cash flows: | ||||||||
Cash and cash equivalents | $ | 23,675 | $ | 16,832 | ||||
Restricted cash | 75,129 | 59,533 | ||||||
Total cash and cash equivalents and restricted cash | $ | 98,804 | $ | 76,365 | ||||
Supplemental cash flow information: | ||||||||
Cash paid for interest | $ | 77,745 | $ | 61,162 | ||||
Cash paid for income taxes | 320 | 193 |
For the Three Months Ended March 31, | ||||||
2019 | 2018 | |||||
(in thousands) | ||||||
Weighted average common shares for basic earnings per share | 164,278 | 164,199 | ||||
Effect of dilutive securities: Unvested share awards | 44 | 20 | ||||
Weighted average common shares for diluted earnings per share | 164,322 | 164,219 |
Acquisition Date | Location | Purchase Price | Land | Land Improvements | Building and Improvements | Furniture, Fixtures and Equipment | ||||||||||||||||
2/22/2019 | Washington, D.C. (1) | $ | 143,742 | $ | 44,972 | $ | 151 | $ | 93,412 | $ | 5,207 |
(1) | On February 22, 2019, we acquired the 335 room Hotel Palomar located in Washington, D.C. for a purchase price of $143,742, including capitalized acquisition costs of $2,292. We added this Kimpton® branded hotel to our management agreement with InterContinental Hotels Group, plc, or IHG. See Note 8 for further information regarding our management agreement with IHG for 101 hotels, or our IHG agreement. |
• | We sold to TA 20 travel center properties, which TA previously leased from us, for a total purchase price of $308,200. |
• | Upon completing these transactions, these travel center properties were removed from the TA leases. |
• | Commencing on April 1, 2019, TA paid us the first of 16 quarterly installments of approximately $4,400 each (an aggregate of $70,458) to fully satisfy and discharge its $150,000 deferred rent obligation to us that otherwise would have become due in five installments between 2024 and 2030. |
• | Commencing with the year ending December 31, 2020, TA will be obligated to pay to us an additional amount of percentage rent equal to one-half percent (0.5%) of the excess of its annual non-fuel revenues at leased sites over the non-fuel revenues for each respective site for the year ending December 31, 2019. |
• | The term of each TA lease was extended by three years. |
• | Certain of the 179 travel center properties that TA continues to lease from us were reallocated among the TA leases. |
2019 | $ | 281,956 | |
2020 | 273,098 | ||
2021 | 272,801 | ||
2022 | 271,222 | ||
2023 | 258,065 | ||
Thereafter | 2,357,802 | ||
Total | $ | 3,714,944 |
2019 | $ | 7,165 | |
2020 | 6,850 | ||
2021 | 6,127 | ||
2022 | 5,632 | ||
2023 | 5,614 | ||
Thereafter | 159,731 | ||
Total lease payments | 191,119 | ||
Less: imputed interest | (114,971 | ) | |
Present value of lease liabilities (1) | $ | 76,148 |
(1) | The weighted average discount rate used to calculate the lease liability and the weighted average remaining term for our ground leases (assuming all extension options) and our hotel operating leases are approximately 5.50% and 32 years (range of 12 to 69 years) and 5.63% and 29 years (range of 9 months to 55 years), respectively. |
For the Three Months Ended March 31, 2019 | ||||||||||||||||
Hotels | Travel Centers | Corporate | Consolidated | |||||||||||||
Revenues: | ||||||||||||||||
Hotel operating revenues | $ | 455,385 | $ | — | $ | — | $ | 455,385 | ||||||||
Rental income | 5,076 | 63,075 | — | 68,151 | ||||||||||||
FF&E reserve income | 1,372 | — | — | 1,372 | ||||||||||||
Total revenues | 461,833 | 63,075 | — | 524,908 | ||||||||||||
Expenses: | ||||||||||||||||
Hotel operating expenses | 319,125 | — | — | 319,125 | ||||||||||||
Depreciation and amortization | 66,583 | 32,782 | — | 99,365 | ||||||||||||
General and administrative | — | — | 12,235 | 12,235 | ||||||||||||
Total expenses | 385,708 | 32,782 | 12,235 | 430,725 | ||||||||||||
Gain on sale of real estate | — | 159,535 | — | 159,535 | ||||||||||||
Dividend income | — | — | 876 | 876 | ||||||||||||
Unrealized gains on equity securities | — | — | 20,977 | 20,977 | ||||||||||||
Interest income | 434 | — | 203 | 637 | ||||||||||||
Interest expense | — | — | (49,766 | ) | (49,766 | ) | ||||||||||
Income before income taxes and equity in earnings of an investee | 76,559 | 189,828 | (39,945 | ) | 226,442 | |||||||||||
Income tax expense | — | — | (1,059 | ) | (1,059 | ) | ||||||||||
Equity in earnings of an investee | — | — | 404 | 404 | ||||||||||||
Net income | $ | 76,559 | $ | 189,828 | $ | (40,600 | ) | $ | 225,787 | |||||||
As of March 31, 2019 | ||||||||||||||||
Hotels | Travel Centers | Corporate | Consolidated | |||||||||||||
Total assets | $ | 4,815,816 | $ | 2,229,038 | $ | 210,950 | $ | 7,255,804 |
For the Three Months Ended March 31, 2018 | ||||||||||||||||
Hotels | Travel Centers | Corporate | Consolidated | |||||||||||||
Revenues: | ||||||||||||||||
Hotel operating revenues | $ | 445,276 | $ | — | $ | — | $ | 445,276 | ||||||||
Rental income | 7,800 | 74,193 | — | 81,993 | ||||||||||||
FF&E reserve income | 1,364 | — | — | 1,364 | ||||||||||||
Total revenues | 454,440 | 74,193 | — | 528,633 | ||||||||||||
Expenses: | ||||||||||||||||
Hotel operating expenses | 314,982 | — | — | 314,982 | ||||||||||||
Depreciation and amortization | 62,446 | 37,171 | — | 99,617 | ||||||||||||
General and administrative | — | — | 11,734 | 11,734 | ||||||||||||
Total expenses | 377,428 | 37,171 | 11,734 | 426,333 | ||||||||||||
Dividend income | — | — | 626 | 626 | ||||||||||||
Unrealized gains and losses on equity securities, net | — | — | 24,955 | 24,955 | ||||||||||||
Interest income | — | — | 292 | 292 | ||||||||||||
Interest expense | — | — | (47,540 | ) | (47,540 | ) | ||||||||||
Income (loss) before income taxes and equity in earnings of an investee | 77,012 | 37,022 | (33,401 | ) | 80,633 | |||||||||||
Income tax expense | — | — | (471 | ) | (471 | ) | ||||||||||
Equity in earnings of an investee | — | — | 44 | 44 | ||||||||||||
Net income (loss) | $ | 77,012 | $ | 37,022 | $ | (33,828 | ) | $ | 80,206 | |||||||
As of December 31, 2018 | ||||||||||||||||
Hotels | Travel Centers | Corporate | Consolidated | |||||||||||||
Total assets | $ | 4,586,709 | $ | 2,398,118 | $ | 192,252 | $ | 7,177,079 |
Fair Value at Reporting Date Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets for | Significant Other | Significant | ||||||||||||||
Carrying Value at | Identical Assets | Observable Inputs | Unobservable Inputs | |||||||||||||
Description | March 31, 2019 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Recurring Fair Value Measurement Assets: | ||||||||||||||||
Investment in TA (1) | $ | 14,056 | $ | 14,056 | $ | — | $ | — | ||||||||
Investment in RMR Inc.(2) | $ | 152,680 | $ | 152,680 | $ | — | $ | — |
(1) | Our 3,420,000 common shares of TA, which are included in other assets in our condensed consolidated balance sheets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our historical cost basis for these shares is $17,407 as of March 31, 2019. During the three months ended March 31, 2019, we recorded unrealized gains of $1,197 to adjust the carrying value of our investment in TA shares to their fair value as of March 31, 2019. |
(2) | Our 2,503,777 shares of class A common stock of RMR Inc., which are included in other assets in our condensed consolidated balance sheets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our historical cost basis for these shares is $66,374 as of March 31, 2019. During the three months ended March 31, 2019, we recorded unrealized gains of $19,780 to adjust the carrying value of our investment in RMR Inc. shares to their fair value as of March 31, 2019. |
March 31, 2019 | December 31, 2018 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value (1) | Value | Value (1) | Value | |||||||||||||
Senior Unsecured Notes, due 2021 at 4.25% | $ | 397,299 | $ | 402,648 | $ | 396,938 | $ | 404,582 | ||||||||
Senior Unsecured Notes, due 2022 at 5.00% | 495,912 | 517,915 | 495,609 | 510,658 | ||||||||||||
Senior Unsecured Notes, due 2023 at 4.50% | 499,309 | 511,155 | 499,268 | 503,295 | ||||||||||||
Senior Unsecured Notes, due 2024 at 4.65% | 347,991 | 357,231 | 347,890 | 349,741 | ||||||||||||
Senior Unsecured Notes, due 2025 at 4.50% | 345,915 | 354,552 | 345,743 | 341,114 | ||||||||||||
Senior Unsecured Notes, due 2026 at 5.25% | 342,237 | 358,311 | 341,955 | 354,060 | ||||||||||||
Senior Unsecured Notes, due 2027 at 4.95% | 394,082 | 399,208 | 393,893 | 391,660 | ||||||||||||
Senior Unsecured Notes, due 2028 at 3.95% | 389,897 | 368,594 | 389,610 | 361,232 | ||||||||||||
Senior Unsecured Notes, due 2030 at 4.375% | 387,672 | 370,522 | 387,389 | 367,110 | ||||||||||||
Total financial liabilities | $ | 3,600,314 | $ | 3,640,136 | $ | 3,598,295 | $ | 3,583,452 |
(1) | Carrying value includes unamortized discounts and premiums and issuance costs. |
For the Three Months Ended March 31, | |||||||||||||||
Increase | % Increase | ||||||||||||||
2019 | 2018 | (Decrease) | (Decrease) | ||||||||||||
Revenues: | |||||||||||||||
Hotel operating revenues | $ | 455,385 | $ | 445,276 | $ | 10,109 | 2.3 | % | |||||||
Rental income - hotels | 5,076 | 7,800 | (2,724 | ) | (34.9 | )% | |||||||||
Rental income - travel centers | 63,075 | 74,193 | (11,118 | ) | (15.0 | )% | |||||||||
Total rental income | 68,151 | 81,993 | (13,842 | ) | (16.9 | )% | |||||||||
FF&E reserve income | 1,372 | 1,364 | 8 | 0.6 | % | ||||||||||
Expenses: | |||||||||||||||
Hotel operating expenses | 319,125 | 314,982 | 4,143 | 1.3 | % | ||||||||||
Depreciation and amortization - hotels | 66,583 | 62,446 | 4,137 | 6.6 | % | ||||||||||
Depreciation and amortization - travel centers | 32,782 | 37,171 | (4,389 | ) | (11.8 | )% | |||||||||
Total depreciation and amortization | 99,365 | 99,617 | (252 | ) | (0.3 | )% | |||||||||
General and administrative | 12,235 | 11,734 | 501 | 4.3 | % | ||||||||||
Gain on sale of real estate | 159,535 | — | 159,535 | n/m | |||||||||||
Dividend income | 876 | 626 | 250 | 39.9 | % | ||||||||||
Unrealized gains and losses on equity securities, net | 20,977 | 24,955 | (3,978 | ) | (15.9 | )% | |||||||||
Interest income | 637 | 292 | 345 | 118.2 | % | ||||||||||
Interest expense | (49,766 | ) | (47,540 | ) | (2,226 | ) | 4.7 | % | |||||||
Income before income taxes and equity earnings of an investee | 226,442 | 80,633 | 145,809 | 180.8 | % | ||||||||||
Income tax expense | (1,059 | ) | (471 | ) | (588 | ) | 124.8 | % | |||||||
Equity in earnings of an investee | 404 | 44 | 360 | 818.2 | % | ||||||||||
Net income | $ | 225,787 | $ | 80,206 | $ | 145,581 | 181.5 | % | |||||||
Weighted average shares outstanding (basic) | 164,278 | 164,199 | 79 | n/m | |||||||||||
Weighted average shares outstanding (diluted) | 164,322 | 164,219 | 103 | 0.1 | % | ||||||||||
Net income per common share (basic and diluted) | $ | 1.37 | $ | 0.49 | $ | 0.88 | 179.6 | % |
• | During the three months ended March 31, 2019, we funded $13,593 for capital improvements to certain hotels under our Marriott No. 1 agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately $3,400 for capital improvements under this agreement during the last nine months of |
