-----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, WIARJhQ/tsP5Jw273LMFKxU5QsEVA/8HWtYMADbJGaCuSW4Yn+YasdiLPeJ964f6 dP1Syh/4GeYdL2ABJLVpGg== 0001104659-05-036432.txt : 20050804 0001104659-05-036432.hdr.sgml : 20050804 20050804150209 ACCESSION NUMBER: 0001104659-05-036432 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050804 DATE AS OF CHANGE: 20050804 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11527 FILM NUMBER: 05999089 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 10-Q 1 a05-12641_110q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-11527

HOSPITALITY PROPERTIES TRUST

Maryland		04-3262075
(State of Organization)		(IRS Employer Identification No.)

400 Centre Street, Newton, Massachusetts 02458

617-964-8389

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b–2 of the Exchange Act).
Yes ý No o

Number of registrant’s common shares of beneficial interest, $0.01 par value per share, outstanding as of August 4, 2005: 71,904,728

HOSPITALITY PROPERTIES TRUST

FORM 10-Q

June 30, 2005

INDEX

		Page
PART I	Financial Information (Unaudited)

	Item 1. Financial Statements
	Consolidated Balance Sheet – June 30, 2005 and December 31, 2004	3

	Consolidated Statement of Income – Three and Six Months Ended June 30, 2005 and 2004	4

	Consolidated Statement of Cash Flows – Six Months Ended June 30, 2005 and 2004	5

	Notes to Consolidated Financial Statements	6

	Item 2.
	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8

	Item 3.
	Quantitative and Qualitative Disclosures About Market Risk	20

	Item 4.
	Controls and Procedures	21

	Warning Concerning Forward Looking Statements	22

	Statement Concerning Limited Liability	22

PART II	Other Information

	Item 2.
	Unregistered Sales of Equity Securities and Use of Proceeds	23

	Item 4
	Submission of Matters to a Vote of Security Holders	23

	Item 6.
	Exhibits	23

	Signatures	24

References in this Form 10-Q to the “Company”, “HPT”, “we”, “us” or “our” include Hospitality Properties Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

PART I Financial Information

Item 1. Financial Statements

HOSPITALITY PROPERTIES TRUST

CONSOLIDATED BALANCE SHEET

(dollars in thousands, except share data)

	June 30, 2005			December 31, 2004
	(Unaudited)
ASSETS

Real estate properties, at cost:
Land	$	503,250		$	460,748
Buildings, improvements and equipment	3,090,248			2,720,242
	3,593,498			3,180,990
Accumulated depreciation	(571,520		)	(556,517		)
	3,021,978			2,624,473
Cash and cash equivalents	10,065			15,894
Restricted cash (FF&E Reserve escrow)	37,421			38,511
Other assets, net	23,495			10,547
	$	3,092,959		$	2,689,425

LIABILITIES AND SHAREHOLDERS’ EQUITY

Revolving credit facility	$	—		$	72,000
Senior notes, net of discounts	921,361			621,679
Mortgage payable	3,796			3,826
Security deposits	185,304			175,304
Accounts payable and other liabilities	93,553			77,782
Due to affiliate	2,958			2,661
Dividends payable	1,914			50,300
Total liabilities	1,208,886			1,003,552

Commitments and contingencies

Shareholders’ equity:
Preferred shares of beneficial interest, no par value, 100,000,000 shares authorized:
Series B preferred shares; 8 7/8% cumulative redeemable; 3,450,000 shares issued and outstanding, aggregate liquidation preference $86,250	83,306			83,306
Common shares of beneficial interest; $0.01 par value; 100,000,000 shares authorized, 71,904,728 and 67,203,228 issued and outstanding, respectively	719			672
Additional paid-in capital	2,059,185			1,859,936
Cumulative net income	1,132,286			1,081,169
Cumulative preferred distributions	(55,508		)	(51,680		)
Cumulative common distributions	(1,335,915		)	(1,287,530		)
Total shareholders’ equity	1,884,073			1,685,873
	$	3,092,959		$	2,689,425

The accompanying notes are an integral part of these financial statements.

