-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rzcuz131BGQsZUKrsiZkD4kHqbd8Rfku/QJ6zm7pxl3bKxNirCBUaaP6rTm3fTzG NdwWmnTwQP4oBfF8O1MIxg== 0001029869-98-000142.txt : 19980217 0001029869-98-000142.hdr.sgml : 19980217 ACCESSION NUMBER: 0001029869-98-000142 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980211 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980212 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOSPITALITY PROPERTIES TRUST CENTRAL INDEX KEY: 0000945394 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 043262075 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11527 FILM NUMBER: 98535560 BUSINESS ADDRESS: STREET 1: 400 CENTRE ST CITY: NEWTON STATE: MA ZIP: 02158 BUSINESS PHONE: 6179648389 MAIL ADDRESS: STREET 1: 400 CENTRE STREET CITY: NEWTON STATE: MA ZIP: 02158 8-K 1 HOSPITALITY PROPERTIES TRUST FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 11, 1998 HOSPITALITY PROPERTIES TRUST (Exact name of registrant as specified in its charter) Maryland (State or other 1-11527 04-3262075 jurisdiction of (Commission (IRS Employer incorporation) File Number) Identification No.) 400 Centre Street, Newton, MA 02158 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 617-964-8389 CERTAIN IMPORTANT FACTORS This Current Report contains statements which constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements appear in a number of places in this Current Report and include statements regarding the intent, belief or expectations of Hospitality Properties Trust (the "Company"), its Trustees or its officers with respect to the declaration or payment of dividends, the consummation of additional acquisitions, policies and plans of the Company regarding investments, dispositions, financings, conflicts of interest or other matters, the Company's qualification and continued qualification as a real estate investment trust or trends affecting the Company's or any hotel's financial condition or results of operations. Readers are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contained in the forward looking statement as a result of various factors. Such factors include without limitation changes in financing terms, the Company's ability or inability to complete acquisitions and financing transactions, results of operations of the Company's hotels and general changes in economic conditions not presently contemplated. The accompanying information contained in this Form 8-K, including the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations", and in the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 1996, including under the captions "Item 5 Business and Properties" and in Exhibit 99 thereof, identifies other important factors that could cause such differences. THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE COMPANY, DATED AUGUST 21, 1995 A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE TRUST. ALL PERSONS DEALING WITH THE TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. 2 Item 5. Other Events A. The Company issued an aggregate of 12,000,000 common shares of beneficial interest in its previously announced and reported public offering. The shares were issued on December 12, 1997, and the gross proceeds were $397 million. The net proceeds were used to pay all outstanding borrowings under the Company's revolving line of credit which were at a floating rate, for hotel acquisitions and for general business purposes. B. The Company entered into an Advisory Agreement (the "New Advisory Agreement") with REIT Management & Research, Inc., a Delaware corporation (the "New Advisor"). The New Advisory Agreement was effective as of January 1, 1998 and replaced the Advisory Agreement dated as of November 20, 1986, as amended (the "Old Advisory Agreement"), between the Company and HRPT Advisors, Inc., a Delaware corporation (the "Old Advisor"). The terms of the New Advisory Agreement are substantially the same as those of the Old Advisory Agreement. The persons who were officers and directors of the Old Advisor as of December 31, 1997 are the officers and directors of the New Advisor, each holding the same office or offices. They are David J. Hegarty, President and Secretary, John G. Murray, Executive Vice President, John A. Mannix, Vice President, Thomas M. O'Brien, Vice President, Ajay Saini, Vice President, David M. Lepore, Vice President and John Popeo, Treasurer, and Gerard M. Martin and Barry M. Portnoy, as Directors. Each of Messrs. Martin and Portnoy own 50% of the outstanding capital stock of both the Old Advisor and the New Advisor. C. Management's Discussion and Analysis of Results of Operations and Financial Condition The following information is provided in connection with the financial statements filed as Item 7 to this Current Report. Overview The Company was organized on February 7, 1995 and commenced operations on March 24, 1995 with the acquisition of its first 21 hotels. The Company completed its initial public offering of shares and acquired an additional 16 hotels on August 22, 1995. Because the Company did not operate for the entire year 1995, the Company believes it is meaningful to an understanding of its operations to discuss the Company's 1995 pro forma results of operations as well as its historical results of operations. The following discussion should be read in conjunction with the financial statements and the notes thereto included elsewhere herein. Pro forma results and percentage relationships set forth in the financial highlights section and in such financial statements may not be indicative of the future operations of the Company. Historical and Pro Forma Results of Operations Year Ended December 31, 1997 versus Year Ended December 31, 1996 - ---------------------------------------------------------------- The Company's assets increased to $1,313 million as of December 31, 1997 from $872 million as of December 31, 1996. The increase resulted primarily from hotel acquisitions completed in 1997. In January 1997 the Company purchased a full service hotel in Salt Lake City, Utah for $44.0 million. In March 1997 the Company agreed to acquire 10 Residence Inn by Marriott(R) hotels (1,276 suites) and four Courtyard by Marriott(R) hotels (543 rooms) for $149 million and acquired all these properties in 1997 after they opened. In September 1997 the Company agreed to acquire from Marriott six Courtyard by Marriott(R) hotels (829 rooms) and three Residence Inn by Marriott(R) hotels (507 suites) for $129 million. As of February 11, 1998, three of these hotels have been acquired; the remaining six are expected to be acquired periodically during the remainder of 1998. In November 1997 the Company acquired 14 Sumner Suites(R) hotels (1,641 suites) for $140 million. In November 1997 the Company agreed to acquire 15 Candlewood(R) hotels for $100 million. Five of these 15 Candlewood(R) hotels were acquired in 1997. An additional 5 properties were acquired in January 1998. The remaining hotels are expected to be acquired during 1998. These acquisitions were funded through the use of cash on hand, borrowings on the company's line of credit, and the net proceeds from the offering of 12,000,000 common shares of beneficial interest ("Shares") in December 1997. Total revenues in 1997 were $114.1 million versus 1996 revenues of $82.6 million. Total revenues were comprised principally of base and percentage rent of $98.6 million and FF&E reserve income of $14.6 million in 1997 versus $69.5 million and $12.2 million, respectively, in the 1996 period. The Company's results are reflective of the full year impact of 45 hotels acquired in 1996 and the impact of the 1997 completion of 37 of the 53 hotel acquisitions announced in 1997. During 1997 the Company earned percentage rent revenue of $2.5 million ($0.09/Share) versus $1.1 million ($0.05/Share) in 1996, as a result of increases in gross hotel revenues at the Company's hotels. Total expenses in 1997 were $55.0 million (including interest expense and depreciation and amortization of real estate assets of $15.5 and $31.9 million, respectively) versus 1996 expenses of $31.0 million (including interest expense and depreciation and amortization of $5.6 million and $20.4 million, respectively). A portion of the hotels purchased in 1997 were temporarily financed with proceeds from the Company's line of credit which was ultimately repaid with the proceeds of the Company's 12,000,000 Share offering in December 1997. These line of credit proceeds, plus the amounts outstanding on certain prepayable mortgage notes issued by a subsidiary of the Company, gave rise to interest expense of $15.5 million in 1997 versus $5.6 million in 1996 when amounts on the Company's line of credit were smaller, were outstanding for shorter periods and during which the Company's mortgage notes were not in place for the entire period. The substantial increase in the number of hotels owned by 3 the Company has also proportionately increased the Company's general expense levels, including depreciation and general and administrative expenses. The Company incurred $713,000 of costs in 1997 in connection with a terminated acquisition attempt. Net income in 1997 was $59.2 million ($2.15/Share) and cash available for distribution ("CAD") was $79.3 million ($2.88/Share) versus $51.7 million ($2.23 per Share) and CAD of $60.8 million ($2.62/Share). Growth in net income and CAD is primarily related to the effects of acquisitions in 1996 and 1997. Cash flow provided by (used for) operating, investing and financing activities was $81.2 million, ($347.3 million) and $309.7 million, respectively, for the year ended December 31, 1997. Year Ended December 31, 1996 versus Pro Forma Year Ended December 31, 1995 - -------------------------------------------------------------------------- The Company's assets increased to $871.6 million as of December 31, 1996 from $338.9 million at December 31, 1995. The increase primarily resulted from three hotel portfolio acquisitions completed during 1996. In March and April of 1996, the Company acquired 16 Courtyard by Marriott(R) hotels for $176.4 million and 18 Residence Inn(R) by Marriott hotels for $172.2 million. In May 1996, the Company acquired 11 Wyndham Garden(R) hotels for $135.3 million. These acquisitions were funded through the use of cash on hand, borrowings on the Company's line of credit, and the net proceeds from the offering of 14,250,000 Shares in April 1996. Total revenues in 1996 were $82.6 million versus pro forma 1995 revenue of $39.9 million. Total revenues were comprised principally of base and percentage rent of $69.5 million and FF&E reserve income of $12.2 million in 1996 versus $33.3 million and $6.4 million, respectively, in the pro forma period. The Company's results of operations in 1996 are reflective of the growth in the number of owned hotels to 82, from 37 at year end 1995. The leases for the Company's 82 hotels at December 31, 1996 call for base rent of $81.3 million annually, versus $32.9 million for the 37 hotels owned at December 31, 1995. During 1996, the Company earned revenue of approximately $1.1 million ($0.05/Share) in percentage rents from its portfolio of 53 Courtyard hotels, reflective of continued increases in Total Hotel Sales at these properties. Total expenses in 1996 were $31.0 million, including interest expense and depreciation and amortization of $5.6 million and $20.4 million, respectively, versus pro forma 1995 expenses of $11.8 million, including depreciation and amortization of $9.2 million. A portion of the hotels purchased in 1996 were financed with proceeds from the Company's line of credit which was ultimately repaid with prepayable floating rate mortgages. Such debt financing in 1996 gave rise to the $5.6 million of interest expense referred to above, versus zero for pro forma 1995, when the Company did not use third-party debt. The substantial increase in the number of hotels owned by the Company has also proportionately increased the Company's general expense levels, including depreciation and amortization and general and administrative expenses. Net income in 1996 was $51.7 million ($2.23 per Share) and CAD for the period was $60.8 million ($2.62 per Share), based in both cases on average outstanding Shares for the period of 23,170,000. This compares with pro forma 1995 net income of $28.0 million ($2.22 per Share) and CAD of $30.8 million ($2.45 per Share), based in both cases upon 12,600,900 outstanding Shares. This 7% growth in CAD is primarily related to the effects of the Company's 1996 hotel acquisitions and related financing activity as well as growth in percentage rent to $1.1 million in 1996 from $0.4 million in the 1995 pro forma period. During April 1996, the Company completed an offering of 14,250,000 Shares raising net proceeds of approximately $358 million to fund its acquisitions and more than doubling its equity capitalization and shares outstanding. Cash flow provided by (used for) operating, investing and financing activities was $61.7 million, ($448.7 million) and $422.9 million, respectively, for the year ended December 31, 1996. February 7, 1995 (Inception) Through December 31, 1995 - ------------------------------------------------------ Total revenues from Inception through December 31, 1995 were $23.6 million, which included base and percentage rent of $19.5 million and FF&E reserve income of $4.0 million. Total expenses for the period were $12.3 million, including interest expense and depreciation and amortization of $5.0 million and $5.8 million, respectively. Net income for the period was $11.3 million ($2.51 per Share) and CAD for the period was $13.2 million ($2.91 per Share), based in both cases on average outstanding Shares for the period of 4,515,000. From Inception until completion of its initial public offering on August 22, 1995, the Company was a 100% owned subsidiary of Health and Retirement Properties Trust ("HRP") and was initially capitalized with $1 million of equity and $163.3 million of debt. The debt was 4 provided by HRP at rates which were lower than the market rates which the Company would have paid on a stand alone basis. Accordingly, the Company does not believe that its results of operations while it was a wholly owned subsidiary of HRP are comparable to subsequent periods. Cash flow provided by (used for) operating, investing and financing activities was $14.1 million, ($303.7 million) and $291.6 million, respectively, for the year ended December 31, 1996. Pro Forma Year Ended December 31, 1995 - -------------------------------------- The pro forma results of operations assume that the Company's formation transactions, the initial public offering of Shares and the acquisition and leasing of the 37 hotels and related transactions all occurred on January 1, 1995. On this pro forma basis, total revenues would have been $39.9 million (principally base and percentage rents of $33.3 million and FF&E reserve income of $6.4 million). Total expenses would have been $11.8 million (including depreciation and amortization of $9.2 million and general and administrative expenses of $2.6 million). Net income would have been $28.0 million or $2.22 per Share, and CAD would have been $30.8 million or $2.45 per Share, based in both cases upon 12,600,900 Shares outstanding. Liquidity and Capital Resources The Company's primary source of cash to fund its dividends, interest and day to day operations is the base and percentage rent it receives. Base rent is paid monthly in advance and percentage rent is paid either monthly or quarterly in arrears. This flow of funds from rent has historically been sufficient for the Company to pay dividends, interest and meet day to day operating expenses. The Company believes that its operating cash flow will be sufficient to meet its operating expenses, interest and dividend payments. In order to fund acquisitions and to accommodate occasional cash needs which may result from timing differences between the receipt of rents and the need to pay dividends or operating expenses, the Company has entered into a line of credit arrangement was with DLJ Mortgage Capital, Inc. ("DLJMC"). The line of credit (the "DLJMC Line of Credit") is for up to $200 million, all of which was available at December 31, 1997. During 1997 the Company expanded its credit facilities with DLJMC temporarily to provide up to $455 million. Drawings under the DLJMC Line of Credit are secured by first mortgage liens on certain of the Company's hotels. Funds may be drawn, repaid and redrawn until maturity, and no principal repayment is due until maturity. The DLJMC Line of Credit matures on December 31, 1998. Interest on borrowings under the DLJMC Line of Credit are payable until maturity at a spread above LIBOR; and interest during the extended term, if any, will be set at market rates at the time the loan is extended. During 1996, subsidiaries of the Company issued $125 million of mortgage notes (the "Notes") secured by such subsidiaries' assets, including 18 Residence Inn by Marriott(R) and 11 Wyndham Garden(R) hotels. The mortgage loan was financed by the issuance of $125 million commercial mortgage pass-through certificates through a trust created by another of the Company's subsidiaries. The certificates were sold in a Rule 144A private placement to institutional investors. The Notes carry interest that floats with one-month LIBOR plus a spread and are due December 1, 2001, but may be prepaid by the Company at any time without penalty. In connection with this issuance of the Notes, the Company entered into interest rate cap agreements for $125 million (notional amount) with a major financial institution which limit the Company's maximum interest rate exposure to 7.6925% on this debt. The Company expects to use existing cash balances, borrowings under the DLJMC Line of Credit or other lines of credit and/or net proceeds of offerings of equity or debt securities to fund future hotel acquisitions. To the extent the Company borrows on a line of credit, the Company will explore various alternatives in both the timing and method of repayment of such amounts. Such alternatives may include incurring long term debt. On January 15, 1997, the Company's shelf registration statement for up to $2 billion of securities, including debt securities, was declared effective by the Securities and Exchange Commission (the "SEC"). An effective shelf registration statement enables the Company to issue specific securities to the public on an expedited basis by filing a prospectus supplement with the SEC. The Company has recently held preliminary discussions with several banks concerning the possibility of replacing the DLJMC Line of Credit. The Company is also exploring the prepayment of the Notes with the proceeds of an issuance of unsecured term debt securities. No assurance can be made that a new credit facility will be available to the Company on acceptable terms or that a prepayment of the Notes will occur. 5 Although there can be no assurance that the Company will consummate any debt or equity security offerings or other financings, the Company believes it will have access to various types of financing in the future, including debt or equity securities offerings, with which to finance future acquisitions. Seasonality The Company's hotels have historically experienced seasonal differences typical of the hotel industry with higher revenues in the second and third quarters of calendar years compared with the first and fourth quarters. This seasonality is not expected to cause fluctuations in the Company's rental income because the Company believes that the revenues generated by its hotels will be sufficient for the lessees to pay rents on a regular basis notwithstanding seasonal fluctuations. Inflation The Company believes that inflation should not have a material adverse effect on the Company. Although increases in the rate of inflation may tend to increase interest rates which the Company may be required to pay for borrowed funds, the Company has a policy of obtaining interest rate caps in appropriate circumstances to protect it from interest rate increases. In addition, the Company's leases provide for the payment of percentage rent to the Company based on increases in total sales, and such rent should increase with inflation. Certain Considerations The discussion and analysis of the Company's financial condition and results of operations requires the Company to make certain estimates and assumptions and contains certain statements of the Company's beliefs, intent or expectation concerning projections, plans, future events and performance. The estimates, assumptions and statements, such as those relating to the Company's ability to expand its portfolio, performance of its assets, the ability to pay dividends, its tax status as a "real estate investment trust," the ability to appropriately balance the use of debt and equity and to access capital markets, depend upon various factors over which the Company and/or the Company's lessees have or may have limited or no control. Those factors include, without limitation, the status of the economy, capital markets (including prevailing interest rates), compliance with the changes to regulations within the hospitality industry, competition, changes to federal, state and local legislation and other factors. The Company cannot predict the impact of these factors, if any. However, these factors could cause the Company's actual results for subsequent periods to be different from those stated, estimated or assumed in this discussion and analysis of the Company's financial condition and results of operations. The Company believes that its estimates and assumptions are reasonable and prudent at this time. Item 7. Financial Statements and Schedule and Exhibits (a) Index to Financial Statements and Financial Statement Schedule (see index on page F-1). (a) List of exhibits. 10 Advisory Agreement by and between REIT Management & Research, Inc. and Hospitality Properties Trust dated January 1, 1998. 12 Ratio of Earnings to Fixed Charges. 23 Consent of Arthur Andersen LLP. 27 Financial data schedule. 6 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Public Accountants...................................... F-2 Consolidated Balance Sheet as of December 31, 1997 and 1996 .................. F-3 Consolidated Statement of Income for the years ended December 31, 1997 and 1996 and the period February 7, 1995 (inception) to December 31, 1995..... F-4 Consolidated Statement of Shareholders' Equity for the years ended December 31, 1997 and 1996 and the period February 7, 1995 (inception) to December 31, 1995.......................................................... F-5 Consolidated Statement of Cash Flows for the years ended December 31, 1997 and 1996 and the period February 7, 1995 (inception) to December 31, 1995...................................................................... F-6 Notes to Consolidated Financial Statements.................................... F-7 Report of Independent Public Accountants on Schedule III ..................... F-11 Schedule III - Real Estate and Accumulated Depreciation ...................... F-12