• | During the three months ended March 31, 2019, we funded $9,000 for capital improvements to certain hotels under our Marriott No. 234 agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately $36,000 for capital improvements under this agreement during the last nine months of 2019 using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase. |
• | We did not fund any capital improvements to hotels under our IHG agreement during the three months ended March 31, 2019. We currently expect to fund approximately $64,900 during the last nine months of 2019 for capital improvements under this agreement using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase. |
• | Our Sonesta agreement does not require FF&E escrow deposits. Under our Sonesta agreement, we are required to fund capital expenditures made at our hotels. During the three months ended March 31, 2019, we funded $10,467 for capital improvements to certain hotels included in our Sonesta agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately $84,500 during the last nine months of 2019 and $42,500 during 2020 for capital improvements under this agreement using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase to the extent amounts funded exceed threshold amounts, as defined in our Sonesta agreement. |
• | Our Wyndham agreement requires FF&E escrow deposits only if there are excess cash flows after payment of our minimum returns. No FF&E escrow deposits were required during the three months ended March 31, 2019. During the three months ended March 31, 2019, we funded $1,022 for capital improvements to certain hotels included in our Wyndham agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately $3,000 for capital improvements under this agreement during the last nine months of 2019 using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase. |
• | During the three months ended March 31, 2019, we funded $10,611 for capital improvements to certain hotels under our Radisson agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately $12,400 during the last nine months of 2019 and $5,000 during 2020 for capital improvements under this agreement using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us will increase. |
Number of | Rent / Return Coverage (3) | |||||||||||||||||||||
Rooms or | Three Months | Twelve Months | ||||||||||||||||||||
Suites (Hotels) / | Annual | Ended | Ended | |||||||||||||||||||
Operating Agreement | Number of | Land Acreage | Minimum | March 31, | March 31, | |||||||||||||||||
Reference Name | Properties | (Travel Centers) | Investment (1) | Return/Rent (2) | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
Marriott (No. 1) (4) | 53 | 7,609 | $ | 719,901 | $ | 71,496 | 0.89x | 0.92x | 1.19x | 1.23x | ||||||||||||
Marriott (No. 234) (5) | 68 | 9,120 | 1,021,394 | 108,160 | 0.92x | 0.97x | 1.08x | 1.11x | ||||||||||||||
Marriott (No. 5) (6) | 1 | 356 | 90,078 | 10,518 | 1.04x | 1.10x | 1.03x | 0.96x | ||||||||||||||
Subtotal / Average Marriott | 122 | 17,085 | 1,831,373 | 190,174 | 0.91x | 0.96x | 1.12x | 1.15x | ||||||||||||||
IHG (7) | 101 | 16,689 | 2,237,462 | 205,011 | 0.79x | 0.93x | 1.02x | 1.13x | ||||||||||||||
Sonesta (8) | 51 | 8,862 | 1,706,276 | 127,573 | 0.44x | 0.51x | 0.64x | 0.75x | ||||||||||||||
Wyndham (9) | 22 | 3,583 | 397,705 | 29,366 | 0.07x | 0.29x | 0.61x | 0.84x | ||||||||||||||
Hyatt (10) | 22 | 2,724 | 301,942 | 22,037 | 0.92x | 1.06x | 1.00x | 1.12x | ||||||||||||||
Radisson (11) | 9 | 1,939 | 280,716 | 19,769 | 0.45x | 1.00x | 0.97x | 1.18x | ||||||||||||||
Subtotal / Average Hotels | 327 | 50,882 | 6,755,474 | 593,930 | 0.71x | 0.82x | 0.95x | 1.04x | ||||||||||||||
TA (No. 1) (12) | 36 | 747 | 668,375 | 49,018 | 1.75x | 1.73x | 1.86x | 1.79x | ||||||||||||||
TA (No. 2) (12) | 36 | 879 | 626,390 | 44,663 | 1.68x | 1.72x | 1.83x | 1.73x | ||||||||||||||
TA (No. 3) (12) | 35 | 885 | 578,630 | 42,404 | 1.65x | 1.67x | 1.82x | 1.74x | ||||||||||||||
TA (No. 4) (12) | 37 | 930 | 594,794 | 48,381 | 1.80x | 1.81x | 1.89x | 1.78x | ||||||||||||||
TA (No. 5) (12) | 35 | 1,039 | 834,559 | 61,617 | 1.67x | 1.77x | 1.79x | 1.74x | ||||||||||||||
Subtotal / Average TA | 179 | 4,480 | 3,302,748 | 246,083 | 1.71x | 1.74x | 1.83x | 1.76x | ||||||||||||||
Total / Average | 506 | 50,882 / 4,480 | $ | 10,058,222 | $ | 840,013 | 1.01x | 1.10x | 1.21x | 1.26x |
(1) | Represents the historical cost of our properties plus capital improvements funded by us less impairment writedowns, if any, and excludes capital improvements made from FF&E reserves funded from hotel operations which do not result in increases in minimum returns or rents. |
(2) | Each of our management agreements or leases provides for payment to us of an annual minimum return or rent, respectively. Certain of these minimum payment amounts are secured by full or limited guarantees or security deposits as more fully described below. In addition, certain of our hotel management agreements provide for payment to us of additional amounts to the extent of available cash flows as defined in the management agreement. Payments of these additional amounts are not guaranteed or secured by deposits. Annualized minimum rent amounts represent cash rent amounts due to us and exclude adjustments necessary to record rent on a straight line basis. |
(3) | We define coverage as combined total property level revenues minus all property level expenses and FF&E reserve escrows which are not subordinated to minimum returns or rents due to us (which data is provided to us by our managers or tenants), divided by the minimum returns or rents due to us. Coverage amounts for our IHG, Sonesta and Radisson agreements and our TA No. 4 lease include data for periods prior to our ownership of certain properties. Coverage amounts for our Sonesta agreement include data for one hotel prior to when it was managed by Sonesta. Coverage amounts for our Radisson and TA agreements exclude data for periods prior to our sale of certain properties. |
(4) | We lease 53 Courtyard by Marriott® branded hotels in 24 states to one of our TRSs. The hotels are managed by a subsidiary of Marriott under a combination management agreement which expires in 2024; Marriott has two renewal options for 12 years each for all, but not less than all, of the hotels. |
(5) | We lease 68 of our Marriott® branded hotels (one full service Marriott®, 35 Residence Inn by Marriott®, 18 Courtyard by Marriott®, 12 TownePlace Suites by Marriott® and two SpringHill Suites by Marriott® hotels) in 22 states to one of our TRSs. The hotels are managed by subsidiaries of |
(6) | We lease one Marriott® branded hotel in Kauai, HI to a subsidiary of Marriott under a lease that expires in 2019. Marriott has four renewal options for 15 years each. On August 31, 2016, Marriott notified us that it will not exercise its renewal option at the expiration of the current lease term ending on December 31, 2019. This lease is guaranteed by Marriott and provides for increases in the annual minimum rent payable to us based on changes in the consumer price index. |
(7) | We lease 100 IHG branded hotels (20 Staybridge Suites®, 61 Candlewood Suites®, two InterContinental®, 10 Crowne Plaza®, four Kimpton® Hotels & Restaurants and three Holiday Inn®) in 29 states in the U.S., the District of Columbia and Ontario, Canada to one of our TRSs. These 100 hotels are managed by subsidiaries of IHG under a combination management agreement. We lease one additional InterContinental® branded hotel in Puerto Rico to a subsidiary of IHG. The annual minimum return amount presented in the table on page 27 includes $7,908 of minimum rent related to the leased Puerto Rico hotel. The management agreement and the lease expire in 2036; IHG has two renewal options for 15 years each for all, but not less than all, of the hotels. |
(8) | We lease our 51 Sonesta branded hotels (six Royal Sonesta® Hotels, six Sonesta Hotels & Resorts® and 39 Sonesta ES Suites® hotels) in 26 states to one of our TRSs. The hotels are managed by Sonesta under a combination management agreement which expires in 2037; Sonesta has two renewal options for 15 years each for all, but not less than all, of the hotels. |
(9) | We lease our 22 Wyndham branded hotels (six Wyndham Hotels and Resorts® and 16 Hawthorn Suites® hotels) in 14 states to one of our TRSs. The hotels are managed by subsidiaries of Wyndham under a combination management agreement which expires in 2038; Wyndham has two renewal options for 15 years each for all, but not less than all, of the hotels. |
(10) | We lease our 22 Hyatt Place® branded hotels in 14 states to one of our TRSs. The hotels are managed by a subsidiary of Hyatt under a combination management agreement that expires in 2030; Hyatt has two renewal options for 15 years each for all, but not less than all, of the hotels. |
(11) | We lease our nine Radisson branded hotels (four Radisson® Hotels & Resorts, four Country Inns & Suites® by Radisson and one Radisson Blu® hotel) in six states to one of our TRSs and these hotels are managed by a subsidiary of Radisson under a combination management agreement which expires in 2035 and Radisson has two 15 year renewal options for all, but not less than all, of the hotels. |
(12) | TA No. 1: We lease 36 travel centers (32 TravelCenters of America® branded travel centers and four Petro Stopping Centers® branded travel centers) in 26 states to a subsidiary of TA under a lease that expires in 2032. TA has two renewal options for 15 years each for all, but not less than all, of these travel centers. In addition to the payment of our minimum rent, this lease provides for payment to us of percentage rent based on increases in total non-fuel revenues over base year levels (3% of non-fuel revenues above 2015 non-fuel revenues). Commencing in 2020, this lease provides for payment of an additional half percent (0.5%) of non-fuel revenues above 2019 non-fuel base year revenues. TA’s previously deferred rent obligation of $14,175 will be paid in 16 quarterly installments of $886 beginning in April 2019. |
No. of | No. of Rooms / | Three Months Ended March 31, | |||||||||||||||
Hotels | Suites | 2019 | 2018 | Change | |||||||||||||
ADR | |||||||||||||||||
Marriott (No. 1) | 53 | 7,609 | $ | 134.43 | $ | 130.81 | 2.8 | % | |||||||||
Marriott (No. 234) | 68 | 9,120 | 135.88 | 131.91 | 3.0 | % | |||||||||||
Marriott (No. 5) | 1 | 356 | 310.91 | 280.56 | 10.8 | % | |||||||||||
Subtotal / Average Marriott | 122 | 17,085 | 140.21 | 135.84 | 3.2 | % | |||||||||||
IHG (1) | 101 | 16,689 | 122.51 | 123.95 | (1.2 | %) | |||||||||||
Sonesta (1) (2) | 51 | 8,862 | 147.96 | 146.31 | 1.1 | % | |||||||||||
Wyndham | 22 | 3,583 | 89.71 | 93.69 | (4.2 | %) | |||||||||||
Hyatt | 22 | 2,724 | 112.98 | 113.36 | (0.3 | %) | |||||||||||
Radisson (1) | 9 | 1,939 | 129.66 | 126.73 | 2.3 | % | |||||||||||
All Hotels Total / Average | 327 | 50,882 | $ | 130.03 | $ | 128.90 | 0.9 | % | |||||||||
OCCUPANCY | |||||||||||||||||
Marriott (No. 1) | 53 | 7,609 | 60.2 | % | 62.7 | % | -2.5 pts | ||||||||||
Marriott (No. 234) | 68 | 9,120 | 68.8 | % | 71.7 | % | -2.9 pts | ||||||||||
Marriott (No. 5) | 1 | 356 | 88.4 | % | 96.4 | % | -8.0 pts | ||||||||||
Subtotal / Average Marriott | 122 | 17,085 | 65.4 | % | 68.2 | % | -2.8 pts | ||||||||||