HOSPITALITY PROPERTIES TRUST

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004

Revenues:
Hotel operating revenues	$	181,059		$	125,846		$	326,106		$	241,919
Rental income	31,890			32,378			62,955			65,014
FF&E reserve income	4,838			4,882			9,237			9,340
Interest income	294			125			530			269
Total revenues	218,081			163,231			398,828			316,542

Expenses:
Hotel operating expenses	132,344			86,486			232,769			164,320
Interest (including amortization of deferred financing costs of $945, $686, $1,679 and $1,372, respectively)	17,591			12,406			33,020			25,245
Depreciation and amortization	31,639			28,749			62,462			57,445
General and administrative	6,796			4,807			12,160			9,207
Loss on asset impairment	7,300			—			7,300			—
Total expenses	195,670			132,448			347,711			256,217

Income before gain on sale of real estate	22,411			30,783			51,117			60,325
Gain on sale of real estate	—			203			—			203

Net income	22,411			30,986			51,117			60,528
Preferred distributions	(1,914		)	(2,151		)	(3,828		)	(5,846		)
Excess of liquidation preference over carrying value of Series A preferred shares	—			—			—			(2,793		)
Net income available for common shareholders	$	20,497		$	28,835		$	47,289		$	51,889

Weighted average common shares outstanding	68,357			67,188			67,783			65,802

Basic and diluted earnings per common share:
Net income available for common shareholders	$	0.30		$	0.43		$	0.70		$	0.79

The accompanying notes are an integral part of these financial statements.

HOSPITALITY PROPERTIES TRUST

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(in thousands)

	Six Months Ended June 30,
	2005			2004

Cash flows from operating activities:
Net income	$	51,117		$	60,528
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	62,462			57,445
Amortization of deferred financing costs as interest	1,679			1,372
Non-cash income	(1,476		)	(1,476		)
FF&E reserve income and deposits	(15,289		)	(14,540		)
Gain on sale of real estate	—			(203		)
Loss on asset impairment	7,300			—
Changes in assets and liabilities:
(Increase) decrease in other assets	(3,582		)	1,533
Increase in accounts payable and other	5,860			2,973
Increase (decrease) in due to affiliate	297			(104		)
Cash provided by operating activities	108,368			107,528

Cash flows from investing activities:
Real estate acquisitions	(428,954		)	—
FF&E reserve fundings	(14,111		)	(6,024		)
Increase in security deposits	10,000			—
Proceeds from sale of real estate	—			7,750
Cash (used in) provided by investing activities	(433,065		)	1,726

Cash flows from financing activities:
Proceeds from issuance of common shares, net	199,233			192,684
Proceeds from issuance of senior notes	299,442			—
Redemption of Series A preferred shares	—			(75,000		)
Draws on revolving credit facility	243,000			186,000
Repayments of revolving credit facility	(315,000		)	(317,000		)
Distributions to common shareholders	(96,771		)	(93,437		)
Distributions to preferred shareholders	(3,828		)	(5,846		)
Deferred finance costs paid	(7,208		)	(2		)
Cash provided by (used in) financing activities	318,868			(112,601		)
Decrease in cash and cash equivalents	(5,829		)	(3,347		)
Cash and cash equivalents at beginning of period	15,894			6,428
Cash and cash equivalents at end of period	$	10,065		$	3,081

Supplemental cash flow information:
Cash paid for interest	$	25,623		$	23,860
Non-cash operating activities:
Property transferred in lease default	$	—		$	4,920
Non-cash investing activities:
Property managers’ deposits in FF&E reserve	$	13,377		$	12,953
Purchases of fixed assets with FF&E reserve	(22,423		)	(22,330		)
Non-cash financing activities:
Issuance of common shares	$	63		$	55

The accompanying notes are an integral part of these financial statements.

HOSPITALITY PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Note 1. Basis of Presentation

The accompanying consolidated financial statements of Hospitality Properties Trust and its subsidiaries have been prepared without audit. Certain information and footnote disclosures required by generally accepted accounting principles for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying financial statements should be read in conjunction with the financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2004. In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included. Certain reclassifications have been made to the 2004 financial statements to conform to the 2005 presentation. All intercompany transactions and balances between Hospitality Properties Trust and its subsidiaries have been eliminated. Our operating results for interim periods and those of our managers and tenants are not necessarily indicative of the results that may be expected for the full year.

Note 2. Revenue Recognition

We report hotel operating revenues for managed hotels in our consolidated statement of income. Hotel operating revenues, consisting primarily of room sales and sales of food, beverages and communication services, are generally recognized when services are performed. Our rights to share in the operating results of our managed hotels in excess of minimum returns due to us are generally determined based upon annual calculations. Hotel operating income in excess of the minimum returns due to us under our management agreements is recognized when all contingencies are met and the income is earned. Deferred hotel operating income was $6,302 and $8,151 for the three and six months ended June 30, 2005, respectively, compared with $1,013 and $2,463 for the three and six months ended June 30, 2004, respectively.