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Trustees and Shareholders of Hospitality Properties Trust: We have audited the accompanying consolidated balance sheet of Hospitality Properties Trust (the "Company") as of December 31, 1997 and 1996, and the related consolidated statements of income, shareholders' equity and cash flows for the years ended December 31, 1997, 1996 and the period from February 7, 1995 (inception) to December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hospitality Properties Trust as of December 31, 1997 and 1996 and the results of its operations and its cash flows for the years ended December 31, 1997 and 1996, and for the period from February 7, 1995 (inception) to December 31, 1995, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Washington, D.C. January 16, 1998 F-2 HOSPITALITY PROPERTIES TRUST CONSOLIDATED BALANCE SHEET
As of December 31, ---------------------------- 1997 1996 (in thousands, except Share data) ASSETS Real estate properties, at cost: Land ................................................. $ 179,928 $ 143,462 Buildings and improvements ........................... 1,086,107 699,225 ---------- --------- 1,266,035 842,687 Less accumulated depreciation ........................ (58,167) (26,218) ---------- --------- 1,207,868 816,469 Cash and cash equivalents ............................. 81,728 38,073 Rent receivable ....................................... 1,623 1,671 Restricted cash (FF&E reserve) ........................ 11,165 7,277 Other assets, net ..................................... 10,872 8,113 ---------- --------- $1,313,256 $ 871,603 ========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Security deposits ..................................... $ 146,662 $ 81,360 Debt .................................................. 125,000 125,000 Dividends payable ..................................... 24,493 15,846 Due to affiliate ...................................... 2,464 2,376 Accounts payable and other ............................ 6,744 1,813 ---------- --------- Total liabilities .................................... 305,363 226,395 Shareholders' equity: Preferred shares of beneficial interest, no par value, 100,000,000 shares authorized, none issued .......... -- -- Common shares of beneficial interest, $.01 par value, 100,000,000 shares authorized, 38,878,295 and 26,856,800 shares issued and outstanding ............ 389 269 Additional paid-in capital ........................... 1,033,073 656,253 Cumulative net income ................................ 122,166 63,013 Dividends (paid or declared) ......................... (147,735) (74,327) ---------- --------- Total shareholders' equity ........................... 1,007,893 645,208 ---------- --------- $1,313,256 $ 871,603 ========== =========
See accompanying notes. F-3 HOSPITALITY PROPERTIES TRUST CONSOLIDATED STATEMENT OF INCOME
February 7, 1995 Year Ended December 31, (inception) to --------------------------- December 31, 1997 1996 1995 (in thousands, except per Share data) Revenues: Rental income ............................................... $ 98,561 $ 69,514 $ 19,531 FF&E reserve income ......................................... 14,643 12,169 4,037 Interest income ............................................. 928 946 74 --------- -------- -------- Total revenues ............................................ 114,132 82,629 23,642 --------- -------- -------- Expenses: Interest (including amortization of deferred finance costs of $1,340, $341 and $24, respectively)...................... 15,534 5,646 5,063 Depreciation and amortization of real estate assets ......... 31,949 20,398 5,820 Terminated acquisition costs ................................ 713 -- -- General and administrative .................................. 6,783 4,921 1,410 --------- -------- -------- Total expenses ............................................ 54,979 30,965 12,293 --------- -------- -------- Net income ................................................... $ 59,153 $ 51,664 $ 11,349 ========= ======== ======== Weighted average Shares outstanding .......................... 27,530 23,170 4,515 Net income per Share ......................................... $ 2.15 $ 2.23 $ 2.51 ========= ======== ========
See accompanying notes. F-4 HOSPITALITY PROPERTIES TRUST CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Additional Cumulative Number Of Common Paid-In Net Shares Shares Capital Income Dividends Total (in thousands, except Share data) Initial capitalization as of February 7, 1995 (inception) . 40,000 $ -- $ 960 $ -- $ -- $ 960 Issuance of Common Shares of Beneficial Interest, net ..... 12,560,000 126 296,980 -- -- 297,106 Stock grants .................. 900 -- 22 -- -- 22 Net income .................... -- -- -- 11,349 -- 11,349 Dividends (paid or declared) .. -- -- -- -- (11,486) (11,486) ---------- ---- ---------- -------- ---------- ---------- Balance at December 31, 1995 .. 12,600,900 $126 $ 297,962 $ 11,349 $ (11,486) $ 297,951 ========== ==== ========== ======== ========== ========== Issuance of Common Shares of Beneficial Interest, net ..... 14,250,000 $143 $ 358,136 $ -- $ -- $ 358,279 Stock grants .................. 5,900 -- 155 -- -- 155 Net income .................... -- -- -- 51,664 -- 51,664 Dividends (paid or declared) .. -- -- -- -- (62,841) (62,841) ---------- ---- ---------- -------- ---------- ---------- Balance at December 31, 1996 .. 26,856,800 $269 $ 656,253 $ 63,013 $ (74,327) $ 645,208 ========== ==== ========== ======== ========== ========== Issuance of Common Shares of Beneficial Interest, net ..... 12,000,000 $120 $ 376,146 $ -- $ -- $ 376,266 Stock grants .................. 21,495 -- 674 -- -- 674 Net income .................... -- -- -- 59,153 -- 59,153 Dividends (paid or declared) .. -- -- -- -- (73,408) (73,408) ---------- ---- ---------- -------- ---------- ---------- Balance at December 31, 1997 .. 38,878,295 $389 $1,033,073 $122,166 $ (147,735) $1,007,893 ========== ==== ========== ======== ========== ==========
See accompanying notes. F-5 HOSPITALITY PROPERTIES TRUST CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended February 7, 1995 December 31, (inception) to ------------------------------ December 31, 1997 1996 1995 (in thousands) Cash flows from operating activities: Net income ................................................... $ 59,153 $ 51,664 $ 11,349 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization .............................. 31,949 20,398 5,820 Amortization of deferred finance costs as interest ......... 1,340 341 24 FF&E reserve income ........................................ (14,643) (12,169) (4,037) Changes in assets and liabilities: Increase in rent receivable and other assets ............. (469) (1,566) (182) Increase in accounts payable and other ................... 3,419 1,926 396 Increase in due to affiliate ............................. 476 1,149 770 ---------- ---------- ---------- Cash provided by operating activities .................... 81,225 61,743 14,140 ---------- ---------- ---------- Cash flows from investing activities: Real estate acquisitions ..................................... (409,799) (491,638) (332,648) Increase in security deposits ................................ 65,302 48,460 32,900 Purchase of FF&E reserve ..................................... (2,794) (5,500) (3,904) ---------- ---------- ---------- Cash used in investing activities ........................ (347,291) (448,678) (303,652) ---------- ---------- ---------- Cash flows from financing activities: Proceeds from issuance of Shares, net ........................ 376,266 358,279 198,088 Draws on credit facility and debt issuance ................... 261,000 240,650 -- Repayments of credit facility ................................ (261,000) (115,650) -- Deferred finance costs incurred .............................. (1,784) (6,481) (1,885) Borrowings and advances from HRP ............................. -- -- 165,241 Payments on borrowings and advances from HRP ................. -- -- (65,241) Dividends paid ............................................... (64,761) (53,925) (4,556) ---------- ---------- ---------- Cash provided by financing activities .................... 309,721 422,873 291,647 ---------- ---------- ---------- Increase in cash and cash equivalents ......................... $ 43,655 $ 35,938 $ 2,135 Cash and cash equivalents at beginning of period .............. 38,073 2,135 -- ---------- ---------- ---------- Cash and cash equivalents at end of period .................... $ 81,728 $ 38,073 $ 2,135 ========== ========== ========== Supplemental cash flow information: Cash paid for interest ....................................... $ 14,086 $ 4,652 $ 5,039 Non-cash investing and financing activities: Property managers' deposits in FF&E reserve .................. 14,213 12,100 3,862 Purchases of fixed assets with FF&E reserve .................. (13,549) (15,665) (2,424) Issuance of Shares to HRP .................................... -- -- 100,000 Cancellation of indebtedness to HRP .......................... -- -- (100,000)