IHG (1) | 101 | 16,689 | 72.7 | % | 75.5 | % | -2.8 pts | ||||||||||
Sonesta (1) (2) | 51 | 8,862 | 63.1 | % | 64.1 | % | -1.0 pts | ||||||||||
Wyndham | 22 | 3,583 | 60.8 | % | 64.6 | % | -3.8 pts | ||||||||||
Hyatt | 22 | 2,724 | 74.5 | % | 77.1 | % | -2.6 pts | ||||||||||
Radisson (1) | 9 | 1,939 | 63.3 | % | 73.8 | % | -10.5 pts | ||||||||||
All Hotels Total / Average | 327 | 50,882 | 67.5 | % | 70.3 | % | -2.8 pts | ||||||||||
RevPAR | |||||||||||||||||
Marriott (No. 1) | 53 | 7,609 | $ | 80.93 | $ | 82.02 | (1.3 | %) | |||||||||
Marriott (No. 234) | 68 | 9,120 | 93.49 | 94.58 | (1.2 | %) | |||||||||||
Marriott (No. 5) | 1 | 356 | 274.84 | 270.46 | 1.6 | % | |||||||||||
Subtotal / Average Marriott | 122 | 17,085 | 91.70 | 92.64 | (1.0 | %) | |||||||||||
IHG (1) | 101 | 16,689 | 89.06 | 93.58 | (4.8 | %) | |||||||||||
Sonesta (1) (2) | 51 | 8,862 | 93.36 | 93.78 | (0.4 | %) | |||||||||||
Wyndham | 22 | 3,583 | 54.54 | 60.52 | (9.9 | %) | |||||||||||
Hyatt | 22 | 2,724 | 84.17 | 87.40 | (3.7 | %) | |||||||||||
Radisson (1) | 9 | 1,939 | 82.07 | 93.53 | (12.3 | %) | |||||||||||
All Hotels Total / Average | 327 | 50,882 | $ | 87.77 | $ | 90.62 | (3.1 | %) |
(1) | Operating data includes data for certain hotels for periods prior to when we acquired them. |
(2) | Operating data includes data for one hotel prior to when it was managed by Sonesta. |
For the Three Months Ended March 31, | |||||||||
2019 | 2018 | ||||||||
Net income | $ | 225,787 | $ | 80,206 | |||||
Add (Less): | Depreciation and amortization expense | 99,365 | 99,617 | ||||||
Gain on sale of real estate (1) | (159,535 | ) | — | ||||||
Unrealized gains and losses on equity securities, net (2) | (20,977 | ) | (24,955 | ) | |||||
FFO and Normalized FFO | $ | 144,640 | $ | 154,868 | |||||
Weighted average shares outstanding (basic) | 164,278 | 164,199 | |||||||
Weighted average shares outstanding (diluted) (3) | 164,322 | 164,219 | |||||||
Basic and diluted per common share amounts: | |||||||||
Net income | $ | 1.37 | $ | 0.49 | |||||
FFO and Normalized FFO | $ | 0.88 | $ | 0.94 | |||||
Distributions declared per share | $ | 0.53 | $ | 0.52 |
(1) | We recorded a $159,535 gain on sale of real estate during the three months ended March 31, 2019 in connection with the sales of 20 travel centers. |
(2) | Unrealized gains and losses on equity securities, net represent the adjustment required to adjust the carrying value of our investments in RMR Inc. and TA common shares to their fair value as of the end of the period. |
(3) | Represents weighted average common shares adjusted to reflect the potential dilution of unvested share awards. |
Principal Balance | Annual Interest Rate | Annual Interest Expense | Maturity | Interest Payments Due | |||||||||
$ | 400,000 | 4.250 | % | $ | 17,000 | 2021 | Semi-Annually | ||||||
500,000 | 5.000 | % | 25,000 | 2022 | Semi-Annually | ||||||||
500,000 | 4.500 | % | 22,500 | 2023 | Semi-Annually | ||||||||
350,000 | 4.650 | % | 16,275 | 2024 | Semi-Annually | ||||||||
350,000 | 4.500 | % | 15,750 | 2025 | Semi-Annually | ||||||||
350,000 | 5.250 | % | 18,375 | 2026 | Semi-Annually | ||||||||
400,000 | 4.950 | % | 19,800 | 2027 | Semi-Annually | ||||||||
400,000 | 3.950 | % | 15,800 | 2028 | Semi-Annually | ||||||||
400,000 | 4.375 | % | 17,500 | 2030 | Semi-Annually | ||||||||
$ | 3,650,000 | $ | 168,000 |
Impact of Increase in Interest Rates | |||||||||||||||
Interest Rate Per Year (1) | Outstanding Debt | Total Interest Expense Per Year | Annual Per Share Impact (2) | ||||||||||||
At March 31, 2019 | 3.54 | % | $ | 541,000 | $ | 19,151 | $ | 0.12 | |||||||
One percentage point increase | 4.54 | % | $ | 541,000 | $ | 24,561 | $ | 0.15 |
Impact of Increase in Interest Rates | |||||||||||||||
Interest Rate Per Year (1) | Outstanding Debt | Total Interest Expense Per Year | Annual Per Share Impact (2) | ||||||||||||
At March 31, 2019 | 3.46 | % | $ | 1,400,000 | $ | 48,440 | $ | 0.29 | |||||||
One percentage point increase | 4.46 | % | $ | 1,400,000 | $ | 62,440 | $ | 0.38 |
(1) | Weighted average based on the interest rates and the respective outstanding borrowings (assuming fully drawn) as of March 31, 2019. |
(2) | Based on diluted weighted average common shares outstanding for the three months ended March 31, 2019. |
• | Our hotel managers’ or tenants’ abilities to pay the contractual amounts of returns or rents due to us, |
• | Our ability to compete for acquisitions effectively, |
• | Our policies and plans regarding investments, financings and dispositions, |
• | Our ability to pay distributions to our shareholders and to sustain the amount of such distributions, |
• | Our ability to raise debt or equity capital, |
• | Our ability to appropriately balance our use of debt and equity capital, |
• | Our intent to make improvements to certain of our properties and the success of our hotel renovations, |
• | Our ability to engage and retain qualified managers and tenants for our hotels and travel centers on satisfactory terms, |
• | The future availability of borrowings under our revolving credit facility, |
• | Our ability to pay interest on and principal of our debt, |
• | Our credit ratings, |
• | The ability of TA to pay current and deferred rent amounts and other obligations due to us, |
• | Our expectation that we benefit from our ownership interest in and other relationships with RMR Inc., |
• | Our expectation that we benefit from our ownership interest in and other relationships with AIC and from our participation in insurance programs arranged by AIC, |
• | Our qualification for taxation as a REIT, |
• | Changes in federal or state tax laws, and |
• | Other matters. |
• | The impact of conditions in the economy and the capital markets on us and our managers and tenants, |
• | Competition within the real estate, hotel, transportation and travel center industries, particularly in those markets in which our properties are located, |
• | Compliance with, and changes to, federal, state and local laws and regulations, accounting rules, tax laws and similar matters, |
• | Limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify for taxation as a REIT for U.S. federal income tax purposes, |
• | Acts of terrorism, outbreaks of so called pandemics or other manmade or natural disasters beyond our control, and |
• | Actual and potential conflicts of interest with our related parties, including our managing trustees, TA, Sonesta, RMR Inc., RMR LLC, AIC and others affiliated with them. |
• | Our ability to make future distributions to our shareholders and to make payments of principal and interest on our indebtedness depends upon a number of factors, including our future earnings, the capital costs we incur to maintain our properties and our working capital requirements. We may be unable to pay our debt obligations or to increase or maintain our current rate of distributions on our common shares and future distributions may be reduced or eliminated, |
• | The security deposits which we hold are not in segregated cash accounts or otherwise separate from our other assets and liabilities. Accordingly, when we record income by reducing our security deposit liabilities, we do not receive any additional cash payment. Because we do not receive any additional cash payment as we apply security deposits to cover payment shortfalls, the failure of our managers or tenants to pay minimum returns or rents due to us may reduce our cash flows and our ability to pay distributions to shareholders, |
• | As of March 31, 2019, approximately 73% of our aggregate annual minimum returns and rents were secured by guarantees or security deposits from our managers and tenants. This may imply that these minimum returns and rents will be paid. In fact, certain of these guarantees and security deposits are limited in amount and duration and all the guarantees are subject to the guarantors’ abilities and willingness to pay. We cannot be sure of the future financial performance of our properties and whether such performance will cover our minimum returns and rents, whether the guarantees or security deposits will be adequate to cover future shortfalls in the minimum returns or rents due to us which they guarantee or secure, or regarding our managers’, tenants’ or guarantors’ future actions if and when the guarantees and security deposits expire or are depleted or their abilities or willingness to pay minimum returns and rents owed to us. Moreover, the security deposits we hold are not segregated from our other assets and the application of security deposits to cover payment shortfalls will result in us recording income, but will not result in us receiving additional cash. The balance of our annual minimum returns and rents as of March 31, 2019 was not secured by guarantees or security deposits, |
• | We have no guarantees or security deposits for the minimum returns due to us from our Marriott No. 1 or our Sonesta agreement and the guaranty from Wyndham has been depleted. Accordingly, we may receive amounts that are less than the contractual minimum returns stated in these agreements. We cannot be sure as to whether Wyndham will continue to pay at least the greater of available hotel cash flows after payment of hotel operating expenses and 85% of the minimum returns due to us or if Wyndham will default on its payments, |
• | We have recently renovated certain hotels and are currently renovating additional hotels. We currently expect to fund approximately $204.2 million during the last nine months of 2019 and $47.5 million in 2020 for renovations and other capital improvement costs at certain of our hotels. The cost of capital projects associated with such renovations may be greater than we currently anticipate. Operating results at our hotels may decline as a result of having rooms out of service or other disruptions during renovations. Also, while our funding of these capital projects will cause our contractual minimum returns to increase, the hotels’ operating results may not increase or may not increase to the extent that the minimum returns increase. Accordingly, coverage of our minimum returns at these hotels may remain depressed for an extended period, |
• | Although we currently do not expect to purchase from TA during 2019 any capital improvements it may make to the travel centers we lease to TA, that may change and we may purchase capital improvements from TA during 2019 at, above or below amounts we have historically purchased from TA, |
• | Hotel room demand and trucking activity are often reflections of the general economic activity in the country and in the geographic areas where our properties are located. If economic activity declines, hotel room demand and trucking |
• | Hotel and other competitive forms of temporary lodging supply (for example, Airbnb) have been increasing and may affect our hotel operators' ability to grow average daily rate, or ADR, and occupancy, and ADR and occupancy could decline due to increased competition which may cause our hotel operators to become unable to pay our returns or rents, |
