8-K

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934

Date of Report (Date of earliest event reported):  July 1, 2003

HOSPITALITY PROPERTIES TRUST

(Exact name of registrant as specified in its charter)

Maryland	1-11527	04-3262075
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)
400 Centre Street, Newton, Massachusetts		02458
(Address of registrant’s principal executive offices)		(Zip code)
617-964-8389
(Registrant’s telephone number, including area code)

Item 5.  Other Events.

A.  Information regarding acquisition of certain Staybridge Suites^® hotels.

On July 1, 2003, we acquired sixteen Staybridge Suites^® hotels from a subsidiary of InterContinental Hotels Group PLC (“IHG”).  Staybridge Suites^® hotels are upscale, extended stay hotels which are designed to attract business travelers and families traveling together.  Most of the accommodations at these hotels consist of one and two bedroom suites with amenities such as full kitchens, separate living rooms, Internet access and personal phone lines and voicemail.  These sixteen hotels have an aggregate of 1,960 guest suites and are located in eleven states, specifically California (2 hotels), Colorado (1 hotel), Florida (1 hotel), Georgia (2 hotels), Maryland (1 hotel), Massachusetts (2 hotels), Michigan (1 hotel), North Carolina (1 hotel), South Carolina (1 hotel), Texas (3 hotels) and Washington (1 hotel).  The average age of the sixteen hotels is approximately 3 years.

Commencing on the acquisition date, these hotels were leased to one of our subsidiaries and operated for such subsidiary’s account under a management agreement with a subsidiary of IHG.  The management agreement has an initial term expiring in 2023 and provides IHG with two 12.5 year renewal options for all, but not less than all, of the hotels.  Further, the management agreement requires that the manager escrow 5% of gross revenues at the hotels (subject to a ramp-up period) for capital expenditures and priority returns to us of $16.9 million per year plus 7.5% of gross revenues in excess of negotiated amounts.  The payment of priority returns to us is senior to the payment of the management fees to the manager.  The manager’s obligations are secured by a security deposit held by us of $16.9 million and are guaranteed by IHG until the financial results of the hotels reach certain negotiated levels.

The aggregate purchase price for these hotels was $185 million and was paid in cash.  The acquisition was funded using cash on hand and borrowings under our unsecured bank credit facility.

B.  Information regarding declaration of default of Prime Hospitality Corp.

On July 2, 2003, we issued a press release regarding notices of default to Prime Hospitality Corp.  A copy of that press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

C.  Supplementary federal income tax considerations.

The following summary of federal income tax considerations supplements and updates the more detailed descriptions of these matters appearing under the caption “Federal Income Tax Considerations” of Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2002 (our “2002 Annual Report”), and supersedes the description of these matters appearing under the caption “Supplementary federal income tax considerations” in our Current Report on Form 8-K filed on May 14, 2003.  Sullivan & Worcester LLP, Boston, Massachusetts, has rendered a legal opinion that the discussion in the portion of our 2002 Annual Report captioned “Federal Income Tax Considerations”, as supplemented by the discussion in this Part C, is accurate in all material respects and fairly summarizes the federal income tax issues discussed in

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those sections, and the opinions of counsel referred to in such portion of our 2002 Annual Report, as supplemented by the discussion in this Part C, represent Sullivan & Worcester LLP’s opinions on those subjects.  Specifically, subject to qualifications and assumptions contained in its opinions, in our 2002 Annual Report and in this Form 8-K, Sullivan & Worcester LLP has given opinions to the effect that we have been organized and have qualified as a REIT under the Internal Revenue Code of 1986, as amended (the “IRC”), for our 1995 through 2002 taxable years, and that our current investments and plan of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the IRC.

On April 28, 2003, we terminated Wyndham’s occupancy and operations of 15 Summerfield Suites by Wyndham^® hotels after a default on lease payments owed to us. We then leased these hotels to one of our taxable REIT subsidiaries.  This taxable REIT subsidiary has engaged Candlewood Management, Inc. (f/k/a Candlewood Management, LLC) to serve as the manager for these hotels. We understand from Candlewood Management, Inc. that it or its affiliate operates several “qualified lodging facilities”, within the meaning of Section 856(d)(9)(D) of the IRC, for parties unrelated to us or the taxable REIT subsidiary.  For a hotel operator to qualify as an “eligible independent contractor” within the meaning of Section 856(d)(9)(A) of the IRC, it or its affiliates must be actively engaged in the business of operating “qualified lodging facilities” for parties unrelated to us.  Although there can be no assurance in this regard, we believe that this arrangement generates rents to us that qualify as “rents from real property” under the REIT gross income tests summarized in our 2002 Annual Report, because we believe that Candlewood Management, Inc. operates enough “qualified lodging facilities”, within the meaning of Section 856(d)(9)(D) of the IRC, for parties unrelated to us or the taxable REIT subsidiary and thus qualifies as such an eligible independent contractor.  We have received an opinion of counsel that Candlewood Management, Inc. should qualify as such an eligible independent contractor, and that, although the matter is not free from doubt, it is reasonable for us to rely on such opinion for purposes of the relief provisions under the REIT gross income tests summarized in our 2002 Annual Report.