See accompanying notes. F-6 HOSPITALITY PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per Share and percent data) 1. Organization and Commencement of Operations Hospitality Properties Trust (HPT) is a Maryland real estate investment trust organized on February 7, 1995. HPT, which invests in income producing hotel and lodging related real estate, was a 100% owned subsidiary of Health and Retirement Properties Trust (HRP) from its inception through August 22, 1995, when it completed its initial public offering of Shares (the IPO). HRP remains an affiliate of HPT, owning approximately 10.3% of HPT's issued and outstanding Shares as of December 31, 1997. HPT commenced operations on March 24, 1995. At December 31, 1997 HPT, directly and through subsidiaries, had purchased 119 properties and committed to purchase an additional 16 properties. The properties of HPT and its subsidiaries (the Company) are leased to and managed by subsidiaries (the Lessees and the Managers) of companies unaffiliated with HPT: Host Marriott Corporation; Marriott International, Inc. (Marriott); Patriot American Hospitality; Candlewood Hotel Company, Inc.; and ShoLodge, Inc. 2. Summary of Significant Accounting Policies Consolidation. These consolidated financial statements include the accounts of HPT and its subsidiaries. All intercompany transactions have been eliminated. Real estate properties. Real estate properties are recorded at cost. Depreciation is provided for on a straight-line basis over estimated useful lives of 7 to 40 years. The Company periodically evaluates the carrying value of its long-lived assets in accordance with Statement of Financial Accounting Standards No. 121 (FAS 121), which it adopted on January 1, 1996. The adoption of FAS 121 had no effect on the Company's financial statements. Cash and cash equivalents. Highly liquid investments with maturities of three months or less at date of purchase are considered to be cash equivalents. The carrying amount of cash and cash equivalents is equal to its fair value. Deferred finance costs. Costs incurred to secure certain borrowings are capitalized and amortized over the terms of the related borrowing, and were $7,371, $5,352 and $1,861 at December 31, 1997, 1996 and 1995, respectively, net of accumulated amortization of $1,143, $313 and $24, respectively. Financial Instruments--interest rate cap agreements. Certain subsidiaries of HPT have entered interest rate protection agreements to limit the Company's exposure to risks of rising interest rates. The cost of the agreements is included in interest expense ratably over the life of the arrangement. Amounts receivable from the counterparties to the cap agreements are accrued as adjustments to interest expense. At December 31, 1997 and 1996, the net carrying value of such agreements was $1,988 and $2,498, respectively, and the fair value of such agreements was $802 and $2,756, respectively. Interest rates have not exceeded the cap amounts and no balances were receivable under the cap agreements at December 31, 1997 and 1996. Revenue recognition. Rental income from operating leases is recognized on a straight line basis over the life of the lease agreements. Additional rent and interest income is recognized as earned. Net income per share. Net income per share is computed using the weighted average number of shares outstanding during the period. The Company has no common share equivalents. Use of estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Income taxes. The Company is a real estate investment trust under the Internal Revenue Code of 1986. The Company is not subject to Federal income taxes on its net income provided it distributes its taxable income to shareholders and meets certain other requirements. F-7 HOSPITALITY PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands, except per Share and percent data) New Accounting Pronouncements. The Financial Accounting Standards Board has issued Financial Accounting Standards Board Statement No. 128 "Earnings Per Share" ("FAS 128"), Statement No. 129 "Disclosure of Information about Capital Structure" ("FAS 129"), Statement No. 130 "Reporting Comprehensive Income" ("FAS 130") and Statement No. 131 "Disclosures About Segments of an Enterprise and Related Information" ("FAS 131"). FAS 128 and FAS 129 were adopted for the Company's 1997 financial statements. The adoption of each of these had no impact on the Company's financial statements. FAS 130 and FAS 131 must be adopted for the Company's 1998 financial statements. The Company anticipates that FAS 130 and FAS 131 will have no impact on the Company's financial statements. 3. Real Estate Properties The Company's hotel properties are leased pursuant to long term operating leases with initial terms expiring between 2008 and 2014. The leases provide for various renewal terms generally totaling 20-50 years unless the Lessee properly notifies the Company in accordance with the leases. Each lease is a triple net lease and generally requires the Lessee to pay: base rent, percentage rent of between 5% and 10% of increases in total hotel sales over a base year, 5% FF&E reserve escrows, and all operating costs associated with the leased property. Each Lessee has posted a security deposit equal to one year's base rent. Each of the Company's properties is part of a pool of properties leased to a single tenant. At December 31, 1997, the Company maintained seven pools of properties, ranging in number of properties from nine to 53. Each property within a pool is subject to certain lease provisions including all-or-none renewals, cross defaults and the ability to use FF&E reserves generated by all hotels within a pool for the maintenance and refurbishment of any hotel within such pool. The FF&E reserve may be used by the Manager and Lessee to maintain the properties in good working order and repair. If the FF&E reserve is not available to fund such expenditures, the Company may make such expenditures, in which case annual base rent will be increased by a minimum of 10% of the amount so funded. During 1995, the Company purchased and leased 37 hotels for a total purchase price of approximately $329,000. In 1996, the Company purchased and leased an additional 45 hotels for an aggregate purchase price of approximately $484,000. During 1997, the company agreed to purchase and lease up to an additional 53 hotels for an aggregate purchase price of approximately $562,000. As of December 31, 1997, the Company had completed the acquisition and leasing of 119 hotels properties and had outstanding commitments, subject to the satisfaction of certain conditions by the sellers of such properties, to purchase an additional 16 hotel properties for an aggregate purchase price of $155,158. Future minimum lease payments to be received by the Company during the remaining initial terms of its leases total $1,742,784 ($120,062 annually). As of December 31, 1997, the weighted average remaining initial term of the Company's leases was 14 years, and the weighted average remaining total term (including all renewal options) was 53.4 years. 4. Indebtedness As of December 31, 1997 and 1996, the Company had no borrowings outstanding under its $200,000 revolving acquisition credit facility ("Credit Facility") which provides for interest on borrowings at one-month LIBOR plus a premium. Borrowings, if any, may be repaid and reborrowed as necessary until December 31, 1998, at which time outstanding balances may, at the Company's option (subject to lender consent), be either repaid or converted into a 10-year loan. The Credit Facility is secured by certain assets of HPT and one of its subsidiaries. The weighted average interest rate on Credit Facility borrowings outstanding during 1997 and 1996 was 7.27% and 7.05%, respectively. There were no borrowings outstanding at any time under the Credit Facility during the 1995 period. During 1997, the Company temporarily expanded its credit facility with the same lender to provide up to an additional $255,000 (the "Expanded Facility") through December 31, 1997. No amounts were outstanding under the Expanded Facility as of December 31, 1997. During 1996, certain subsidiaries of the Company issued $125,000 of notes (Notes) which require payment of interest only through their maturity in December 2001, at which time the principal balance is due. The Notes are prepayable at any time without penalty. Interest on the Notes is equal to one month LIBOR plus a premium. F-8 HOSPITALITY PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands, except per Share and percent data) The Notes are non-recourse to HPT and its subsidiaries and are secured by first mortgages on hotels owned by certain subsidiaries of the Company having a net carrying value of $319,538 at December 31, 1997. Approximately $30,820 of annual minimum lease payments are attributed to such hotels. Generally, among other restrictions, the terms of the Notes limit the ability of certain subsidiaries of the Company to incur significant secured or unsecured liabilities and restrict the use of proceeds from any sale or other disposition of the encumbered assets. The Notes carried a weighted average interest rate in 1997 of 6.44% and from their date of issuance to December 31, 1996 of 6.32%. At December 31, 1997 and 1996, the Notes carried an interest rate of 6.69% and 6.07%, respectively. The carrying amount of the Notes is equal to their fair value. 5. Transactions with Affiliates The Company has an agreement with HRPT Advisors, Inc. (the "Advisor") whereby the Advisor provides investment, management and administrative services to the Company. The Advisor is compensated at an annual rate equal to 0.7% of HPT's average real estate investments up to the first $250,000 of such investments and 0.5% thereafter plus an incentive fee based upon improvements in cash available for distribution per Share (as defined). Cash advisory fees earned for the years ended 1997, 1996 and for period from February 7, 1995 (inception) to December 31, 1995 were $5,299, $3,915 and $1,292 respectively. As of December 31, 1997 the Advisor owned 264,595 shares of HPT. Incentive advisory fees are paid to Advisors in restricted Common Shares based on a formula. The Company accrued $551 and $463 in incentive fees during 1997 and 1996 respectively. In February of 1997 the Company issued 14,595 restricted Common Shares to the Advisor satisfying the 1996 fee. The 1997 fee will be paid in restricted Common Shares in 1998. From time to time the Company may seek short term borrowings from the Advisor. During 1997, the Company made one such borrowing of $7,000 which was outstanding for 60 days. Interest paid to the Advisor totaled $62. The Advisor is under no obligation to make funds available to the Company. As of January 1, 1998, the functions of the Advisor were assumed by REIT Management & Research, Inc. ("RMR"), a newly formed affiliate of the Advisor under a new advisory agreement on substantially the same terms as the previous agreement. The Advisor and RMR are each owned by Gerard M. Martin and Barry M. Portnoy, who also serve as Managing Trustees of the Company. 6. Concentration The Company's assets are income producing lodging related real estate located throughout the United States. The Company's lessees are:
Annual Number of Initial % of Minimum % of Subsidiaries of Properties Investment Total Rent Total Host Marriott Corp. .................. 53 $ 505,000 37% $ 50,500 37% Host Marriott Corp. .................. 18 172,000 13% 17,200 13% Patriot American Hospitality ......... 12 180,000 13% 18,000 13% Marriott International, Inc. ......... 14 149,000 11% 14,900 11% Marriott International, Inc. ......... 9 129,000 9% 12,900 9% ShoLodge, Inc. ....................... 14 140,000 10% 14,000 10% Candlewood Hotel Company ............. 15 100,000 7% 10,000 7% -- ---------- -- -------- -- 135 $1,375,000 100% $137,500 100%