• | If the current level of commercial activity in the country declines, if the price of diesel fuel increases significantly, if fuel conservation measures are increased, if freight business is directed away from trucking, if TA is unable to effectively compete or operate its business, if fuel efficiencies, the use of alternative fuels or transportation technologies reduce the demand for products and services TA sells or for various other reasons, TA may become unable to pay current and deferred rents due to us, |
• | Our ability to grow our business and increase our distributions depends in large part upon our ability to buy properties that generate returns or can be leased for rents which exceed our operating and capital costs. We may be unable to identify properties that we want to acquire and we may fail to reach agreement with the sellers and complete the purchases of any properties we do want to acquire. In addition, any properties we may acquire may not generate returns or rents which exceed our operating and capital costs, |
• | We believe that our portfolio agreements include diverse groups of properties. Our portfolio agreements may not increase the security of our cash flows or increase the likelihood our agreements will be renewed as we expect, |
• | Contingencies in our acquisition and sale agreements may not be satisfied and any expected acquisitions and sales and any related management or lease arrangements we expect to enter may not occur, may be delayed or the terms of such transactions or arrangements may change, |
• | At March 31, 2019, we had $23.7 million of cash and cash equivalents, $859.0 million available under our $1.0 billion revolving credit facility and security deposits and guarantees covering some of our minimum returns and rents. These statements may imply that we have abundant working capital and liquidity. However, our managers and tenants may not be able to fund minimum returns and rents due to us from operating our properties or from other resources; in the past and currently, certain of our tenants and hotel managers have in fact not paid the minimum amounts due to us from their operations of our leased or managed properties. Also, certain of the security deposits and guarantees we have to cover any such shortfalls are limited in amount and duration, and any security deposits we apply for such shortfalls do not result in additional cash flows to us. Our properties require, and we have agreed to provide, significant funding for capital improvements, renovations and other matters. Accordingly, we may not have sufficient working capital or liquidity, |
• | We may be unable to repay our debt obligations when they become due, |
• | We intend to conduct our business activities in a manner that will afford us reasonable access to capital for investment and financing activities. However, we may not succeed in this regard and we may not have reasonable access to capital, |
• | Continued availability of borrowings under our revolving credit facility is subject to our satisfying certain financial covenants and other credit facility conditions that we may be unable to satisfy, |
• | Actual costs under our revolving credit facility or other floating rate debt will be higher than LIBOR plus a premium because of fees and expenses associated with such debt, |
• | The maximum borrowing availability under our revolving credit facility and term loan may be increased to up to $2.3 billion on a combined basis in certain circumstances; however, increasing the maximum borrowing availability under our revolving credit facility and term loan is subject to our obtaining additional commitments from lenders, which may not occur, |
• | The premiums used to determine the interest rate payable on our revolving credit facility and term loan and the facility fee payable on our revolving credit facility are based on our credit ratings. Changes in our credit ratings may cause the interest and fees we pay to increase, |
• | We have the option to extend the maturity date of our revolving credit facility upon payment of a fee and meeting other conditions; however, the applicable conditions may not be met, |
• | The business and property management agreements between us and RMR LLC have continuing 20 year terms. However, those agreements permit early termination in certain circumstances. Accordingly, we cannot be sure that these agreements will remain in effect for continuing 20 year terms, |
• | We believe that our relationships with our related parties, including RMR LLC, RMR Inc., TA, Sonesta, AIC and others affiliated with them may benefit us and provide us with competitive advantages in operating and growing our business. However, the advantages we believe we may realize from these relationships may not materialize, |
• | RMR Inc. may reduce the amount of its distributions to its shareholders, including us, and |
• | Marriott, has notified us that it does not intend to extend its lease for our resort hotel on Kauai, Hawaii when that lease expires on December 31, 2019. We are in negotiations with Marriott regarding this hotel. If we and Marriott are unable to reach agreement, we will evaluate alternatives for this hotel, which may include rebranding or selling the hotel. These statements may imply that Marriott will not operate this hotel in the future or that we may have other alternatives for this hotel that may be more beneficial to maintaining Marriott as the operator of that hotel if we are unable to reach agreement with Marriott. At this time we cannot predict how our negotiations with Marriott will impact the future of this hotel. For example, this hotel may continue to be operated by Marriott on different contract terms than the current lease, we may identify a different operator for this hotel or the cash flows which we receive from our ownership of this hotel may be different than the rent we now receive. Also, although the current lease expires on December 31, 2019, we and Marriott may agree upon a different termination date. |
Exhibit Number | Description | ||
3.1 | |||
3.2 | |||
4.1 | |||
4.2 | |||
4.3 | |||
4.4 | |||
4.5 | |||
4.6 | |||
4.7 | |||
4.8 | |||
4.9 | |||
4.10 | |||
4.11 | |||
4.12 | |||
4.13 | |||
4.14 | |||
31.1 | |||
31.2 | |||
32.1 |
Exhibit Number | Description | ||
101.1 | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Statements of Shareholders' Equity, (iv) the Condensed Consolidated Statements of Cash Flows and (v) related notes to these financial statements, tagged as blocks of text and in detail. (Filed herewith.) |
HOSPITALITY PROPERTIES TRUST | |
/s/ John G. Murray | |
John G. Murray | |
President and Chief Executive Officer | |
Dated: May 10, 2019 | |
/s/ Brian E. Donley | |
Brian E. Donley | |
Chief Financial Officer and Treasurer | |
(Principal Financial and Accounting Officer) | |
Dated: May 10, 2019 |
1. | I have reviewed this Quarterly Report on Form 10-Q of Hospitality Properties Trust; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 10, 2019 | /s/ John G. Murray |
John G. Murray | |
Managing Trustee, President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Hospitality Properties Trust; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 10, 2019 | /s/ Brian E. Donley |
Brian E. Donley | |
Chief Financial Officer and Treasurer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ John G. Murray | /s/ Brian E. Donley | |
John G. Murray | Brian E. Donley | |
Managing Trustee, President and | Chief Financial Officer and Treasurer | |
Chief Executive Officer | ||
Date: May 10, 2019 |
Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2019 |
May 09, 2019 |
|
Document and Entity Information | ||
Entity Registrant Name | HOSPITALITY PROPERTIES TRUST | |
Entity Central Index Key | 0000945394 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity filer Category | Large Accelerated Filer | |
Entity common Stock, Shares Outstanding | 164,440,067 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Entity Emerging Growth Company | false | |
Entity Small Business | false |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common shares, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common shares, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Common shares, shares issued (in shares) | 164,441,709 | 164,441,709 |
Common shares, shares outstanding (in shares) | 164,441,709 | 164,441,709 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2019 |
Mar. 31, 2018 |
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Income Statement [Abstract] | ||
Interest expense, amortization of debt issuance costs and debt discounts and premiums | $ 2,570 | $ 2,478 |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited) - USD ($) $ in Thousands |
Total |
Common Shares |
Cumulative Common Distributions |
Additional Paid in Capital |
Cumulative Net Income Available for Common Shareholders |
Cumulative Other Comprehensive Income (Loss) |
---|---|---|---|---|---|---|
Beginning balance at Dec. 31, 2017 | $ 2,755,422 | $ 1,643 | $ (4,834,491) | $ 4,542,307 | $ 2,966,605 | $ 79,358 |
Beginning balance (in shares) at Dec. 31, 2017 | 164,349,141 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Net income | 80,206 | 80,206 | ||||
Equity interest in investee’s unrealized gains (losses) | (93) | (93) | ||||
Common share repurchases | (101) | (101) | ||||
Common share repurchases (in shares) | (3,394) | |||||
Distributions | (85,460) | (85,460) | ||||
Ending balance at Mar. 31, 2018 | 2,749,974 | $ 1,643 | (4,919,951) | 4,542,206 | 3,126,367 | (291) |
Ending balance (in shares) at Mar. 31, 2018 | 164,345,747 | |||||
Beginning balance at Dec. 31, 2018 | 2,597,431 | $ 1,644 | (5,181,323) | 4,545,481 | 3,231,895 | (266) |
Beginning balance (in shares) at Dec. 31, 2018 | 164,441,709 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Net income | 225,787 | 225,787 | ||||
Equity interest in investee’s unrealized gains (losses) | 66 | 66 | ||||
Common share grants | 436 | 436 | ||||
Distributions | (87,154) | (87,154) | ||||
Ending balance at Mar. 31, 2019 | $ 2,736,566 | $ 1,644 | $ (5,268,477) | $ 4,545,917 | $ 3,457,682 | $ (200) |
Ending balance (in shares) at Mar. 31, 2019 | 164,441,709 |
Basis of Presentation |
3 Months Ended |