On May 12, 2003, we terminated Wyndham’s occupancy and operations of 12 Wyndham^® hotels after a default on lease payments owed to us.  We then leased these hotels to one of our taxable REIT subsidiaries. This taxable REIT subsidiary has engaged Crestline Hotels & Resorts, Inc. to serve as the manager for these hotels.  We believe that Crestline Hotels & Resorts, Inc. is actively engaged in the business of operating “qualified lodging facilities”, within the meaning of Section 856(d)(9)(D) of the IRC, for parties unrelated to us or the taxable REIT subsidiary.  Although there can be no assurance in this regard, we believe that this arrangement generates rents to us that qualify as “rents from real property” under the REIT gross income tests summarized in our 2002 Annual Report, because we believe that Crestline Hotels & Resorts, Inc. qualifies under Section 856(d)(9)(A) of the IRC as an “eligible independent contractor”.

As discussed above, on July 1, 2003, we acquired 16 Staybridge Suites^® hotels and began leasing them to one of our taxable REIT subsidiaries.  This taxable REIT subsidiary has engaged InterContinental Hotels Group Resources, Inc. to serve as the manager for these hotels pursuant to a long-term management agreement.  We believe that InterContinental Hotels Group Resources, Inc. or its affiliates are actively engaged in the business of operating “qualified lodging facilities”, within the meaning of Section 856(d)(9)(D) of the IRC, for parties unrelated to us or the taxable REIT subsidiary, and accordingly, although there can be no assurance in this

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regard, we believe that InterContinental Hotels Group Resources, Inc. qualifies as an “eligible independent contractor” under Section 856(d)(9)(A) of the IRC.

In addition, although there is no clear precedent to distinguish for federal income tax purposes among leases, management contracts, partnerships, financings, and other contractual arrangements, we believe that the leases and management agreements to which our taxable REIT subsidiaries discussed above are a party will be respected for purposes of the IRC.  Accordingly, although there can be no assurance in this regard, we expect that the rental income we receive from the taxable REIT subsidiaries will qualify as “rents from real property” under the REIT gross income tests summarized in our 2002 Annual Report.  We will also take steps to qualify for the 75% and 95% gross income tests under the relief provision described in our 2002 Annual Report, including for example attaching an applicable schedule of gross income to our federal income tax returns as required by Section 856(c)(6)(A) of the IRC.  Thus, even if the IRS or a court ultimately determines that one or more of our operators failed to operate enough “qualified lodging facilities” for others and thus failed to qualify as an eligible independent contractor, and that this failure thereby implicated our compliance with the REIT gross income tests summarized in our 2002 Annual Report, we expect we would qualify for the gross income tests’ relief provision and thereby preserve our qualification as a REIT. If this relief provision were to apply to us, we would then be subject to a penalty tax at a 100% rate on the greater of the amount by which we failed the 75% or the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year; however, based on our computations, we would expect to owe little or no penalty tax in these circumstances.

Restrictions are imposed on a taxable REIT subsidiary to ensure that it will be subject to an appropriate level of federal income taxation.  For example, if a taxable REIT subsidiary pays interest, rent, or other amounts to its affiliated REIT in an amount that exceeds what an unrelated third party would have paid in an arm’s length transaction, then the REIT generally will be subject to an excise tax equal to 100% of the excessive portion of the payment.  There can be no assurance that arrangements involving our taxable REIT subsidiaries will not result in the imposition of one or more of these restrictions or excise taxes, but we do not believe that we are or will be subject to these impositions.