At December 31, 1997 the Company was committed to purchase 16 of the properties shown in the table above with allocated initial investment and annual minimum rent of $155,158 and $15,516, respectively. At December 31, 1997 the Company's 119 hotels contain 16,527 rooms and are located in 30 states, with 5% to 11% of its hotels in each of Virginia, Pennsylvania, Massachusetts, Arizona, Georgia, Texas, and California. Including the commitments to purchase 16 properties, the Company's 135 hotels contain 18,497 rooms and are located in 35 states. F-9 HOSPITALITY PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (in thousands, except per Share and percent data) 7. Pro Forma Information (Unaudited) In December 1997 the Company agreed to acquire and net lease 53 hotels for a total of $562,000 (including 16 hotels which as of December 31, 1997 had not been acquired). In December 1997 the Company completed an offering of 12,000 Shares. Assuming the acquisition and leasing of these hotels and the completion of the December Shares offering had occurred on January 1, 1997, unaudited pro forma 1997 revenues, net income and earnings per share would have been $153,116, $83,715, and $2.17 respectively. In the opinion of management, all adjustments necessary to reflect the effects of the transactions discussed above have been reflected in the pro forma data. The unaudited pro forma data is not necessarily indicative of what the actual consolidated results of operations for the Company would have been for the years indicated, nor does it purport to represent the results of operations for the Company for future periods. 8. Selected Quarterly Financial Data (Unaudited) The following is a summary of the unaudited quarterly results of operations of the Company for 1997, 1996 and 1995.
1997 ---------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Revenues ......................... $25,477 $28,276 $29,017 $31,362 Net Income ....................... 14,910 14,926 15,017 14,300 Net Income per Share ............. .56 .56 .56 .48 Dividends paid per Share (3) ..... .59 .61 .62 .63
1996 ------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Revenues ......................... $ 10,334 $ 23,011 $24,878 $24,406 Net Income ....................... 6,622 14,623 15,446 14,973 Net Income per Share ............. .53 .56 .58 .56 Dividends paid per Share (3)...... .58 .58 .59 .59 1995 ------------ Third Fourth Quarter(1) Quarter Revenues ......................... $ 7,853 $ 9,998 Net income ....................... 3,623 6,989 Net income per Share ............. .24(2) .55 Dividends paid per Share (3)...... .24 .55
- ------------ (1) HPT's IPO occurred August 22, 1995 and accordingly the third quarter 1995 figures for revenues and net income partially relate to periods prior to the IPO. (2) Represents the per Share amount of net income from the IPO date to September 30, 1995. (3) Amounts represent dividends declared with respect to the periods shown. F-10 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Trustees and Shareholders of Hospitality Properties Trust: We have audited in accordance with generally accepted auditing standards the consolidated financial statements of Hospitality Properties Trust and have issued our report thereon dated January 16, 1998. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule on pages F-12 and F-13 is the responsibility of Hospitality Properties Trust's management and is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Washington, D.C. January 16, 1998 F-11 HOSPITALITY PROPERTIES TRUST SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 (Dollars in millions)
Gross Amount at Initial Costs December 31, 1997 ---------------------- --------------------------------- Subsequent Buildings & Costs Buildings & Accumulated Date of Description Encumbrances Land Improvements Capitalized Land Improvements Total Depreciation Acquisition 59 Courtyard by Marriott(R) hotels $ -- $ 98 $443 $4 $98 $447 $545 $(24) 1995/1996/1997 29 Residence Inn by Marriott(R) hotels 70 49 221 1 49 222 271 (6) 1996/1997 14 Sumner Suites(R) hotels -- 13 114 -- 13 114 127 -- 1997 12 Wyndham Garden(R) hotels 55 16 153 -- 16 153 169 (6) 1996/1997 5 Candlewood(R) hotels -- 3 30 -- 3 30 33 -- 1997 ------------------------------------------------------------------------------------------------- Total $ 125 $179 $961 $5 $179 $966 $1,145 $(36) =================================================================================================
Date Of Depreciation Description Construction Life 59 Courtyard 1987 by Marriott(R) through hotels 1997 15-40 years 29 Residence Inn by 1989 Marriott(R) through hotels 1997 15-40 years 14 Sumner Suites(R) 1992/1993 hotels 1996/1997 15-40 years 1987 12 Wyndham through Garden(R) hotels 1990 15-40 years 5 Candlewood(R) hotels 1996/1997 15-40 years
The accompanying notes are an integral part of this schedule. F-12 HOSPITALITY PROPERTIES TRUST NOTES TO SCHEDULE III DECEMBER 31, 1997 (In thousands) (A) The change in accumulated depreciation for the period from February 7, 1995 (inception) to December 31, 1997 is as follows:
1997 1996 1995 ---- ---- ---- Balance at beginning of period.................. $ 16,701 $ 3,679 $ -- Additions: Depreciation expense................ 19,241 13,022 3,679 ------------------------ ------------------- ---------------- Balance at close of period...................... $ 35,942 $ 16,701 $ 3,679 ======================== =================== ================
(B) The change in total cost of properties for the period from January 1, 1996 to December 31, 1997 is as follows:
1997 1996 ---- ---- Balance at beginning of period........................... $ 773,497 $ 305,447 Additions: Hotel acquisitions and capital expenditures.. 371,476 468,050 ------------------------- ------------------------ Balance at close of period............................... $ 1,144,973 $ 773,497 ========================= ========================
(C) The net tax basis of the Company's real estate properties was $1,108,000 million as of December 31, 1997. F-13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HOSPITALITY PROPERTIES TRUST By: /s/ Thomas M. O'Brien ---------------------------------- Thomas M. O'Brien, Treasurer and Chief Financial Officer Date: February 11, 1998 EX-10 2 MATERIAL CONTRACTS EXHIBIT 10 ADVISORY AGREEMENT THIS ADVISORY AGREEMENT (this "Agreement") is entered into effective as of January 1, 1998, by and between Hospitality Properties Trust, a Maryland real estate investment trust (the "Company"), HRPT Advisors, Inc., a Delaware corporation (the "Advisor"), and, solely with respect to Section 15 of this Agreement with respect to certain non-competition covenants, Barry M. Portnoy and Gerard M. Martin. WHEREAS, the Company is a Maryland real estate investment trust pursuant to a Declaration of Trust effective May 12, 1995 (as amended and restated from time to time, the "Declaration") for the purpose of buying, selling, leasing, holding and financing real and personal property and granting and holding mortgages thereon; WHEREAS, the Advisor is a corporation organized for the purpose of providing management and administrative services with respect to the ownership of real property; WHEREAS, Barry M. Portnoy and Gerard M. Martin are both directors and 50% shareholders of the Advisor; WHEREAS, the Company has qualified and intends to continue to qualify as a real estate investment trust as defined in the Internal Revenue Code of 1986, as amended, (said Code, as in effect from time to time, together with any regulations and rulings thereunder, being hereinafter referred to as the "Internal Revenue Code"); and WHEREAS, the Company desires to make use of the advice and assistance of the Advisor and certain sources of information available to the Advisor, and the Advisor desires to undertake the duties and responsibilities herein set forth, on behalf of and subject to the supervision of the Company's Board of Trustees (the "Trustees"), all as provided for herein; NOW, THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereto agree as follows: 1. General Duties of the Advisor. The Advisor shall use its best efforts to present to the Company a continuing and suitable investment program consistent with the investment policies and objectives of the Company. Subject to the supervision of the Trustees and upon their direction, and consistent with the provisions of the Declaration, the Advisor shall: (a) serve as the Company's investment advisor, with its obligations to include providing research and economic and statistical data in connection with the Company's investments and recommending changes in the Company's investment policies, when appropriate; (b) investigate and evaluate investment opportunities and make recommendations concerning such opportunities to the Trustees; (c) manage the Company's short term investments including the acquisition and sale of money market instruments in accordance with the Company's policies; (d) administer the day to day operations of the Company; (e) investigate, select and conduct relations and enter into appropriate contracts on behalf of the Company with other individuals, corporations and entities in furtherance of the investment activities of the Company; (f) upon request of the Trustees, act as attorney in fact or agent in acquiring and disposing of investments and funds of the Company and in handling, prosecuting and settling any claims of the Company; (g) upon request of the Trustees, invest and reinvest any money of the Company; (h) obtain for the Company, when appropriate, the services of property managers or management firms to perform customary property management services with regard to the real estate properties owned by or in the possession of the Company, and perform such supervisory or monitoring services on behalf of the Company with respect to the activities of such property managers or management firms as would be performed by a prudent owner, including but not limited to closely supervising the activities of such property managers or management firms, visiting the properties, participating in property management budgeting, reviewing the accounting of property income and expenses, reporting on the financial status of the properties and reviewing the accounting of property income and expenses, reporting on the financial status of the properties and reviewing and approving marketing plans, but excluding the actual on-site property management functions performed by said property managers or management firms; (i) obtain for the Company such services as may be required for other activities relating to the investment portfolio of the Company; (j) administer such day-to-day