We recognize rental income from operating leases on a straight line basis over the life of the lease agreements. Percentage rent is recognized when all contingencies are met and rent is earned. Deferred percentage rent was $967 and $1,887 for the three and six months ended June 30, 2005, respectively, compared with $667 and $1,267 for the three and six months ended June 30, 2004, respectively.

We own all the FF&E reserve escrows for hotels leased to our taxable REIT subsidiaries, or TRSs. Some of our third party leases provide that FF&E reserve escrows are owned by us. One third party lease provides that the FF&E reserve escrow is owned by the tenant and we have a security and remainder interest in that escrow account. When we own the escrow account, payments by our third party tenants into the escrow are reported by us as FF&E reserve income. When we have a security and remainder interest in the escrow account, tenant deposits are not included in revenue.

Note 3. Shareholders’ Equity

On January 18, 2005 and April 15, 2005, we paid a $0.5546875 per share distribution to our Series B preferred shareholders. On June 1, 2005, we declared a $0.5546875 per share distribution to Series B preferred shareholders of record on June 30, 2005. This amount was paid on July 15, 2005.

On January 31, 2005 and May 19, 2005, we paid a $0.72 per share distribution to our common shareholders for the quarters ended December 31, 2004 and March 31, 2005. On July 7, 2005, we declared a distribution of $0.72 per share to common shareholders of record on July 21, 2005, for the quarter ended June 30, 2005. We plan to pay this amount on or about August 18, 2005.

On June 5, 2005, we sold 4,500,000 of our common shares at a price of $44.39 per share in a public offering. On June 24, 2005, we sold an additional 200,000 common shares at a price of $44.39 pursuant to an over allotment option granted to the underwriters. Net proceeds from both these sales, after underwriting and other offering expenses, were $199,233. We used these proceeds to reduce borrowings outstanding under our revolving credit facility.

Note 4. Indebtedness

On February 15, 2005, we issued $300,000 of 5.125% senior notes due 2015. Net proceeds after underwriting and other offering expenses were $297,048.

On May 23, 2005, we amended and restated our unsecured revolving credit facility to increase the maximum borrowing amount from $350,000 to $750,000 and to extend the maturity date to June 2009. Our amended and restated credit facility includes provisions whereby the maturity date may be extended by one year upon payment of an additional fee and the maximum borrowing may be expanded to up to $1,500,000 in certain circumstances. Several additional amendments were made to the terms of our credit facility. Interest paid on drawings under the credit facility were reduced from LIBOR plus 135 basis points to LIBOR plus 80 basis points, subject to adjustments based on changes to our credit ratings. Certain financial and other covenants in the credit facility were also amended to reflect current market conditions. As of June 30, 2005, we had zero outstanding on our credit facility and $750,000 available to be drawn for acquisitions and general business purposes.

Note 5. Real Estate Properties

We purchased 12 hotels on February 16, 2005 and an additional hotel on May 31, 2005, from InterContinental Hotels Group, plc, or InterContinental, for $425,000, and simultaneously entered into a long term management agreement for 12 of the hotels and a long term lease for one hotel with InterContinental. We are obtaining valuations of certain of the acquired assets and we may change our initial purchase price allocation as a result of such valuations. Pursuant to the terms of these agreements our annual minimum returns and rents increased by $34,713.

During the six months ended June 30, 2005, we also provided $4,111 of funding for planned tenant improvements to certain of our hotels, which resulted in a $411 increase in our annual minimum returns and rents.

Note 6. Management Agreements

In October 2004, Blackstone Group, or Blackstone, acquired Prime Hospitality Corporation, or Prime, and in January 2005, Blackstone sold Prime’s AmeriSuites^® brand to Hyatt Corporation, or Hyatt. As part of its AmeriSuites^® acquisition, Hyatt acquired the rights and obligations under our management agreement covering 36 hotels (24 AmeriSuites^® and 12 Prime Hotels^SM) previously managed by Prime. On April 4, 2005, we entered into new management agreements with subsidiaries of Hyatt and Carlson Hotels Worldwide, or Carlson, with respect to this portfolio of 36 hotels. The new management agreements split the previous management agreement we had with Prime into two: one with Hyatt for 24 limited service AmeriSuites^® and one with Carlson for the 12 Prime Hotels^SM. The economic terms of the new management agreements on a combined basis are unchanged from the previous management agreement with Prime, but, because the two management agreements each include a smaller number of hotels and are less diverse, certain security features, including guarantees from Hyatt and Carlson, have been changed. The new management agreements have limited guarantees from Hyatt and Carlson of $50,000 and $40,000, respectively.