WARNING REGARDING FORWARD LOOKING STATEMENTS

STATEMENTS CONTAINED IN THIS FORM 8-K THAT ARE NOT HISTORICAL FACTS ARE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND THE FEDERAL SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT BELIEFS AND EXPECTATIONS, BUT THEY ARE NOT GUARANTEED TO OCCUR.  THESE FORWARD LOOKING STATEMENTS INCLUDE THE IMPLICATIONS THAT THE OPERATIONS OF THE 16 STAYBRIDGE SUITES^® HOTELS WILL GENERATE SUFFICIENT CASH FLOWS TO PAY OUR OWNER’S PRIORITY AND THAT THE INTERCONTINENTAL HOTELS GROUP GUARANTY WILL INSURE THIS PAYMENT.  THE OPERATIONS OF THE HOTELS MAY NOT PRODUCE SUFFICIENT EARNINGS TO PAY OUR OWNER’S PRIORITY. SUCH UNEXPECTED RESULTS MAY OCCUR FOR MANY DIFFERENT REASONS, SOME OF WHICH ARE BEYOND OUR CONTROL. FOR EXAMPLE, A TERRORIST ATTACK WITHIN THE UNITED STATES OR A

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CONTINUING DECLINE IN THE U.S. TRAVEL INDUSTRY WOULD ADVERSELY AFFECT THE HOTELS’ FINANCIAL RESULTS. SIMILARLY, IHG MAY BE UNWILLING OR UNABLE TO HONOR ITS GUARANTY. THE IHG GUARANTY IS LIMITED TO $50 MILLION AND WILL EXPIRE WHEN NEGOTIATED PERFORMANCE LEVELS ARE ACHIEVED.  OUR CONTINUED QUALIFICATION AS A REIT DEPENDS ON MANY FACTORS, INCLUDING BUT NOT LIMITED TO OUR ARRANGEMENTS WITH IHG FOR THE OPERATION OF THE 16 STAYBRIDGE SUITES^® HOTELS, AND OUR INTERPRETATION OF COMPLIANCE WITH QUALIFICATION TESTS IS SUBJECT TO ALTERNATIVE INTERPRETATION BY THE INTERNAL REVENUE SERVICE.  OTHER EVENTS OR TRANSACTIONS WHICH MAY OCCUR IN THE FUTURE MAY ALSO IMPACT THESE FORWARD LOOKING STATEMENTS, SOME OF WHICH MAY BE BEYOND OUR CONTROL.  INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS CONTAINED IN THIS FORM 8-K.

Item 7.  Financial Statements and Exhibits.

Exhibits.

Exhibit Number	Description
8.1	Opinion of Sullivan & Worcester LLP as to certain tax matters. (Filed Herewith)
99.1	Press release, dated July 2, 2003. (Filed Herewith)

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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
	(Registrant)
	By:	/s/ Mark L. Kleifges
		Mark L. Kleifges
		Treasurer
Dated:  July 7, 2003

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EX-8.1

Exhibit 8.1

July 7, 2003

Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts  02458

Ladies and Gentlemen:

The following opinion is furnished to Hospitality Properties Trust, a Maryland real estate investment trust (the “Company”) to be filed with the Securities Exchange Commission (the “SEC”) as Exhibit 8.1 to the Company’s Current Report on Form 8-K (the “Form 8-K”), to be filed within one week of the date hereof, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

In connection with this opinion, we have reviewed originals or copies, certified or otherwise identified to our satisfaction, of corporate records, certificates and statements of officers and accountants of the Company and of public officials, and such other documents as we have considered relevant and necessary in order to furnish the opinion hereinafter set forth.  In doing so, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies, and the authenticity of the originals of such documents.  Specifically, and without limiting the generality of the foregoing, we have reviewed:  (i) the declaration of trust and the by-laws of the Company, each as amended and restated; (ii) the section in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 filed under the Exchange Act (the “Annual Report”) captioned “Federal Income Tax Considerations”; (iii) the section in the Form 8-K captioned “Supplementary federal income tax considerations”; (iv) the master lease agreement between HPTSHC Properties Trust (“HPTSHC”), a wholly-owned subsidiary of the Company, and HPT TRS SPES, Inc. (“HPT TRS SPES”), also a wholly-owned subsidiary of the Company, for 15 hotels formerly leased by HPTSHC to Wyndham International, Inc. or its subsidiaries (“Wyndham”) and formerly operated by Wyndham; (v) the management agreement pursuant to which these properties are operated on behalf of HPT TRS SPES by Candlewood Management, LLC; (vi) the master lease agreement between HPTWN Properties Trust (“HPTWN”), a wholly-owned subsidiary of the