bookkeeping and accounting functions as are required for the proper management of the assets of the Company, contract for audits and prepare or cause to be prepared such reports as may be required by any governmental authority in connection with the ordinary conduct of the Company's business, including without limitation, periodic reports, returns or statements required under the Securities Exchange Act of 1934, as amended, the Internal Revenue Code after, the securities and tax securities of any jurisdiction in which the Company is obligated to file such reports, or the rules and regulations promulgated under any of the foregoing; (k) provide office space, office equipment and the use of accounting or computing equipment when required, and provide personnel necessary for the performance of the foregoing services; and -2- (l) from time to time, or at any time requested by the Trustees, make reports thereto of its performance of the foregoing services to the Company. In performing its services under this Agreement, the Advisor may utilize facilities, personnel and support services of various of its Affiliates (as defined below). The Advisor shall be responsible for paying such Affiliates for their personnel and support services and facilities out of its own funds. Notwithstanding the above, the Company may request, and will pay for the direct costs of, services provided by Affiliates of the Advisor provided that such request is approved by a majority vote of the Directors who are not Affiliates of the Advisor and who do not perform any services for the Company except as Trustee (the "Independent Trustees"). As used in this Agreement, the term "Affiliate" means, as to any Person, (i) any other Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any other Person that owns beneficially, directly or indirectly, five percent (5%) or more of the outstanding capital stock, shares or equity interests of such Person, or (iii) any officer, director, employee, general partner or trustee of such Person or of any Person controlling, controlled by or under common control with such Person (excluding Trustees who are not otherwise Affiliates of such Person). The term "Person" means and includes individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, limited liability companies, and other entities. 2. Bank Accounts. The Advisor shall establish and maintain one or more bank accounts in its own name or, at the direction of the Trustees, in the name of the Company, and shall collect and deposit into such account or accounts and disburse therefrom any monies on behalf of the Company, provided that no funds in any such account shall be commingled with any funds of the Advisor or any other Person. The Advisor shall from time to time render an appropriate accounting of such collections and payments to the Trustees and to the auditors of the Company. 3. Records. The Advisor shall maintain appropriate books of account and records relating to services performed pursuant to this Agreement, which books of account and records shall be available for inspection by representatives of the Company upon reasonable notice during ordinary business hours. 4. Information Furnished Advisor. The Trustees shall at all times keep the Advisor fully informed with regard to the investment policies of the Company, the capitalization policy of the Company, and generally the Trustees' then-current intentions as to the future of the Company. In particular, the Trustees shall notify the Advisor promptly of their intention to sell or otherwise dispose of any of the Company's investments or to make any new investment. The Company shall furnish the Advisor with a certified copy of all financial statements, a signed copy of each report prepared by independent certified public accountants, and such other information with regard to its affairs as the Advisor may from time to time reasonably request. The Company shall retain legal counsel and accountants to provide such legal and accounting advice and services as the Advisor or the Trustees shall deem necessary or appropriate to adequately perform the functions of the Company. -3- 5. REIT Qualification. Anything else in this Agreement to the contrary notwithstanding, the Advisor shall refrain from any action (including, without limitation, the furnishing or rendering of services to tenants of property or managing real property) which, in its judgment made in good faith, or in the judgement of the Trustees as transmitted to the Advisor in writing, would (a) adversely affect the status of the Company as a real estate investment trust as defined and limited in the Internal Revenue Code or which would make the Company subject to the Investment Company Act of 1940, as amended, or (b) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company or over its securities, or (c) otherwise not be permitted by the Declaration or Bylaws of the Company, except if such action shall be ordered by the Trustees, in which event the Advisor shall promptly notify the Trustees of the Advisor's judgment that such action would adversely affect such status or violate any such law, rule or regulation or the Declaration or Bylaws of the Company and shall refrain from taking such action pending further clarification or instructions from the Trustees. In addition, the Advisor shall take such affirmative steps which, in its judgment made in good faith, or in the judgment of the Trustees as transmitted to the Advisor in writing, would prevent or cure any action described in (a), (b) or (c) above. 6. Self-Dealing. Neither the Advisor nor any Affiliate of the Advisor shall sell any property or assets to the Company or purchase any property or assets from the Company, directly or indirectly, except as approved by a majority of the Independent Trustees. In addition, except as otherwise provided in Sections 1, 9, or 10 hereof, or except as approved by a majority of the Independent Trustees, neither the Advisor nor any Affiliate of the Advisor shall receive any commission or other remuneration, directly or indirectly, in connection with the activities of the Company or any joint venture or partnership in which the Company is a party. Except for compensation received by the Advisor pursuant to Section 9 hereof, all commissions or other remuneration received by the Advisor or an Affiliate of the Advisor and not approved by the Independent Trustees under Sections 1 or 10 hereof or this Section 6 shall be reported to the Company annually within ninety (90) days following the end of the Company's fiscal year. Upon request of any Trustee, the Advisor shall from time to time promptly furnish the Company with information on a confidential basis as to any investments within the Company's investment policies made by the Advisor for its own account. 7. No Partnership or Joint Venture. The Company and the Advisor are not partners or joint venturers with each other and neither the terms of this Agreement nor the fact that the Company and the Advisor have joint interests in any one or more investments shall be construed so as to make them such partners or joint venturers or impose any liability as such on either of them. 8. Fidelity Bond. The Advisor shall not be required to obtain or maintain a fidelity bond in connection with the performance of its services hereunder. 9. Compensation. The Advisor shall be paid, for the services rendered by it to the Company pursuant to this Agreement, an annual advisory fee (the "Advisory Fee") equal to 0.70 percent of the Average Invested Capital (as defined below) computed as of the last day of the Company's fiscal year up to $250,000,000, and 0.50 percent of the Average Invested Capital equal to or exceeding $250,000,000. In addition, the Advisor shall be paid an annual incentive fee (the -4- "Incentive Fee"), consisting of a number of shares of the Company's Common Shares of Beneficial Interest ("Common Shares") with a value (determined as provided below) equal to 15 percent of the amount by which Cash Available for Distribution to Shareholders (as defined below) for such fiscal year exceeds Cash Available for Distribution to Shareholders for the fiscal year immediately prior to such fiscal year, but in no event shall the Incentive Fee payable in respect of any year exceed $.02 multiplied by the weighted average number of Common Shares outstanding during such year. Payment of the Incentive Fee shall be made by issuance of Common Shares, under the Company's 1995 Incentive Share Award Plan or otherwise. The number of Common Shares to be issued in payment of the Incentive Fee shall be the whole number of shares (disregarding any fraction) equal to the value of the Incentive Fee, as provided above, divided by the average closing price of the Common Shares on the New York Stock Exchange during the month of December in the year for which the computation is made. (The Advisory Fee and Incentive Fee are hereinafter collectively referred to as the "Fees.") For purposes of this Agreement: "Average Invested Capital" of the Company shall mean the daily weighted average of the total book value of the assets of the Company invested, directly or indirectly, in equity interests in and loans secured by real estate and personal property owned in connection with such real estate (collectively, "Properties"), before reserves for depreciation or bad debts or other similar noncash reserves, computed by taking the weighted average of such values. "Cash Available for Distribution" shall mean, for any period, the net income of the Company, before real estate depreciation, amortization and other non-cash or non-recurring items, less the amount, if any, included in the calculation thereof which represents rental income recognized by the Company in respect of amounts which, pursuant to leasing arrangements relating to any of the Properties, the Company is required to escrow or reserve for renovations and refurbishments. Calculation of Average Invested Capital shall be made annually by the Company; calculation of Cash Available for Distribution to Shareholders shall be made annually by the Company's independent certified public accountants. The Advisory Fee shall be computed and paid within thirty (30) days following the end of each fiscal month by the Company, and the Incentive Fee shall be computed and paid within thirty (30) days following the public availability of the Company's annual audited financial statements for each fiscal year. Such computations shall be based upon the Company's monthly or annual financial statements, as the case may be, and shall be in reasonable detail. A copy of such computations shall promptly be delivered to the Advisor accompanied by payment of the Fees shown thereon to be due and payable. The payment of the aggregate annual Fees paid for any fiscal year shall be subject to adjustment as of the end of each fiscal year. On or before the 30th day after public availability of the Company's annual audited financial statements for each fiscal year, the Company shall deliver to the Advisor an Officer's Certificate (a "Certificate") reasonably acceptable to the Advisor and certified by an authorized officer of the Company setting forth (i) the Average Invested Capital and Funds From Operations for the Company's fiscal year ended upon the immediately preceding December 31, and (ii) the Company's computation of the Fees payable for said fiscal year. -5- If the aggregate annual Fees payable for said fiscal year as shown in such Certificate exceed the aggregate amounts previously paid with respect thereto by the Company, the Company shall include its check for such deficit and deliver the same to the Advisor with such Certificate. If the aggregate annual Fees payable for said fiscal year as shown in such Certificate are less than the aggregate amounts previously paid with respect thereto by the Company, the Company shall specify in such Certificate whether the Advisor should (i) remit to the Company its check in an amount equal to such difference or (ii) grant the Company a credit against the Fees next coming due in the amount of such difference until such amount has been fully paid or otherwise discharged. 