During the second quarter of 2005, 11 of our Prime Hotels^SM were rebranded with Carlson brands, including Radisson Hotels & Resorts^®, Country Inn & Suites by Carlson^SM and Park Plaza^® Hotels & Resorts. In June 2005, we authorized Carlson to pursue the sale of our remaining Prime Hotel^SMlocated in Atlanta, GA. In connection with this decision we recorded a $7,300 loss on asset impairment to reduce the carrying value of the hotel to its estimated net realizable value less cost to sell. Under the terms of our management agreement with Carlson the annual minimum return due to us for the combination of our hotels managed by Carlson will be reduced by an amount equal to 7% of the net proceeds we realize from the sale of the hotel. We are presently in discussions with Carlson regarding the purchase of a replacement property for this combination.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollar amounts in thousands, except per share amounts)

Overview

The following information should be read in conjunction with financial statements and accompanying notes thereto included in this quarterly report and with our Annual Report on Form 10-K for the year ended December 31, 2004.

Hotel Industry Conditions

During 2004 and the first half of 2005, the U.S. hotel industry benefited from an expanding economy and limited new hotel supply. For the first half of 2005, nine of our ten combinations of hotels reported increases in revenue per available room, or RevPAR; however, our hotels’ profitability generally remained below 2000 levels. All of our operating agreements and leases contain security features, such as security deposits and, in certain instances, guarantees, which are intended to protect payments of owner’s priority returns and minimum rents to us. However, the effectiveness of these various security features to provide uninterrupted payments to us is not assured. If any of our hotel operators, tenants or guarantors default in their payment obligations to us, our revenues and cash flows may decline and our ability to continue to pay dividends may be jeopardized.

2005 Developments

On December 17, 2004, we agreed to purchase 13 hotels from InterContinental for $450,000. The hotels include four full service InterContinental^® hotels, four full service Crowne Plaza^® hotels, three full service Holiday Inn^® hotels and two extended stay Staybridge Suites^® hotels, and have a total of 3,946 rooms/suites and approximately 164,000 square feet of meeting rooms. The hotels are located in six states in the United States; one InterContinental^® hotel and one Staybridge Suites^® hotel are located in Toronto, Canada; and one InterContinental^® hotel is located in San Juan, Puerto Rico. The $450,000 purchase price includes $25,000 which we have agreed to pay during the three years following the closing in connection with certain improvements to the hotels. On February 16, 2005, we completed the acquisition of 12 of the 13 hotels. On May 31, 2005, we completed the purchase of the final InterContinental hotel.

Simultaneously with our purchase of these hotels, we entered a long term combination management agreement for 12 of the hotels and a long term lease for one hotel, the InterContinental hotel in San Juan, Puerto Rico, with subsidiaries of InterContinental. The combined annual amount payable to us for all 13 hotels as owner’s priority return under the management agreement and base rent under the lease is $37,750 in 2005, increases to $40,725 in 2006 and increases to approximately $42,000 after the full $450,000 purchase price has been paid. In addition, we are entitled to receive cash flow remaining after base and incentive management fees are paid to InterContinental at the managed hotels and, starting in 2007, a percentage of increases in gross revenues over a threshold at each of the hotels. The owner’s priority return under the management agreement and the base rent under the lease are measured and payable in U.S. dollars. Other amounts due under these agreements, with respect to the two hotels located in Canada, may be measured in Canadian dollars, but will be payable in U.S. dollars. The management agreement and the lease each extend through 2029, and InterContinental has two all or none renewal options for 15 years each. The obligations to pay owner’s priority return under the management agreement and the base rent under the lease are supported by a limited, partial guaranty from InterContinental until the operations at these hotels reach negotiated levels. Further, the obligation to pay the owner’s priority return under the management agreement is also supported by a limited, partial guaranty from the InterContinental subsidiary tenant for the Puerto Rico hotel. The agreements also provide for a reserve for capital expenditures starting in 2007.