Company, and HPT TRS SPES II, Inc. (“HPT TRS SPES II”), also a wholly-owned subsidiary of the Company, for 12 hotels formerly leased by HPTWN to Wyndham and formerly operated by Wyndham; (vii) the management agreement pursuant to which these properties are operated on behalf of HPT TRS SPES II by Crestline Hotels & Resorts, Inc.; (viii) the purchase and sale agreement between InterContinental Hotels Group Resources, Inc. (“IHG”) and HPT IHG Properties Trust (“HPT IHG”), a wholly-owned subsidiary of the Company, with respect to 16 hotels operated by IHG as Staybridge Suites hotels; (ix) the lease agreement between HPT IHG and HPT TRS IHG-1, Inc. (“HPT TRS IHG-1”), a wholly-owned subsidiary of the Company, with respect to these properties; (x) the management agreement pursuant to which these properties are operated on behalf of HPT TRS IHG-1 by IHG; (xi) the guaranty agreement between InterContinental Hotels Group PLC (“IHG PLC”), HPT TRS IHG-1 and the Company pursuant to which IHG PLC will guarantee certain of IHG’s obligations under the management agreement; and (xii) the guaranty agreement between the Company and IHG PLC pursuant to which the Company will guarantee certain of HPT TRS IHG-1’s obligations under the management agreement.  With respect to all questions of fact on which the opinion set forth below is based, we have assumed the accuracy and completeness of and have relied on the information set forth in the Annual Report, the Form 8-K and in the documents incorporated therein by reference, and on representations made to us by officers of the Company.  We have not independently verified such information.

The opinion set forth below is based upon the Internal Revenue Code of 1986, as amended, the Treasury Regulations issued thereunder, published administrative interpretations thereof, and judicial decisions with respect thereto, all as of the date hereof (collectively, the “Tax Laws”).  No assurance can be given that the Tax Laws will not change.  In preparing the discussions with respect to Tax Laws in the section of the Annual Report captioned “Federal Income Tax Considerations”, as supplemented by the section of the Form 8-K captioned “Supplementary federal income tax considerations”, we have made certain assumptions and expressed certain conditions and qualifications therein, all of which assumptions, conditions and qualifications are incorporated herein by reference.  With respect to all questions of fact on which our opinion is based, we have assumed the initial and continuing truth, accuracy and completeness of: (i) the information set forth in the Annual Report, the Form 8-K, and in the documents incorporated therein by reference; and (ii) representations made to us by officers of the Company or contained in the Annual Report or the Form 8-K, in each such instance without regard to qualifications such as “to the best knowledge of” or “in the belief of.”

We have relied upon, but not independently verified, the foregoing assumptions.  If any of the foregoing assumptions is inaccurate or incomplete for any reason, or if the transactions described in the Annual Report or the Form 8-K are consummated in a manner that is inconsistent with the manner contemplated therein, our opinion as expressed below may be adversely affected and may not be relied upon.

Based upon and subject to the foregoing, we are of the opinion that the discussion with respect to Tax Laws matters in the section of the Annual Report captioned “Federal Income Tax Considerations”, as supplemented by the discussion in the Form 8-K captioned “Supplementary federal income tax considerations,” in all material respects is accurate and fairly summarizes the

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Tax Laws issues addressed therein, and hereby confirm that the opinions of counsel referred to in said sections represent our opinions on the subject matter thereof.

This opinion is intended solely for the benefit and use of the Company, and is not to be used, released, quoted, or relied upon by anyone else for any purpose (other than as required by law) without our prior written consent.  We hereby consent to filing of a copy of this opinion as an exhibit to the Form 8-K, which is incorporated by reference in the Company’s Registration Statements on Form S-3 (File Nos. 333-43573, 333-89307, 333-84064) under the Securities Act of 1933, as amended (the “Act”), and to the references to our firm in the Form 8-K and such Registration Statements.  In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Act or under the rules and regulations of the SEC promulgated thereunder.

Very truly yours,

/s/ Sullivan & Worcester LLP

SULLIVAN & WORCESTER LLP

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EX-99.1

Exhibit 99.1

HPT DECLARES PRIME IN DEFAULT

Newton, MA (July 2, 2003): Hospitality Properties Trust (NYSE: HPT) today sent notices of default to Prime Hospitality Corp. (NYSE: PDQ) because Prime failed to pay rent due to HPT on July 1, 2003.

HPT owns 24 AmeriSuites Hotels (2,929 keys) located in 14 states which are leased to a subsidiary of Prime. HPT also holds a guaranty for the lease obligation. The lease and the guaranty are secured by deposits totaling $42.1 million. In addition, Prime’s obligation to maintain these hotels is partially secured by a reserve account and in which there was approximately $4.2 million on deposit on May 31, 2003. The notices of default sent by HPT earlier today state that HPT intends to retain the security and guaranty deposits and to take control of the improvement reserve account.