10. Compensation for Additional Services. If, and to the extent that, the Company shall request the Advisor to render services on behalf of the Company other than those required to be rendered by the Advisor in accordance with the terms of this Agreement, such additional services shall be compensated separately on terms to be agreed upon between the Advisor and the Company from time to time. 11. Expenses of the Advisor. Without regard to the compensation received by the Advisor from the Company pursuant to this Agreement, the Advisor shall bear the following expenses incurred in connection with the performance of its duties under this Agreement: (a) employment expenses of the personnel employed by the Advisor, including but not limited to, salaries, wages, payroll taxes and the cost of employee benefit plans; (b) fees and travel and other expenses paid to directors, officers and employees of the Advisor, except fees and travel and other expenses of such persons who are Trustees or officers of the Company incurred in their capacities as Trustees or officers of the Company; (c) rent, telephone, utilities, office furniture, equipment and machinery and other office expenses of the Advisor, except to the extent such expenses relate solely to an office maintained by the Company separate from the office of the Advisor; and (d) miscellaneous administrative expenses incurred in supervising, monitoring and inspecting real property and other investments of the Company or relating to performance by the Advisor of its obligations hereunder. 12. Expenses of the Company. Except as expressly otherwise provided in this Agreement, the Company shall pay all its expenses not payable by the Advisor, and, without limiting the generality of the foregoing, it is specifically agreed that the following expenses of the Company shall be paid by the Company and shall not be paid by the Advisor: (a) the cost of borrowed money; (b) taxes on income and taxes and assessments on real property, if any, and all other taxes applicable to the Company; -6- (c) legal, auditing, accounting, underwriting, brokerage, listing, reporting, registration and other fees, and printing, engraving and other expenses and taxes incurred in connection with the issuance, distribution, transfer, trading, registration and stock exchange listing of the Company's securities, including transfer agent's, registrar's and indenture trustee's fees and charges; (d) expenses of organizing, restructuring, reorganizing or terminating the Company, or of revising, amending, converting or modifying the Company's organizational documents; (e) fees and travel and other expenses paid to Trustees and officers of the Company in their capacities as such (but not in their capacities as officers or employees of the Advisor) and fees and travel and other expenses paid to advisors, contractors, mortgage services, consultants, and other agents and independent contractors employed by or on behalf of the Company; (f) Expenses directly connected with the acquisition, disposition or ownership of real estate interests or other property (including the costs of foreclosure, insurance premiums, legal services, brokerage and sales commissions, maintenance, repair, improvement and local management or property), other than expenses with respect thereto of employees of the Advisor, to the extent that such expenses are to be borne by the Advisor pursuant to Section 11 above; (g) all insurance costs incurred in connection with the Company (including officer and trustee liability insurance) or in connection with any officer and trustee indemnity agreement to which the Company is a party; (h) expenses connected with payments of dividends or interest or contributions in cash or any other form made or caused to be made by the Trustees to holders of securities of the Company; (i) all expenses connected with communications to holders of securities of the Company and other bookkeeping and clerical work necessary to maintaining relations with holders of securities, including the cost of printing and mailing certificates for securities and proxy solicitation materials and reports to holders of the Company's securities; (j) legal, accounting and auditing fees and expenses, other than those described in subsection (c) above; and (k) expenses relating to any office or office facilities maintained by the Company separate from the office of the Advisor. 13. Annual Operating Expenses Limitation Requiring Refunds by the Advisor. There shall be a limitation (the "Limitation") on Operating Expenses (as defined below) of the Company for each fiscal year which shall be the lower of the following: -7- (a) the greater of (i) 2% of the Average Invested Capital of the Company for such fiscal year; and (ii) 25% of the Net Income (as defined below) of the Company for such fiscal year; or (b) the lowest of any applicable operating expense limitations that may be imposed by law or regulation in a state in which any securities of the Company are or will be qualified for sale or by a national securities exchange on which any securities of the Company are or may be listed, as such limitations may be altered from time to time. For purposes of this Agreement, "Operating Expenses" shall be calculated on the basis of the Company's annual audited financial statements and shall be deemed to mean the aggregate annual expenses regarded as ordinary operating expenses in accordance with generally accepted accounting principles (including the Fees), exclusive of the following: (i) the expenses set forth in subsections (a) through (d), inclusive, and (f) of Section 12 hereof; (ii) non-cash expenditures, including provisions for depreciation, depletion, bad debt reserve and amortization; (iii) losses on the disposition of assets and provisions for such losses; (iv) options granted to the Advisor; and (v) other extraordinary charges including, without limitation, litigation costs. For purposes of this Agreement, "Net Income" for any period shall be calculated on the basis of the Company's audited financial statements and shall be deemed to mean total revenues applicable to such period, less the expenses applicable to such period, including additions to reserves for depreciation or bad debts or other similar noncash reserves, determined in accordance with generally accepted accounting principles. On or before the 30th day after public availability of the Company's annual audited financial statements for each fiscal year, the Advisor shall refund (to the extent of the aggregate Fees it has received with respect to such year) to the Company the amount, if any, by which the Operating Expenses exceeded the Limitation; provided however, that unless such action is prohibited by laws or regulations, the Company may instead permit such refund to be effected by a reduction in the amount of the Fees to be paid by the Company during the fiscal years following the fiscal year with respect to which such refund is to be made until such time as any such refund is fully paid and provided the Limitation imposed by this Section 13 shall require that only so much of such excess need be refunded as is conclusively determined by the Trustees, including a majority of the Independent Trustees, to be unjustified. 14. Limits of Advisor Responsibility. The Advisor assumes no responsibility other than to render the services described herein in good faith and shall not be responsible for any action of the Trustees in following or declining to follow any advice or recommendation of the Advisor. The -8- Advisor, its shareholders, directors, officers, employees and Affiliates will not be liable to the Company, its shareholders, or others, except by reason of acts constituting bad faith, willful or wanton misconduct or gross negligence. The Company shall reimburse, indemnify and hold harmless the Advisor, its shareholders, directors, officers and employees and its Affiliates for and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever in respect of or arising from any acts or omissions of the Advisor undertaken in good faith and in accordance with the standard set forth above pursuant to the authority granted to it by this Agreement. 15. Other Activities of Advisor. Neither the Advisor nor Gerard M. Martin nor Barry M. Portnoy shall, without the consent of the Company's Independent Trustees, (i) provide advisory services to, or serve as a director or officer of, any other REIT which is principally engaged in the business of ownership of hotel properties or (ii) make direct investments in hotel facilities. Nothing herein shall prevent the Advisor from engaging in other activities or businesses or from acting as advisor to any other Person (including other real estate investment trusts) provided that no such activity shall conflict with the Advisor's obligations under the immediately preceding sentence; provided, further, however, that the Advisor shall notify the Company in writing in the event that it does so act as an advisor to another real estate investment trust. The Advisor shall be free from any obligation to present to the Company any particular investment opportunity which comes to the Advisor. Without limiting the foregoing provisions, the Advisor agrees, upon the request of any Trustee of the Company, to disclose certain investment information concerning the Advisor or certain of its Affiliates, provided, however, that such disclosure shall be required only if it does not constitute a breach of any fiduciary duty or obligation of the Advisor. Directors, officers, employees and agents of the Advisor or of its Affiliates may serve as Trustees, officers, employees, agents, nominees or signatories of the Company. When executing documents other otherwise acting in such capacities for the Company, such persons shall use their respective titles in the Company. Such persons shall receive no compensation from the Company for their services to the Company in any such capacities. 