In October 2004, Blackstone acquired Prime and in January 2005, Blackstone sold Prime’s AmeriSuites^® brand to Hyatt. As part of its AmeriSuites^® acquisition, Hyatt acquired the rights and obligations under our management agreement covering 36 hotels (24 AmeriSuites^® and 12 Prime Hotels^SM) previously managed by Prime. On April 4, 2005, we entered into new management agreements with subsidiaries of Hyatt and Carlson with respect to this portfolio

of 36 hotels. The new management agreements split the previous management agreement we had with Prime into two: one with Hyatt for 24 limited service AmeriSuites^® and one with Carlson for the 12 Prime Hotels^SM. The economic terms of the new management agreements on a combined basis are unchanged from the previous management agreement with Prime, but, because the two management agreements each include a smaller number of hotels and are less diverse, certain security features, including guarantees from Hyatt and Carlson, have been changed. The new management agreements have limited guarantees from Hyatt and Carlson of $50,000 and $40,000, respectively.

Management Agreements and Leases

At June 30, 2005, each of our 298 hotels was included in one of ten combinations of hotels of which 189 are leased to our TRSs and managed by an independent hotel operating company, and 109 are leased to third parties. Our consolidated statement of income includes hotel operating revenues and expenses of managed hotels and rental income from our leased hotels. Additional information regarding the terms of our management agreements and leases is included in the table on pages 17 and 18.

Results of Operations (dollar amounts in thousands, except per share amounts)

Three Months Ended June 30, 2005 versus 2004

	For the three months ended June 30,
	2005		2004		Increase (Decrease)			% Increase (Decrease)
	(amounts in dollars, except number of shares)
Revenues:
Hotel operating revenues	$	181,059	$	125,846	$	55,213		43.9	%
Rental income	31,890		32,378		(488		)	(1.5	)%
FF&E reserve income	4,838		4,882		(44		)	(0.9	)%
Interest income	294		125		169			135.2	%

Expenses:
Hotel operating expenses	132,344		86,486		45,858			53.0	%
Interest expense	17,591		12,406		5,185			41.8	%
Depreciation and amortization	31,639		28,749		2,890			10.1	%
General and administrative	6,796		4,807		1,989			41.4	%
Loss on asset impairment	7,300		—		7,300			—

Net income	22,411		30,986		(8,575		)	(27.7	)%
Net income available for common shareholders	20,497		28,835		(8,338		)	(28.9	)%
Weighted average shares outstanding	68,357		67,188		1,169			1.7	%
Net income available for common shareholders per common share	$	0.30	$	0.43	$	(0.13	)	(30.2	)%

The increases in hotel operating revenues and expenses were caused by the increase in the number of managed hotels in 2005 due to: (i) our February and May 2005 acquisitions of 12 hotels and the initiation of a management agreement for these hotels; (ii) the change of seven hotels under our agreement with Marriott International, Inc., or Marriott, from

leased to managed hotels in June 2004; and (iii) the general increase in hotel revenues due to improving lodging industry conditions during 2005.

Pro forma hotel operating revenues of our 189 managed hotels, which includes revenues for periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties, were $183,308 for the three months ended June 30, 2005, an increase of 8.1% from pro forma hotel operating revenues of $169,554 for the three months ended June 30, 2004. The increase in revenues is attributable primarily to the strengthening lodging market that has resulted in improved occupancy and average daily room rate at many of our hotels offset by lower revenues at our former Prime Hotels^SM. As described above, we transferred operating responsibility for our Prime Hotels^SM to Carlson on April 4, 2005, and 11 of these 12 hotels were rebranded with Carlson brands during the second quarter of 2005.

Pro forma hotel operating expenses of our managed hotels, which includes expenses for periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties, were $123,503 for the three months ended June 30, 2005, an increase of 4.5% from pro forma hotel operating expenses of $118,233 for the three months ended June 30, 2004. This increase is due primarily to increased labor costs.

Certain of our managed hotels had net operating results that were $336 less than the minimum returns due to us in the three months ended June 30, 2004. This amount was reflected in our consolidated statement of income as a net reduction to hotel operating expenses in that period because the minimum returns were funded by our managers. In the second quarter of 2005, all our managed hotel combinations had net operating results that were more than the minimum returns due to us.

The decrease in rental income is primarily a result of the elimination of $2,105 of minimum rent for seven hotels under our agreement with Marriott which were previously leased but are now managed for our account. This decrease was partially offset by the initiation of a new lease for our hotel in San Juan, Puerto Rico on February 16, 2005, and increased rental income resulting from our funding of improvements at certain of our leased hotels in 2005 and 2004.