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Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Note 1. Basis of Presentation The accompanying condensed consolidated financial statements of Hospitality Properties Trust and its subsidiaries, or HPT, we, our or us, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2018, or our 2018 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair statement of results for the interim period, have been included. These condensed consolidated financial statements include the accounts of HPT and our subsidiaries, all of which are 100% owned directly or indirectly by HPT. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods and those of our managers and tenants are not necessarily indicative of the results that may be expected for the full year. Reclassifications have been made to the prior years’ condensed consolidated financial statements to conform to the current year’s presentation. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in our condensed consolidated financial statements include the allowance for doubtful accounts, purchase price allocations, useful lives of fixed assets, impairment of real estate and the valuation of intangible assets. We have determined that each of our wholly owned taxable REIT subsidiaries, or TRSs, is a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification™. We have concluded that we must consolidate each of our wholly owned TRSs because we are the entity with the power to direct the activities that most significantly impact such VIEs’ performance and we have the obligation to absorb losses or the right to receive benefits from each VIE that could be significant to the VIE and are, therefore, the primary beneficiary of each VIE. The assets of our TRSs were $34,409 and $31,917 as of March 31, 2019 and December 31, 2018, respectively, and consist primarily of amounts due from and working capital advances to certain of our hotel managers. The liabilities of our TRSs were $135,210 and $148,459 as of March 31, 2019 and December 31, 2018, respectively, and consist primarily of security deposits they hold and amounts payable to certain of our hotel managers. The assets of our TRSs are available to satisfy our TRSs’ obligations and we have guaranteed certain obligations of our TRSs. |
New Accounting Pronouncements |
3 Months Ended |
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Mar. 31, 2019 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Pronouncements | Note 2. New Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update, or ASU, No. 2016-02, Leases. Additional guidance and targeted improvements to ASU No. 2016-02 were made through the issuance of supplemental ASUs in July 2018, December 2018 and March 2019, or collectively with ASU No. 2016-02, the Lease Standard. We adopted the Lease Standard on January 1, 2019. The Lease Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The Lease Standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. Upon adoption, we applied the package of practical expedients that allowed us not to reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases, (iii) initial direct costs for any expired or existing leases and (iv) the option to initially apply the Lease Standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption, although we did not have such an adjustment. Additionally, our leases met the criteria not to separate non-lease components from the related lease component. As a lessor. We are required to account for leases using an approach that is substantially equivalent to existing guidance for sales type leases, direct financing leases and operating leases. Adoption of the Lease Standard did not have a material impact in our condensed consolidated financial statements for our leases where we are the lessor. As a lessee. We are required to record right of use assets and lease liabilities in our condensed consolidated balance sheets for leases with terms greater than 12 months, where we are the lessee. We recorded right of use assets and related lease liabilities of $77,010 upon implementation of the Lease Standard. Adoption of the Lease Standard did not have a material effect in our condensed consolidated statements of comprehensive income or condensed consolidated statements of cash flows for our leases where we are the lessee. See Note 8 for further information regarding our leases and the adoption of the Lease Standard. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that entities use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently assessing the potential impact the adoption of ASU No. 2016-13 will have in our condensed consolidated financial statements. |
Revenue Recognition |
3 Months Ended |
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Mar. 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Note 3. Revenue Recognition We report hotel operating revenues for managed hotels in our condensed consolidated statements of comprehensive income. We generally recognize hotel operating revenues, consisting primarily of room and food and beverage sales, when goods and services are provided. We report rental income for leased hotels and travel centers in our condensed consolidated statements of comprehensive income. We recognize rental income from operating leases on a straight line basis over the term of the lease agreements. Rental income includes decreases of $1,132 and increases of $3,079 for the three months ended March 31, 2019 and 2018, respectively, of adjustments necessary to record scheduled rent changes under certain of our leases, the deferred rent obligations payable to us under our leases with TravelCenters of America LLC, or TA, and the estimated future payments to us under our TA leases for the cost of removing underground storage tanks at our travel centers on a straight line basis. See Notes 8 and 10 for further information regarding our TA leases. Due from related persons includes $57,738 and $66,347 and other assets, net, includes $3,155 and $3,073 of straight line rent receivables at March 31, 2019 and December 31, 2018, respectively. We determine percentage rent due to us under our leases annually and recognize it when all contingencies are met and the rent is earned. We had deferred estimated percentage rent of $1,069 and $835 for the three months ended March 31, 2019 and 2018, respectively. We own all the FF&E reserve escrows for our hotels. We report deposits by our third party tenants into the escrow accounts as FF&E reserve income. We do not report the amounts which are escrowed as reserves established for the regular refurbishment of our hotels, or FF&E reserves, for our managed hotels as FF&E reserve income. |
Weighted Average Common Shares |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted Average Common Shares | Note 4. Weighted Average Common Shares The following table provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per share:
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Shareholders' Equity |
3 Months Ended |
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Mar. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' Equity | Note 5. Shareholders' Equity Share Purchases On April 5, 2019, we purchased an aggregate of 1,642 of our common shares for $26.64 per common share, the closing price of our common shares on The Nasdaq Stock Market LLC on that day, from a former officer of The RMR Group LLC, or RMR LLC, in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares. Distributions On February 21, 2019, we paid a regular quarterly distribution to our common shareholders of record on January 28, 2019 of $0.53 per share, or $87,154. On April 18, 2019, we declared a regular quarterly distribution to common shareholders of record on April 29, 2019 of $0.54 per share, or $88,798. We expect to pay this amount on or about May 16, 2019. Cumulative Other Comprehensive Loss Cumulative other comprehensive loss, as of March 31, 2019, represents our share of the comprehensive loss of Affiliates Insurance Company, or AIC. See Note 10 for further information regarding this investment. |
Indebtedness |
3 Months Ended |
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Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Indebtedness | Note 6. Indebtedness Our principal debt obligations at March 31, 2019 were: (1) $141,000 of outstanding borrowings under our $1,000,000 unsecured revolving credit facility; (2) our $400,000 unsecured term loan; and (3) $3,650,000 aggregate outstanding principal amount of senior unsecured notes. Our revolving credit facility and our term loan are governed by a credit agreement with a syndicate of institutional lenders. Our $1,000,000 revolving credit facility is available for general business purposes, including acquisitions. The maturity date of our revolving credit facility is July 15, 2022, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to extend the maturity date of the facility for two additional six month periods. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity. We are required to pay interest on borrowings under our revolving credit facility at the rate of LIBOR plus a premium, which was 100 basis points per annum as of March 31, 2019. We also pay a facility fee, which was 20 basis points per annum at March 31, 2019, on the total amount of lending commitments under our revolving credit facility. Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings. As of March 31, 2019, the annual interest rate payable on borrowings under our revolving credit facility was 3.41%. The weighted average annual interest rate for borrowings under our revolving credit facility was 3.41% and 2.75% for the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019, we had $141,000 outstanding and $859,000 available under our revolving credit facility. As of May 9, 2019, we had $96,000 outstanding and $904,000 available to borrow under our revolving credit facility. Our $400,000 term loan, which matures on July 15, 2023, is prepayable without penalty at any time. We are required to pay interest on the amount outstanding under our term loan at the rate of LIBOR plus a premium, which was 110 basis points per annum as of March 31, 2019. The interest rate premium is subject to adjustment based on changes to our credit ratings. As of March 31, 2019, the annual interest rate for the amount outstanding under our term loan was 3.59%. The weighted average annual interest rate for borrowings under our term loan was 3.60% and 2.80% for the three months ended March 31, 2019 and 2018, respectively. Our credit agreement also includes a feature under which maximum aggregate borrowings may be increased to up to $2,300,000 on a combined basis in certain circumstances. Our credit agreement and our unsecured senior notes indentures and their supplements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes RMR LLC ceasing to act as our business manager. Our credit agreement and our unsecured senior notes indentures and their supplements also contain covenants, including those that restrict our ability to incur debts or to make distributions under certain circumstances and generally require us to maintain certain financial ratios. We believe we were in compliance with the terms and conditions of our credit agreement and our unsecured senior notes indentures and their supplements at March 31, 2019. |
Real Estate Properties |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Properties | Note 7. Real Estate Properties At March 31, 2019, we owned 327 hotels and 179 travel centers. During the three months ended March 31, 2019, we funded $44,766 for improvements to certain of our properties which, pursuant to the terms of our management and lease agreements with our managers and tenants, resulted in increases in our contractual annual minimum returns and rents of $3,585. See Notes 8 and 10 for further information about our management and lease agreements and our fundings of improvements to certain of our properties. Acquisitions During the three months ended March 31, 2019, we acquired one hotel. We accounted for this transaction as an acquisition of assets. Our allocation of the purchase price of this acquisition based on the estimated fair value of the acquired assets is presented in the table below.