The rent due to HPT from Prime, net of interest previously credited to Prime on the deposits, is $1,982,900/month.

Prime’s management and franchise arrangements for these 24 hotels are subordinated to the lease obligations to HPT. Accordingly, HPT has the right to install a new manager and to re-brand these hotels. HPT intends to meet with Prime in the near future and it has not determined whether to change the management of these hotels or their brand.

Hospitality Properties Trust is a real estate investment trust headquartered in Newton, Massachusetts, which owns 267 hotels located throughout the United States.

WARNING REGARDING FORWARD LOOKING STATEMENTS

THIS PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND THE FEDERAL SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON HPT’S PRESENT BELIEFS AND EXPECTATIONS BUT THEY ARE NOT GUARANTEED TO OCCUR. FOR EXAMPLE:

•THIS PRESS RELEASE STATES THAT HPT HAS NOTIFIED PRIME THAT PRIME IS IN DEFAULT OF ITS LEASE OBLIGATIONS, THAT HPT WILL RETAIN THE SECURITY AND GUARANTY DEPOSITS WHICH HPT HOLDS AND THAT HPT INTENDS TO TAKE CONTROL OF THE IMPROVEMENT RESERVE ACCOUNT FOR THE 24 AMERISUITES HOTELS. HOWEVER, PRIME MAY ASSERT THAT IT IS NOT IN DEFAULT OR THAT IT CAN CURE THE DEFAULT AND THAT HPT MAY NOT RETAIN DEPOSITS OR CONTROL THE IMPROVEMENT RESERVE ACCOUNT. ALSO, THE IMPROVEMENT RESERVE ACCOUNT IS DEPOSITED IN A FINANCIAL INSTITUTION WHICH MAY REFUSE TO ACCEPT HPT’S CONTROL OF THIS ACCOUNT.

•THIS PRESS RELEASE IMPLIES THAT THE DEPOSITS AND THE RESERVE ACCOUNT MAY BE SUFFICIENT TO COMPENSATE HPT FOR LOST RENT OR OTHER DAMAGES HPT MAY INCUR AS A RESULT OF PRIME’S DEFAULT. HOWEVER, HPT HAS NOT ESCROWED THE SECURITY AND GUARANTY

DEPOSITS; AND, ACCORDINGLY, HPT’S RETAINING THESE DEPOSITS WILL RELIEVE HPT OF ITS REPAYMENT OBLIGATIONS BUT IT WILL NOT PROVIDE CASH TO HPT. ALSO, THE DAMAGES WHICH HPT MAY INCUR MAY BE GREATER THAN THESE DEPOSITS AND THOSE EXCESS DAMAGES MAY NOT BE COLLECTABLE FROM PRIME OR OTHERWISE. SIMILARLY, THE IMPROVEMENT RESERVE ACCOUNT MAY BE INSUFFICIENT TO PAY FOR NECESSARY REPAIRS AT THE 24 HOTELS.

•THIS PRESS RELEASE STATES THAT HPT INTENDS TO MEET WITH PRIME AND IMPLIES THAT A SETTLEMENT OF THE DEFAULT MAY BE NEGOTIATED. PRIME MAY REFUSE TO MEET WITH HPT AND, IF A MEETING DOES OCCUR, HPT AND PRIME MAY BE UNABLE TO REACH A SETTLEMENT OF THE DEFAULT.

•THIS PRESS RELEASE STATES THAT HPT MAY CHANGE THE MANAGEMENT AND BRAND OF THESE 24 HOTELS. PRIME MAY DISPUTE HPT’S RIGHT TO MAKE THESE CHANGES. ALSO, IT IS POSSIBLE THAT HPT MAY DECIDE NOT TO CHANGE THE MANAGEMENT OR BRAND OF THESE HOTELS AS A RESULT OF NEGOTIATIONS WITH PRIME OR FOR OTHER REASONS.

PRIME’S DEFAULT AND THE ACTIONS TAKEN BY HPT IN RESPONSE TO THIS DEFAULT MAY RESULT IN LITIGATION BETWEEN HPT AND PRIME. DISCOVERY DURING LITIGATION AND DECISIONS BY COURTS AND JURIES MAY CAUSE RESULTS WHICH ARE DIFFERENT FROM WHAT HPT NOW EXPECTS; AND LITIGATION MAY BE EXPENSIVE. FOR ALL OF THE FOREGOING REASONS, INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE.

Investor Relations: 888-HPT-0321

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