FF&E reserve income represents amounts paid by our tenants into restricted accounts owned by us, the purpose of which is to accumulate funds for future capital expenditures. The terms of our leases require these amounts to be calculated as a percentage of total sales at our hotels. The decrease in FF&E reserve income is primarily due to seven Marriott hotels which were changed from leased to managed hotels in June 2004. This decrease was partially offset by increased levels of hotel sales in the second quarter of 2005 versus the same period in 2004 for our leased hotels. The amounts which are escrowed as FF&E reserves for our managed hotels and for leased hotels where the FF&E reserve is owned by our tenants are not reported as FF&E reserve income in our consolidated statement of income.

The increase in interest income is due to higher average balances and interest rates during the three months ended June 30, 2005.

The increase in interest expense is primarily due to higher average borrowings and a higher weighted average interest rate during the three months ended June 30, 2005.

The increase in depreciation and amortization is due principally to the depreciation of 12 hotels acquired on February 16, 2005 and the hotel acquired on May 31, 2005 and the impact of the purchases in 2005 and 2004 of depreciable assets with funds from FF&E reserve accounts owned by us. This is offset to some extent by the sale of one hotel in April 2004 and the retirement of fully depreciated assets of $31,525 and $15,064, in the three months ended March 31, 2005, and June 30, 2005, respectively and $50,619 throughout 2004.

The increase to general and administrative expense is due principally to the impact of additional hotel investments during 2005 and higher incentive fees during the three months ended June 30, 2005, compared to the same period in 2004.

As described above, we recorded a $7,300 loss on asset impairment to reduce the carrying value of our Prime Hotel^SM in Atlanta, GA to its realizable value less cost to sell in the 2005 second quarter.

We recorded a $203 gain on the sale of a Summerfield Suites hotel located in Buckhead, GA in the 2004 second quarter.

The decreases in net income and net income available for common shareholders are primarily due to the investment and operating activity discussed above. The decrease in net income available for common shareholders per common share was primarily a result of the investment and operating activity described above and the issuance of 4.7 million common shares in the second quarter of 2005.

Six Months Ended June 30, 2005 versus 2004

	For the six months ended June 30,
	2005		2004		Increase (Decrease)			% Increase (Decrease)
	(amounts in dollars, except number of shares)
Revenues:
Hotel operating revenues	$	326,106	$	241,919	$	84,187		34.8	%
Rental income	62,955		65,014		(2,059		)	(3.2	)%
FF&E reserve income	9,237		9,340		(103		)	(1.1	)%
Interest income	530		269		261			97.0	%

Expenses:
Hotel operating expenses	232,769		164,320		68,449			41.7	%
Interest expense	33,020		25,245		7,775			30.8	%
Depreciation and amortization	62,462		57,445		5,017			8.7	%
General and administrative	12,160		9,207		2,953			32.1	%
Loss on asset impairment	7,300		—		7,300			—

Net income	51,117		60,528		(9,411		)	(15.5	)%
Net income available for common shareholders	47,289		51,889		(4,600		)	(8.9	)%
Weighted average shares outstanding	67,783		65,802		1,981			3.0	%
Net income available for common shareholders per common share	$	0.70	$	0.79	$	(0.09	)	(11.4	)%

Pro forma hotel operating revenues of our 189 managed hotels, which includes revenues for periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties, were $347,166 for the first six months of 2005, an increase of 6.8% from pro forma hotel operating revenues of $324,962 for the first six months of 2004. The increase in revenues is attributable primarily to the strengthening lodging market that has resulted in improved occupancy and average daily room rate at many of our hotels offset by lower revenues at our Prime Hotels^SM. As described above, we transferred operating responsibility for our former Prime Hotels^SM to Carlson on April 4, 2005, and 11 of these 12 hotels were rebranded with Carlson brands during the second quarter of 2005.

Pro forma hotel operating expenses of our managed hotels, which includes expenses for periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties, were $240,364 for the first six months of 2005, an increase of 3.0% from pro forma hotel operating expenses of $233,344 for the first six months of 2004. This increase is due primarily to increased labor costs.

Certain of our managed hotels had net operating results that were $267 and $4,610 less than the minimum returns due to us in the six months ended June 30, 2005 and 2004, respectively. These amounts have been reflected in our consolidated

statement of income as net reductions to hotel operating expenses in these periods because the minimum returns were funded by our managers.