On May 7, 2019, we acquired the 198 room Crowne Plaza Milwaukee West hotel in Milwaukee, WI for a purchase price of $30,000, excluding acquisition related costs. We added this Crowne Plaza® branded hotel to our management agreement with IHG. Dispositions In January 2019, in a series of transactions, we sold 20 travel centers in 15 states to TA for $308,200. We recorded a gain of $159,535 in the first quarter of 2019 as a result of these sales. See Notes 8 and 10 for further information regarding these transactions, our relationship and leases with TA. |
Management Agreements and Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Management Agreements and Leases | Note 8. Management Agreements and Leases As of March 31, 2019, we owned 327 hotels and 179 travel centers, which were included in 13 operating agreements. We do not operate any of our properties. As of March 31, 2019, 325 of our hotels were leased to our TRSs and managed by independent hotel operating companies and two hotels were leased to third parties. As of March 31, 2019, our hotel properties were managed by or leased to separate subsidiaries of Marriott International, Inc., or Marriott, IHG, Sonesta International Hotels Corporation, or Sonesta, Wyndham Hotels & Resorts, Inc., or Wyndham, Hyatt Hotels Corporation, or Hyatt, and Radisson Hospitality, Inc., or Radisson, under eight agreements. These hotel agreements have initial terms expiring between 2019 and 2038. Each of these agreements is for between one and 101 of our hotels. In general, the agreements contain renewal options for all, but not less than all, of the affected properties included in each agreement, and the renewal terms range between 20 to 60 years. Most of these agreements require the third party manager or tenant to: (1) make payments to us of minimum returns or minimum rents; (2) deposit a percentage of total hotel sales into FF&E reserves; and (3) for our managed hotels, make payments to our TRSs of additional returns to the extent of available cash flows after payment of operating expenses, funding of the FF&E reserves, payment of our minimum returns, payment of certain management fees and replenishment of security deposits or guarantees. Some of our managers or tenants or their affiliates have provided deposits or guarantees to secure their obligations to pay us. Marriott No. 1 agreement. Our management agreement with Marriott for 53 hotels, or our Marriott No. 1 agreement, provides that, as of March 31, 2019, we are to be paid an annual minimum return of $71,496 to the extent that gross revenues of the hotels, after payment of hotel operating expenses and funding of the FF&E reserve, are sufficient to do so. Marriott’s base and incentive management fees are only earned after we receive our minimum returns. We realized minimum returns of $15,712 and $16,083 during the three months ended March 31, 2019 and 2018, respectively, under this agreement. We do not have any security deposits or guarantees for our minimum returns from the 53 hotels included in our Marriott No. 1 agreement. Accordingly, the minimum returns we receive from these hotels managed by Marriott are limited to the hotels' available cash flows after payment of operating expenses and funding of the FF&E reserve. We funded $13,593 and $177 for capital improvements to certain of the hotels included in our Marriott No. 1 agreement during the three months ended March 31, 2019 and 2018, respectively, which resulted in increases in our contractual annual minimum returns of $1,359 and $18, respectively. Marriott No. 234 agreement. Our management agreement with Marriott for 68 hotels, or our Marriott No. 234 agreement, provides that, as of March 31, 2019, we are to be paid an annual minimum return of $108,160. We realized minimum returns of $26,893 and $26,710 during the three months ended March 31, 2019 and 2018, respectively, under this agreement. Pursuant to our Marriott No. 234 agreement, Marriott has provided us with a security deposit to cover minimum return payment shortfalls, if any. Under this agreement, this security deposit may be replenished and increased up to $64,700 from a share of hotel cash flows in excess of the minimum returns due to us. Marriott’s base and incentive management fees are only earned after we receive our minimum returns. During the three months ended March 31, 2019, we reduced the available security deposit by $2,113 to cover shortfalls in hotel cash flows available to pay the minimum returns due to us for the period. The available balance of this security deposit was $30,598 as of March 31, 2019. Pursuant to our Marriott No. 234 agreement, Marriott has also provided us with a limited guaranty which expires in 2019 for shortfalls up to 90% of our minimum returns, if and after the available security deposit has been depleted. The available balance of the guaranty was $30,672 as of March 31, 2019. We funded $9,000 and $3,680 for capital improvements to certain of the hotels included in our Marriott No. 234 agreement during the three months ended March 31, 2019 and 2018, respectively, which resulted in increases in our contractual annual minimum returns of $810 and $331, respectively. Marriott No. 5 agreement. We lease one hotel in Kauai, HI to Marriott which requires that, as of March 31, 2019, we are paid annual minimum rents of $10,518. This lease is guaranteed by Marriott and we realized $2,630 and $2,580 of rent for this hotel during the three months ended March 31, 2019 and 2018, respectively. The guaranty provided by Marriott with respect to this leased hotel is unlimited. Marriott has four renewal options for 15 years each. On August 31, 2016, Marriott notified us that it will not exercise its renewal option at the expiration of the current lease term ending on December 31, 2019. IHG agreement. Our IHG agreement, provides that, as of March 31, 2019, we are to be paid annual minimum returns and rents of $205,011. We realized minimum returns and rents of $49,584 and $47,315 during the three months ended March 31, 2019 and 2018, respectively, under this agreement. Pursuant to our IHG agreement, IHG has provided us with a security deposit to cover minimum payment shortfalls, if any. Under this agreement, IHG is required to maintain a minimum security deposit of $37,000 and this security deposit may be replenished and increased up to $100,000 from a share of future cash flows from the hotels in excess of our minimum returns and rents. During the three months ended March 31, 2019, we reduced the available security deposit by $14,255 to cover shortfalls in hotel cash flows available to pay the minimum returns and rents due to us for the period. The available balance of this security deposit was $85,745 as of March 31, 2019. In connection with the February 2019 acquisition of the Hotel Palomar described in Note 7, IHG agreed to provide us $5,000 to supplement the existing security deposit. We did not fund any capital improvements to our IHG hotels during each of the three months ended March 31, 2019 and 2018. Sonesta agreement. As of March 31, 2019, Sonesta managed 12 of our full service hotels and 39 of our limited service hotels pursuant to management agreements for each of the hotels, which we refer to collectively as our Sonesta agreement, and a pooling agreement, which combines those management agreements for purposes of calculating gross revenues, payment of hotel operating expenses, payment of fees and distributions and minimum returns due to us. Our Sonesta agreement provides that we are paid a fixed annual minimum return equal to 8% of our invested capital, as defined therein, if gross revenues of the hotels, after payment of hotel operating expenses and management and related fees (other than Sonesta’s incentive fee, if applicable), are sufficient to do so. Our fixed annual minimum return under our Sonesta agreement was $127,573 as of March 31, 2019. Our Sonesta agreement further provides that we are paid an additional return based upon operating profits, as defined therein, after payment of Sonesta’s incentive fee, if applicable. We realized returns of $14,161 and $11,972 during the three months ended March 31, 2019 and 2018, respectively, under our Sonesta agreement. We do not have any security deposits or guarantees for our Sonesta hotels. Accordingly, the returns we receive from our Sonesta hotels are limited to the hotels’ available cash flows after payment of operating expenses, including management and related fees. Pursuant to our Sonesta agreement, we incurred management, reservation and system fees and reimbursement costs for certain guest loyalty, marketing program and third party reservation transmission fees of $8,523 and $7,325 for the three months ended March 31, 2019 and 2018, respectively. In addition, we incurred procurement and construction supervision fees of $405 for each of the three months ended March 31, 2019 and 2018, respectively, under our Sonesta agreement. These amounts are included in hotel operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements. Our Sonesta agreement does not require FF&E escrow deposits, but does require us to fund capital expenditures at our Sonesta hotels. We funded $10,467 and $13,132 for renovations and other capital improvements to certain hotels included in our Sonesta agreement during the three months ended March 31, 2019, and 2018, respectively, which resulted in increases in our contractual annual minimum returns of $484 and $747, respectively. The annual minimum returns due to us under our Sonesta agreement increase by 8% of the capital expenditure amounts we fund in excess of threshold amounts, as defined therein. We owed Sonesta $9,226 and $5,419 for capital expenditure and other reimbursements at March 31, 2019 and 2018, respectively. Amounts due from Sonesta are included in due from related persons and amounts owed to Sonesta are included in due to related persons in our condensed consolidated balance sheets. See Note 10 for further information regarding our relationship, agreements and transactions with Sonesta. Wyndham agreements. Our management agreement with Wyndham for 22 hotels, or our Wyndham agreement, provides that, as of March 31, 2019, we are to be paid annual minimum returns of $27,873. Pursuant to our Wyndham agreement, Wyndham has provided us with a guaranty, which was limited to $35,656, subject to an annual payment limit of $17,828, and expires on July 28, 2020. This guaranty was depleted during 2017 and remained depleted as of March 31, 2019. This guaranty may be replenished from a share of future cash flows from these hotels in excess of our minimum returns. The Wyndham agreement provides that if the hotel cash flows available after payment of hotel operating expenses are less than the minimum returns due to us and if the guaranty is depleted, to avoid a default Wyndham is required to pay us the greater of the available hotel cash flows after payment of hotel operating expenses and 85% of the contractual amount due to us. We cannot be sure as to whether Wyndham will continue to pay at least the greater of available hotel cash flows after payment of hotel operating expenses and 85% of the minimum returns due to us or if Wyndham will default on its payments. During the three months ended March 31, 2019 and 2018, we realized returns of $5,907 and $5,856, respectively, which represents 85% of the minimum returns due for the period, under this agreement. Our Wyndham agreement requires FF&E escrow deposits equal to 5% of total hotel sales for all hotels included in the agreement subject to available cash flows after payment of our minimum return. No FF&E escrow deposits were made during the three months ended March 31, 2019. We funded $1,022 for capital improvements to certain of the hotels included in our Wyndham agreement during the three months ended March 31, 2019, which resulted in increases in our contractual annual minimum returns of $82. We did not fund any capital improvements to the hotels included in our Wyndham agreement during the three months ended March 31, 2018. We also lease 48 vacation units in one of our hotels to a subsidiary of Wyndham Destinations, Inc. (NYSE: WYND), or Destinations, which requires that, as of March 31, 2019, we are paid annual minimum rents of $1,493. The guaranty provided by Destinations with respect to the Destinations lease for part of one hotel is unlimited. We recognized the contractual rents of $454 during the three months ended March 31, 2019 and 2018 under our Destinations lease agreement. Rental income for the three months ended March 31, 2019 and 2018 for this lease includes $80 and $91, respectively, of adjustments necessary to record rent on a straight line basis. Hyatt agreement. Our management agreement with Hyatt for 22 hotels, or our Hyatt agreement, provides that, as of March 31, 2019, we are to be paid an annual minimum return of $22,037. We realized minimum returns of $5,509 during each of the three months ended March 31, 2019 and 2018 under this agreement. Pursuant to our Hyatt agreement, Hyatt has provided us with a guaranty, which is limited to $50,000. During the three months ended March 31, 2019, the hotels under this agreement generated cash flows that were less than the minimum returns due to us for the period, and Hyatt made $430 of guaranty payments to cover the shortfall. The available balance of the guaranty was $21,485 as of March 31, 2019. Radisson agreement. Our management agreement with Radisson for nine hotels, or our Radisson agreement, provides that, as of March 31, 2019, we are to be paid an annual minimum return of $19,769. We realized minimum returns of $4,831 and $3,230 during the three months ended March 31, 2019 and 2018, respectively, under this agreement. Pursuant to our Radisson agreement, Radisson has provided us with a limited guaranty which, as a result of amounts funded by us during the three months ended March 31, 2019, as described below, was increased $849 to a total of $46,849. During the three months ended March 31, 2019, the hotels under this agreement generated cash flows that were less than the minimum returns due to us for the period, and Radisson made $2,646 of guaranty payments to cover the shortfall. The available balance of the guaranty was $39,913 as of March 31, 2019. We funded $10,611 for capital improvements at certain of the hotels included in our Radisson agreement during the three months ended March 31, 2019, which resulted in increases in our contractual annual minimum returns of $849. We did not fund any capital improvements to the hotels included in our Radisson agreement during the three months ended March 31, 2018. TA leases. On January 16, 2019, we entered agreements with TA, pursuant to which in January 2019:
See Note 7 for further information regarding the effects of certain of our property dispositions on our leases with TA. As of March 31, 2019, we leased to TA a total of 179 travel centers under five leases that expire between 2029 and 2035 and require annual minimum returns of $246,083. We recognized rental income from TA of $63,075 and $74,193 for the three months ended March 31, 2019 and 2018, respectively. Rental income for the three months ended March 31, 2019 and 2018 includes $1,214 and $2,984, respectively, of adjustments to record the deferred rent obligations under our TA leases and the estimated future payments to us by TA for the cost of removing underground storage tanks on a straight line basis. As of March 31, 2019 and December 31, 2018, we had receivables for current rent amounts owed to us by TA and straight line rent adjustments of $79,710 and $91,212, respectively. These amounts are included in due from related persons in our condensed consolidated balance sheets. Our TA leases do not require FF&E escrow deposits. However, TA is required to maintain the leased travel centers, including structural and non-structural components. Under our TA leases, TA may request that we fund capital improvements in return for increases in TA’s annual minimum rent equal to 8.5% of the amounts funded. We did not fund any capital improvements to our properties that we leased to TA during the three months ended March 31, 2019. We funded $13,137 for the three months ended March 31, 2018 of capital improvements to our properties that we leased to TA. As a result, TA’s annual minimum rent payable to us increased by $1,117. In addition to the rental income that we recognized during the three months ended March 31, 2019 and 2018 as described above, our TA leases require TA to pay us percentage rent based upon increases in certain sales. We determine percentage rent due under our TA leases annually and recognize any resulting amount as rental income when all contingencies are met. We had aggregate deferred percentage rent under our TA leases of $1,069 and $835 for the three months ended March 31, 2019 and 2018, respectively. See Note 10 for further information regarding our relationship with TA. Additional lease information (as lessor). As of March 31, 2019, our leases with parties other than our TRSs provide for contractual minimum rents to be paid to us during the remaining current terms as follows:
Additional lease information (as lessee). As of January 1, 2019, 14 of our hotels and one of our travel centers were subject to ground leases where we are the lessee. In addition, our hotel operators enter various leases on our behalf in the normal course of business at our hotels, or our hotel operating leases. We calculated right of use assets and lease liabilities as the present value of the remaining lease payment obligations for our operating leases, which include the ground leases and hotel operating leases, over the remaining lease term using our estimated incremental borrowing rate. The right of use assets and related lease liabilities are included within other assets, net and accounts payable and other liabilities, respectively, in our condensed consolidated balance sheets. At March 31, 2019, our right of use assets and related lease liabilities totaled $76,148, which represented our future obligations under our operating lease agreements. Our operating leases require minimum fixed rent payments, percentage rent payments based on a percentage of hotel revenues in excess of certain thresholds, or rent payments equal to the greater of a minimum fixed rent or percentage rent. For the three months ended March 31, 2019, $3,397 of rental expense related to our operating leases is included in hotel operating expenses within our condensed consolidated statements of comprehensive income. As of March 31, 2019, our operating leases provide for contractual minimum rent payments to third parties during the remaining lease terms, as follows:
As of March 31, 2019, 14 of our travel centers are on land we leased partially or entirely from unrelated third parties. We are not required to record right of use assets and lease liabilities for these properties as we are not the primary obligor under the leases. The average remaining terms of the ground leases on these 14 travel centers was 12 years (range of one month to 32 years) with rents averaging $429 per year. Generally, payments of ground lease obligations are made by our managers or tenants. However, if a manager or tenant did not perform obligations under a ground lease or did not renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected property. Guarantees and security deposits generally. When we reduce the amounts of the security deposits we hold for any of our operating agreements for payment deficiencies, it does not result in additional cash flows to us of the deficiency amounts, but reduces the refunds due to the respective tenants or managers who have provided us with these security deposits upon expiration of the respective operating agreement. The security deposits are non-interest bearing and are not held in escrow. Under these agreements, any amount of the security deposits which are applied to payment deficits may be replenished from a share of future cash flows from the applicable hotel operations pursuant to the terms of the respective agreements. Certain of our managed hotel portfolios had net operating results that were, in the aggregate, $42,839 and $27,586 less than the minimum returns due to us for the three months ended March 31, 2019 and 2018, respectively. When managers of these hotels are required to fund the shortfalls under the terms of our management agreements or their guarantees, we reflect such fundings (including security deposit applications) in our condensed consolidated statements of comprehensive income as a reduction of hotel operating expenses. The reduction to hotel operating expenses was $22,465 and $10,851 for the three months ended March 31, 2019 and 2018, respectively. We had shortfalls at certain of our managed hotel portfolios not funded by the managers of these hotels under the terms of our management agreements of $20,676 and $17,769 for the three months ended March 31, 2019, and 2018, respectively, which represent the unguaranteed portions of our minimum returns from our Marriott No. 1, Sonesta and Wyndham agreements. Certain of our managed hotel portfolios had net operating results that were, in the aggregate, $1,275 more than the minimum returns due to us for the three months ended March 31, 2018. The net operating results of our managed hotel portfolios did not exceed the minimum returns due to us for the three months ended March 31, 2019. Certain of our guarantees and our security deposits may be replenished by a share of future cash flows from the applicable hotel operations in excess of the minimum returns due to us pursuant to the terms of the respective agreements. When our guarantees and our security deposits are replenished by cash flows from hotel operations, we reflect such replenishments in our condensed consolidated statements of comprehensive income as an increase to hotel operating expenses. We had $1,275 of guaranty and security deposit replenishments for the three months ended March 31, 2018. There were no replenishments for the three months ended March 31, 2019. |
Business and Property Management Agreements with RMR LLC |
3 Months Ended |
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Mar. 31, 2019 | |
Real Estate [Abstract] | |
Business and Property Management Agreements with RMR LLC | Note 9. Business and Property Management Agreements with RMR LLC We have no employees. The personnel and various services we require to operate our business are provided to us by RMR LLC. We have two agreements with RMR LLC to provide management services to us: (1) a business management agreement, which relates to our business generally, and (2) a property management agreement, which relates to our property level operations of the office building component of one of our hotels. Pursuant to our business management agreement, we recognized net business management fees of $9,727 and $9,724 for the three months ended March 31, 2019 and 2018, respectively. Based on our common share total return, as defined in our business management agreement, as of March 31, 2019, no incentive fees are included in the net business management fees we recognized for the three months ended March 31, 2019. The actual amount of annual incentive fees for 2019, if any, will be based on our common share total return, as defined in our business management agreement, for the three year period ending December 31, 2019, and will be payable in 2020. The net business management fees we recognized for the three months ended March 31, 2018 did not include any estimated incentive fees. In January 2019, we paid RMR LLC an incentive fee of $53,635 for 2018. We include business management fee amounts in general and administrative expenses in our condensed consolidated statements of comprehensive income. Pursuant to our property management agreement with RMR LLC, we recognized property management fees of $11 and $13 for the three months ended March 31, 2019 and 2018, respectively. These fees are payable in connection with the management of the office building component of one of our hotels. These amounts are included in hotel operating expenses in our condensed consolidated statements of comprehensive income. We are generally responsible for all our operating expenses, including certain expenses incurred or arranged by RMR LLC on our behalf. We are generally not responsible for payment of RMR LLC’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR LLC employees assigned to work exclusively or partly at the office building component of one of our hotels, our share of the wages, benefits and other related costs of RMR LLC's centralized accounting personnel, our share of RMR LLC’s costs for providing our internal audit function, and as otherwise agreed. We reimbursed RMR LLC $200 and $135 for these expenses and costs for the three months ended March 31, 2019 and 2018, respectively. We included these amounts in hotel operating expenses and selling, general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income. |
Related Person Transactions |
3 Months Ended |
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Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Person Transactions | Note 10. Related Person Transactions We have relationships and historical and continuing transactions with TA, Sonesta, RMR LLC, The RMR Group Inc., or RMR Inc., AIC and others related to them, including other companies to which RMR LLC or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. TA. TA is our largest tenant and property operator, leasing 31% of our gross carrying value of real estate properties as of March 31, 2019. We lease all of our travel centers to TA under the TA leases. We are also TA’s largest shareholder; as of March 31, 2019, we owned 3,420,000 common shares of TA, representing approximately 8.5% of TA’s outstanding common shares. RMR LLC provides management services to both us and TA, and Adam D. Portnoy, one of our Managing Trustees, also serves as a managing director of TA and, as of March 31, 2019, beneficially owned through RMR LLC 1,492,691 common shares of TA, representing approximately 3.7% of TA's outstanding common shares. See Note 8 for further information regarding our relationships, agreements and transactions with TA and Note 13 for further information regarding our investment in TA. Sonesta. Sonesta is a private company owned in part by Adam Portnoy, one of our Managing Trustees. Both our Managing Trustees and our Secretary are directors of Sonesta. As of March 31, 2019, Sonesta managed 51 of our hotels pursuant to management and pooling agreements. See Note 8 for further information regarding our relationships, agreements and transactions with Sonesta. Our Manager, RMR LLC. We have two agreements with RMR LLC to provide management services to us. See Note 9 for further information regarding our management agreements with RMR LLC. RMR Inc. RMR LLC is a majority owned subsidiary of RMR Inc. One of our Managing Trustees, Adam Portnoy, is the sole trustee of ABP Trust, is the controlling shareholder of RMR Inc., is a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR LLC. John G. Murray, our other Managing Trustee and our President and Chief Executive Officer, and each of our other officers is also an officer and employee of RMR LLC, including Ethan S. Bornstein, the brother-in-law of Adam Portnoy. As of March 31, 2019, we owned 2,503,777 shares of class A common stock of RMR Inc. See Note 13 for further information regarding our investment in RMR Inc. AIC. We, ABP Trust, TA and four other companies to which RMR LLC provides management services currently own AIC, an Indiana insurance company, in equal amounts. We and the other AIC shareholders participate in a combined property insurance program arranged and reinsured in part by AIC. As of March 31, 2019 and December 31, 2018, our investment in AIC had a carrying value of $9,109 and $8,639, respectively. These amounts are included in other assets in our condensed consolidated balance sheets. We recognized income of $404 and $44 for the three months ended March 31, 2019 and 2018, respectively, related to our investment in AIC, which amounts are presented as equity in earnings of an investee in our condensed consolidated statements of comprehensive income. Our other comprehensive income (loss) includes our proportionate part of unrealized gains and (losses) on securities that are owned by AIC related to our investment in AIC. For further information about these and certain other such relationships and certain other related person transactions, refer to our 2018 Annual Report. |
Income Taxes |
3 Months Ended |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 11. Income Taxes We have elected to be taxed as a real estate investment trust, or REIT, under the United States Internal Revenue Code of 1986, as amended, or the IRC, and, as such, are generally not subject to federal and most state income taxation on our operating income provided we distribute our taxable income to our shareholders and meet certain organization and operating requirements. We are subject to income tax in Canada, Puerto Rico and certain states despite our qualification for taxation as a REIT. Further, we lease our managed hotels to our wholly owned TRSs that, unlike most of our subsidiaries, file a separate consolidated tax return and are subject to federal, state and foreign income taxes. Our consolidated income tax provision includes the income tax provision related to the operations of our TRSs and certain state and foreign income taxes incurred by us despite our qualification for taxation as a REIT. During the three months ended March 31, 2019, we recognized income tax expense of $1,059, which includes $315 of foreign taxes and $744 of state taxes. During the three months ended March 31, 2018, we recognized income tax expense of $471, which includes $129 of foreign taxes and $342 of state taxes. |
Segment Information |
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Segment Information | Note 12. Segment Information We aggregate our hotels and travel centers into two reportable segments, hotel investments and travel center investments, based on their similar operating and economic characteristics.
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Fair Value of Assets and Liabilities |
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Fair Value of Assets and Liabilities | Note 13. Fair Value of Assets and Liabilities The table below presents certain of our assets carried at fair value at March 31, 2019, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset.