16. Term, Termination. This Agreement shall continue in force and effect until December 31, 1998 unless extended or sooner terminated in accordance with the terms of this Section 16. The expiration date of the then current term of this Agreement is referred to herein as the "Termination Date." The Company shall give written notice to the Advisor prior to the Termination Date of its intention to renew this Agreement and the period of such extension. Such renewal shall be determined by a majority of the Independent Trustees of the Company. Notwithstanding any other provision of this Agreement to the contrary, this Agreement, or any extension hereof, may be terminated by either party hereto upon sixty (60) days' written notice to the other party, pursuant to a majority vote of the Independent Trustees; or, in the case of a termination by the Advisor, by a majority vote of the directors of the Advisor. Paragraph 19 hereof shall govern the rights, liabilities and obligations of the parties upon termination of this Agreement; and, except as provided in paragraph 20, such termination shall be without further liability of either party to the other than for breach or violation of this Agreement prior to termination. -9- 17. Assignment. The Company may terminate this Agreement at any time in the event of its assignment by the Advisor except an assignment to a corporation, association, trust, or other successor organization which may take over the property and carry on the affairs of the Advisor; provided that, following such assignment, the persons who controlled the operations of the Advisor immediately prior to the assignment shall control the operation of the successor organization, including the performance of its duties under this Agreement, and such successor organization shall be bound by the same restrictions by which the Advisor was bound prior to such assignment. Such assignment or any other assignment of this Agreement by the Advisor shall bind the assignee hereunder in the same manner as the Advisor is bound hereunder. This Agreement shall not be assignable by the Company without the prior written consent of the Advisor, except in the case of any assignment by the Company to a corporation or other organization which is the successor to the Company, in which case such successor shall be bound hereby and by the terms of said assignment in the same manner and to the same extent as the Company is bound hereby. 18. Default, Bankruptcy, Etc. of the Advisor. At the sole option of the Company, this Agreement may be terminated immediately upon written notice of such termination from the Trustees to the Advisor if any of the following events shall have occurred: (a) the Advisor shall have violated any provision of this Agreement and, after written notice from the Trustees of such violation, shall have failed to cure such default within thirty (30) days; (b) a petition shall have been filed against the Advisor for an involuntary proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, and such petition shall not have been dismissed within ninety (90) days of filing; or a court having jurisdiction shall have appointed a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Advisor for any substantial portion of its property, or ordered the winding upon or liquidation of its affairs, and such appointment or order shall not have been rescinded or vacated within ninety (90) days of such appointment or order; or (c) the Advisor shall have commenced a voluntary proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall have made any general assignment for the benefit of creditors, or shall have failed generally to pay its debts as they became due. The Advisor agrees that, if any of the events specified in Paragraphs (b) or (c) of this Section 18 shall occur, it will give written notice thereof to the Trustees within seven (7) days following the occurrence of such event. 19. Action Upon Termination. From and after the effective date of any termination of this Agreement pursuant to Sections 16, 17 or 18 hereof, the Advisor shall be entitled to no compensation for services rendered hereunder for the then-current term of this Agreement, but shall be paid, on a pro rata basis, all compensation due for services performed prior to such termination (reduced by the amount, if any, of the Fees to be refunded by the Advisor pursuant to Section 13 hereof, which section shall apply pro rata to the applicable portion of the fiscal year in which -10- termination occurs in the event of a termination occurring at other than the end of the Company's fiscal year. Upon such termination, the Advisor immediately shall: (a) pay over to the Company all monies collected and held for the account of the Company by it pursuant to this Agreement, after deducting therefrom any accrued Fees (reduced by amounts owed by the Advisor to the Company pursuant to the last paragraph of Section 13 hereof) and reimbursements for its expenses to which it is then entitled; (b) deliver to the Trustees a full and complete accounting, including a statement showing all sums collected by it and a statement of all sums held by it for the period commencing with the date following the date on its last accounting to the Trustees; and (c) deliver to the Trustees all property and documents of the Company then in its custody or possession. The amount of Fees paid to the Advisor upon termination shall be subject to adjustment pursuant to the following mechanism. On or before the 30th day after public availability of the Company's annual audited financial statements for the fiscal year in which termination occurs, the Company shall deliver to the Advisor a Certificate reasonably acceptable to the Advisor and certified by an authorized officer of the Company setting forth (i) the Average Invested Real Estate Assets, Cash Available for Distribution to Shareholders and Funds From Operations for the Company's fiscal year ended upon the immediately preceding December 31, and (ii) the Company's computation of the Fees payable upon the date of termination (reduced by the aggregate amount of any excess expenses to be refunded pursuant to Section 13 hereof, which Section shall apply to the applicable portion of the fiscal year in which termination occurs in the event of a termination occurring at other than the end of the Company's fiscal year. If the annual Fees owed upon termination as shown in such Certificate exceed the Fees paid by the Company upon termination, the Company shall include its check for such deficit and deliver the same to the Advisor with such Certificate. If the Annual Fees owed upon termination as shown in such Certificate are less than the Fees paid by the Company upon termination, the Advisor shall remit to the Company its check in an amount equal to such difference. 20. Trustee Action. Wherever action on the part of the Trustees is contemplated by this Agreement, action by a majority of the Trustees, including a majority of the Independent Trustees, shall constitute the action provided for herein. 21. Notices. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is accepted by the party to whom it is given, and shall be given by being delivered at the following addresses to the parties hereto: If to the Company: -11- Hospitality Properties Trust 400 Centre Street Newton, MA 02158 Attention: President If to the Advisor: REIT Management & Research, Inc. 400 Centre Street Newton, MA 02158 Attention: President Such notice shall be effective upon its receipt by the party to whom it is directed. Either party hereto may at any time given notice to the other party in writing of a change of its address for purposes of this paragraph 21. 22. Amendments. The Agreement shall not be amended, changed, modified, terminated, or discharged in whole or in part except by an instrument in writing signed by each of the parties hereto, or by their respective successors or assigns, or otherwise as provided herein. 23. Successors and Assigns. This Agreement shall be binding upon any successors or permitted assigns of the parties hereto as provided herein. 24. Governing Law. The provisions of this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. 25. Captions. The captions included herein have been inserted for ease of reference only and shall not be construed to affect the meaning, construction or effect of this Agreement. 26. Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes and cancels any pre-existing agreements with respect to such subject matter. 27. Attorneys' Fees. If any legal action is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action in addition to any other relief to which it or they may be entitled. -12- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, under seal, as of the day and year first above written. ATTEST: HOSPITALITIES PROPERTIES TRUST /s/ John D. Murray By: /s/ Thomas M. O'Brien - ----------------------------- ------------------------------- Its Treasurer and Chief Financial Officer WITNESS: REIT MANAGEMENT & RESEARCH, INC. /s/ Sylvia DiGregorio By: /s/ John Popeo - ------------------------------ ------------------------------ Its Treasurer THE PROVISIONS OF SECTION 15 HEREOF ARE HEREBY AGREED TO: /s/ Gerard M. Martin - ------------------------------ Gerard M. Martin /s/ Barry M. Portnoy - ------------------------------ Barry M. Portnoy -13- EX-12 3 STATEMENT RE: COMPUTATION OF RATIOS Exhibit 12 Hospitality Properties Trust Computation of Ratio to Fixed Charges (in thousands, except ratio amounts)
For the Period February 7, For the Year For the Year 1995 ended ended (inception) to December 31, December 31, December 31, 1997 1996 1995 Income $59,153 $51,664 $11,349 Fixed Charges 15,534 5,646 5,063 ------- ------- -------- Adjusted Earnings $74,687 $57,310 $16,412 ======= ======= ======= Fixed Charges: Interest on indebtedness and amortization of deferred finance cost $15,534 $5,646 $5,063 ------- ------- ------- Total Fixed Charges $15,534 $5,646 $5,063 ======= ======= ======= Ratio of Earnings to Fixed Charges 4.81x 10.15x 3.24x ======= ======= =======
EX-23 4 CONSENTS OF EXPERTS AND COUNSEL Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation by reference in Hospitality Properties Trust's Registration Statement No. 333-43573 of our reports dated January 16, 1998 included in Hospitality Properties Trust's Form 8-K dated February 11, 1998 and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP Washington, D.C. February 12, 1998 EX-27 5 FINANCIAL DATA SCHEDULE
5 0000945394 HOSPITALITY PROPERTIES TRUST 1,000 U.S. DOLLARS YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 1 81,728 0 1,623 0 0 0 1,266,035 58,167 1,313,256 0 125,000 0 0 389 1,033,073 1,313,256 0 114,132 0 0 39,445 0 15,534 59,153 0 59,153 0 0 0 59,153 2.15 2.15
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