The decrease in rental income is primarily a result of the elimination of $4,530 of minimum rent for seven hotels under our agreement with Marriott which were previously leased but are now managed for our account. This decrease was partially offset by the initiation of a new lease for our hotel in San Juan, Puerto Rico on February 16, 2005, and increased rental income resulting from our funding of improvements at certain of our leased hotels in 2005 and 2004.

The decrease in FF&E reserve income is primarily due to seven Marriott hotels which were changed from leased to managed hotels in June 2004. This decrease was partially offset by increased levels of hotel sales in the first six months of 2005 versus the same period in 2004 for our leased hotels.

The increase in interest income is due to higher average balances and interest rates during the six months ended June 30, 2005.

The increase in interest expense is primarily due to higher average borrowings and a higher weighted average interest rate during the six months ended June 30, 2005.

The increase to general and administrative expense is due principally to the impact of additional hotel investments in 2005 and higher incentive fees during the six months ended June 30, 2005, compared to the same period in 2004.

We recorded a $203 gain on the sale of a Summerfield Suites hotel located in Buckhead, GA in the 2004 second quarter.

We recorded a $2,793 reduction to income available to common shareholders arising from our redemption of our Series A preferred shares during the first quarter of 2004, which amount reflects the excess of the redemption payments over the carrying value of these preferred shares before their redemption.

The decrease in net income is primarily due to the investment and operating activity discussed above. The increases in net income available for common shareholders and net income available for common shareholders per common share was primarily a result of the investment and operating activity described above and the reduction in 2005 of preferred dividends and the preferred share redemption costs due to the redemption of our Series A preferred shares in April 2004. On a per share basis, the percentage increase was lower due to our issuance of 4.7 million common shares in the second quarter of 2005.

Liquidity and Capital Resources (dollar amounts in thousands, except per share amounts)

Our Managers and Tenants

As of June 30, 2005, all 298 of our hotels are operated under management agreements or leases with unrelated third party hotel operating companies. All costs of operating and maintaining our hotels are paid by the third party hotel managers as agent for us or by third party hotel tenants for their own account. These third parties derive their funding for hotel operating expenses, FF&E reserves, and returns and rents due us generally from hotel operating revenues and, to the extent that these parties fund our returns and minimum rents, from their separate resources.

We define coverage for each of our combination hotel management agreements or leases as total hotel sales minus all expenses which are not subordinated to minimum payments to us and the required FF&E reserve contributions, divided by the minimum payments due to us under each agreement. More detail regarding coverage, guarantees and other security features of our ten agreements is presented in the table on pages 17 and 18. Assuming our operating agreements as of June 30, 2005, had been in place during the twelve months ended June 30, 2005, six hotel combinations, representing 138 hotels, generated coverage using historical operating results of at least 1.0x. The remaining four combinations, representing 160 hotels, generated coverages using historical operating results of .81x to .95x.

Many of our hotels are operated under management agreements or leases which are subject to full or limited guarantees. These guarantees may provide us with continued payments if combined total hotel sales less total hotel expenses and required FF&E reserve payments fail to equal or exceed amounts due to us. Our managers and tenants or their affiliates may also supplement cash flow from our hotels in order to make payments to us and preserve their rights to continue operating our hotels. Guarantee or supplemental payments to us, if any, made under any of our management agreements or leases, do not subject us to repayment obligations but, under some of our agreements, these guarantee or supplemental payments may be recovered by the third party operator or tenant from the future cash flows from our hotels after our future minimum returns and rents are paid.

As of June 30, 2005, all payments due, including those payments due under leases or operating agreements whose hotels have generated less than 1.0x coverage during the last twelve months, are current. However, the effectiveness of our various security features to provide uninterrupted payments to us is not assured, particularly if the profitability of our hotels continues at the current level for an extended period. If any of our hotel operators, tenants or guarantors default in their payment obligations to us, our revenues and cash flows may decline.

Our Operating Liquidity and Capital Resources

Our principal source of funds for current expenses and distributions to shareholders are minimum returns from our managed hotels and minimum rents from our leased properties. We receive minimum returns and minimum rents from our managers and tenants monthly. We receive our share of the operating profits of our managed hotels in excess of minimum returns and percentage rents either monthly or quarterly. This flow of funds has historically been sufficient for us to pay our operating expenses, interest and distributions. We believe that our operating cash flow will be sufficient to meet our operating expenses, interest and distribution payments for the foreseeable future.