In addition to the investment securities included in the table above, our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, revolving credit facility, term loan, senior notes and security deposits. At March 31, 2019 and December 31, 2018, the fair values of these additional financial instruments approximated their carrying values in our condensed consolidated balance sheets due to their short term nature or floating interest rates, except as follows:
At March 31, 2019 and December 31, 2018, we estimated the fair values of our senior notes using an average of the bid and ask price of our then outstanding issuances of senior notes (Level 2 inputs). |
New Accounting Pronouncements (Policies) |
3 Months Ended |
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Mar. 31, 2019 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Basis of Accounting | The accompanying condensed consolidated financial statements of Hospitality Properties Trust and its subsidiaries, or HPT, we, our or us, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2018, or our 2018 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair statement of results for the interim period, have been included. These condensed consolidated financial statements include the accounts of HPT and our subsidiaries, all of which are 100% owned directly or indirectly by HPT. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods and those of our managers and tenants are not necessarily indicative of the results that may be expected for the full year. Reclassifications have been made to the prior years’ condensed consolidated financial statements to conform to the current year’s presentation. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in our condensed consolidated financial statements include the allowance for doubtful accounts, purchase price allocations, useful lives of fixed assets, impairment of real estate and the valuation of intangible assets. |
Variable Interest Entity | We have determined that each of our wholly owned taxable REIT subsidiaries, or TRSs, is a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification™. We have concluded that we must consolidate each of our wholly owned TRSs because we are the entity with the power to direct the activities that most significantly impact such VIEs’ performance and we have the obligation to absorb losses or the right to receive benefits from each VIE that could be significant to the VIE and are, therefore, the primary beneficiary of each VIE. |
New Accounting Pronouncements | In February 2016, the FASB issued Accounting Standards Update, or ASU, No. 2016-02, Leases. Additional guidance and targeted improvements to ASU No. 2016-02 were made through the issuance of supplemental ASUs in July 2018, December 2018 and March 2019, or collectively with ASU No. 2016-02, the Lease Standard. We adopted the Lease Standard on January 1, 2019. The Lease Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The Lease Standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. Upon adoption, we applied the package of practical expedients that allowed us not to reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases, (iii) initial direct costs for any expired or existing leases and (iv) the option to initially apply the Lease Standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption, although we did not have such an adjustment. Additionally, our leases met the criteria not to separate non-lease components from the related lease component. As a lessor. We are required to account for leases using an approach that is substantially equivalent to existing guidance for sales type leases, direct financing leases and operating leases. Adoption of the Lease Standard did not have a material impact in our condensed consolidated financial statements for our leases where we are the lessor. As a lessee. We are required to record right of use assets and lease liabilities in our condensed consolidated balance sheets for leases with terms greater than 12 months, where we are the lessee. We recorded right of use assets and related lease liabilities of $77,010 upon implementation of the Lease Standard. Adoption of the Lease Standard did not have a material effect in our condensed consolidated statements of comprehensive income or condensed consolidated statements of cash flows for our leases where we are the lessee. See Note 8 for further information regarding our leases and the adoption of the Lease Standard. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that entities use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently assessing the potential impact the adoption of ASU No. 2016-13 will have in our condensed consolidated financial statements. |
Weighted Average Common Shares (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation weighted average common shares to calculate basic and diluted earnings per share | The following table provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per share:
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Real Estate Properties (Tables) |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of purchase price allocation | Our allocation of the purchase price of this acquisition based on the estimated fair value of the acquired assets is presented in the table below.
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Management Agreements and Leases (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of minimum rents to be received | As of March 31, 2019, our leases with parties other than our TRSs provide for contractual minimum rents to be paid to us during the remaining current terms as follows:
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Schedule of minimum rent payments | As of March 31, 2019, our operating leases provide for contractual minimum rent payments to third parties during the remaining lease terms, as follows:
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Segment Information (Tables) |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment information |
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Fair Value of Assets and Liabilities (Tables) |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of certain of the entity's assets carried at fair value, categorized by the level of inputs used in the valuation of each asset | The table below presents certain of our assets carried at fair value at March 31, 2019, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset.
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Schedule of fair value of additional financial instruments | At March 31, 2019 and December 31, 2018, the fair values of these additional financial instruments approximated their carrying values in our condensed consolidated balance sheets due to their short term nature or floating interest rates, except as follows:
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Basis of Presentation (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Ownership interest in subsidiaries | 100.00% | |
Assets of TRSs | $ 34,409 | $ 31,917 |
Liabilities of TRSs | $ 135,210 | $ 148,459 |
New Accounting Pronouncements (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Jan. 01, 2019 |
---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Lease liability | $ 76,148 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Right of use asset | 76,148 | $ 77,010 |
Lease liability | $ 76,148 | $ 77,010 |
Revenue Recognition - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
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Revenue from Contract with Customer [Abstract] | |||
Adjustments necessary to record rent on straight line basis | $ (1,132) | $ 3,079 | |
Straight line rent receivables | 3,155 | $ 3,073 | |
TA | |||
Related Party Transaction [Line Items] | |||
Straight line rent receivable, due from related persons | 57,738 | $ 66,347 | |
Deferred percentage rental income | $ 1,069 | $ 835 |
Weighted Average Common Shares (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
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Earnings Per Share [Abstract] | ||
Weighted average common shares outstanding (basic) (in shares) | 164,278 | 164,199 |
Effect of dilutive share awards: Unvested share awards (in shares) | 44 | 20 |
Weighted average common shares outstanding (diluted) (in shares) | 164,322 | 164,219 |
Shareholders' Equity - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
Apr. 18, 2019 |
Apr. 05, 2019 |
Feb. 21, 2019 |
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Distributions | |||
Common stock, quarterly per share distribution (in dollars per share) | $ 0.53 | ||
Common stock dividend | $ 87,154 | ||
Subsequent event | |||
Distributions | |||
Shares repurchased (in shares) | 1,642 | ||
Treasury stock repurchased (in dollars per share) | $ 26.64 | ||
Common stock dividend | $ 88,798 | ||
Quarterly distribution declared (in dollars per share) | $ 0.54 |
Real Estate Properties - Schedule of Purchase Price Allocation (Details) - Hotel $ in Thousands |
Feb. 22, 2019
USD ($)
hotel
room
|
Mar. 31, 2019
hotel
|
---|---|---|
Maximum | ||
Real Estate Properties [Line Items] | ||
Number of properties owned | hotel | 101 | 101 |
Hotel Palomar | Washington, D.C. | ||
Real Estate Properties [Line Items] | ||
Purchase Price | $ 143,742 | |
Land | 44,972 | |
Land Improvements | 151 | |
Building and Improvements | 93,412 | |
Furniture, Fixtures and Equipment | $ 5,207 | |
Number of rooms/suites | room | 335 | |
Capitalized acquisition costs | $ 2,292 |
Management Agreements and Leases - Marriott No. 5 (Details) - Hotel $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
agreement
hotel
|
Mar. 31, 2018
USD ($)
|
|
Management Agreements and Leases [Line Items] | ||
Number of properties owned | hotel | 327 | |
Marriott No 5 contract | ||
Management Agreements and Leases [Line Items] | ||
Number of properties owned | hotel | 1 | |
Operating agreement annual rent and return | $ | $ 10,518 | |
Realized returns and rents | $ | $ 2,630 | $ 2,580 |
Number of renewal options | agreement | 4 | |
Term of renewal options | 15 years |
Management Agreements and Leases - Hyatt Agreement (Details) - Hotel $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
hotel
|
Mar. 31, 2018
USD ($)
|
|
Management Agreements and Leases [Line Items] | ||
Number of properties owned | hotel | 327 | |
Hyatt Hotels Corporation | ||
Management Agreements and Leases [Line Items] | ||
Number of properties owned | hotel | 22 | |
Operating agreement annual rent and return | $ 22,037 | |
Realized returns and rents | 5,509 | $ 5,509 |
Guarantee provided to the entity, maximum | 50,000 | |
Increase (decrease) in guaranty | (430) | |
Guarantee provided to the entity, remaining amount | $ 21,485 |
Management Agreements and Leases - Radisson Agreement (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
hotel
|
Mar. 31, 2018
USD ($)
|
|
Management Agreements and Leases [Line Items] | ||
Capital improvements from leased facilities, funded | $ 11,738 | $ 26,483 |
Hotel | ||
Management Agreements and Leases [Line Items] | ||
Amount by which the cash flow available to pay the entity's minimum rent or return was more than the minimum amount | $ 0 | 1,275 |
Number of properties owned | hotel | 327 | |
Radisson Agreement | Hotel | ||
Management Agreements and Leases [Line Items] | ||
Number of properties owned | hotel | 9 | |
Operating agreement annual rent and return | $ 19,769 | |
Realized returns and rents | 4,831 | 3,230 |
Increase in guaranty, maximum | 849 | |
Guarantee provided to the entity, maximum | 46,849 | |
Increase (decrease) in guaranty | (2,646) | |
Guarantee provided to the entity, remaining amount | 39,913 | |
Capital improvements from leased facilities, funded | 10,611 | $ 0 |
Increase (decrease) in annual minimum returns and rents | $ 849 |
Management Agreements and Leases - Schedule of Minimum Rents to be Received (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
2019 | $ 281,956 |
2020 | 273,098 |
2021 | 272,801 |
2022 | 271,222 |
2023 | 258,065 |
Thereafter | 2,357,802 |
Total | $ 3,714,944 |
Management Agreements and Leases - Schedule of Minimum Rent Payments (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Lessee, Lease, Description [Line Items] | |
2019 | $ 7,165 |
2020 | 6,850 |
2021 | 6,127 |
2022 | 5,632 |
2023 | 5,614 |
Thereafter | 159,731 |
Total lease payments | 191,119 |
Less: imputed interest | (114,971) |
Present value of lease liabilities | $ 76,148 |
Hotel Operating Leases | |
Lessee, Lease, Description [Line Items] | |
Weighted average discount rate used to calculate lease liability | 5.63% |
Lease term | 29 years |
Hotel Operating Leases | Minimum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 9 months |
Hotel Operating Leases | Maximum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 55 years |
Land | |
Lessee, Lease, Description [Line Items] | |
Weighted average discount rate used to calculate lease liability | 5.50% |
Lease term | 32 years |
Land | Minimum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 12 years |
Land | Maximum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 69 years |
Management Agreements and Leases - Guarantees and Security Deposits Generally (Details) - Hotel - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Management Agreements and Leases [Line Items] | ||
Amount by which the cash flow available to pay the entity's minimum rent or return was less than the minimum amount | $ 42,839 | $ 27,586 |
Reduction of hotel operating expenses | 22,465 | 10,851 |
Shortfalls due to unguaranteed portions of minimum returns | 20,676 | 17,769 |
Amount by which the cash flow available to pay the entity's minimum rent or return was more than the minimum amount | 0 | 1,275 |
Increase in guarantee provided and security deposit to the entity | $ 0 | $ 1,275 |
Business and Property Management Agreements with RMR LLC (Details) $ in Thousands |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
Jan. 31, 2019
USD ($)
|
Mar. 31, 2019
USD ($)
employee
agreement
|
Mar. 31, 2018
USD ($)
|
|
Real Estate Properties [Line Items] | |||
Number of employees | employee | 0 | ||
Amended and restate business management agreement | RMR LLC | |||
Real Estate Properties [Line Items] | |||
Number of management service agreements | agreement | 2 | ||
Business management fees incurred | $ 9,727 | $ 9,724 | |
Incentive fee calculation period | 3 years | ||
Incentive fees paid | $ 53,635 | ||
Related party property management and construction management fee | $ 11 | 13 | |
Related party reimbursement expenses | $ 200 | $ 135 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Components of provision for income taxes | ||
Income tax expense | $ 1,059 | $ 471 |
Current foreign tax expense | 315 | 129 |
Current state tax expense | $ 744 | $ 342 |
Label | Element | Value |
---|---|---|
Accounting Standards Update 2016-01 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 0 |
Accounting Standards Update 2016-01 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 79,556,000 |
Accounting Standards Update 2016-01 [Member] | AOCI Attributable to Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (79,556,000) |
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