We maintain our status as a real estate investment trust, or REIT, under the Internal Revenue Code by meeting certain requirements. As a REIT, we do not expect to pay federal income taxes on the majority of our income. Federal legislation known as the REIT Modernization Act, or the RMA, became effective on January 1, 2001. The RMA, among other things, allows a REIT to lease hotels to a TRS if the hotel is managed by an independent third party. The income realized by our TRS in excess of the rent it pays to us is subject to income tax at corporate tax rates. As, and if, the financial performance of the hotels operated for the account of our TRS improves, these taxes may become material, but these anticipated taxes are not material to our consolidated financial results at this time. Also, the income we receive from our hotels in Canada and Puerto Rico is subject to taxes in those jurisdictions.

Our Investment and Financing Liquidity and Resources

Various percentages of total sales at most of our hotels are escrowed as FF&E reserves. As of June 30, 2005, there was approximately $38,424 on deposit in these escrow accounts, of which $37,421 was held directly by us and reflected on our balance sheet as restricted cash. The remaining $1,003 is held in an account owned by one of our tenants and is not reflected on our balance sheet; but we have security and remainder interests in the account owned by this tenant. During the six months ended June 30, 2005, $14,301 was contributed to these accounts and $22,879 was spent from these accounts to renovate and refurbish our hotels.

In order to fund acquisitions and to meet cash needs that may result from timing differences between the receipt of rents and returns and our desire or need to make distributions or pay operating expenses, we maintain a revolving credit facility with a group of commercial banks. On May 23, 2005, we amended and restated our unsecured revolving credit facility to increase the maximum borrowing amount from $350,000 to $750,000 and to extend the maturity date to June 2009. Our amended and restated credit facility includes provisions whereby the maturity date may be extended by one year upon payment of an additional fee and the maximum borrowing may be expanded to up to $1,500,000 in certain circumstances. Several additional amendments were made to the terms of our credit facility. Interest paid on drawings under the credit facility were reduced from LIBOR plus 135 basis points to LIBOR plus 80 basis points, subject to adjustments based on changes to our credit ratings. Certain financial and other covenants in the credit facility were also amended to reflect current market conditions. As of June 30, 2005, we had zero outstanding on our credit facility and $750,000 available to be drawn for acquisitions and general business purposes. Funds may be drawn, repaid and redrawn until maturity, and no principal repayment is due until maturity.

At June 30, 2005, we had $10,065 of cash and cash equivalents and $750,000 available on our revolving credit facility. We expect to use existing cash balances, borrowings under our credit facility or net proceeds of offerings of equity or debt securities to fund future property acquisitions.

As described above, on December 17, 2004, we announced our agreement to purchase 13 hotels from InterContinental for $450,000. We acquired 12 of the hotels on February 16, 2005 and the remaining hotel on May 31, 2005, for $425,000 using proceeds from the senior notes issuance described below and borrowings under our revolving credit facility. The $450,000 purchase price includes $25,000 which we have agreed to pay InterContinental during the next three years in connection with certain improvements to the hotels.

During the first half of 2005 we funded $4,111 for improvements to two of our Marriott hotel portfolios. We expect to fund an additional $16,373 for improvements to three of our Marriott hotel portfolios in 2005 with funds from existing cash balances or borrowings under our credit facility. Our minimum annual returns and rent for these hotels is increased by approximately 10% of the amounts we fund, which amounts are in addition to recurring FF&E reserve funding from hotel operations.

Pursuant to our agreement with InterContinental for management of 15 Staybridge Suites^® hotels (part of a 30 hotel combination), we agreed to fund $20,000 for rebranding costs and other capital improvements. As part of this agreement, InterContinental agreed to provide us with a $20,000 deposit to secure its obligations under the management agreement that we will not escrow. During the first quarter of 2005 the final $10,000 of these fundings occurred. The timing of our funding to InterContinental and its funding of the deposit to us was simultaneous.

Pursuant to the agreement we entered with Prime in 2003 for management of 36 hotels, we agreed to fund $25,000 for rebranding costs and other capital improvements. As of June 30, 2005, $10,000 of this funding has occurred. Pursuant to our new management agreements for these hotels described above, this funding will be allocated between Hyatt and Carlson. We have also agreed to provide additional funding to Hyatt and Carlson for rebranding and refurbishment of the hotels. To the extent our fundings exceed $25,000, the minimum return payable by Hyatt and Carlson to us will increase as these funds are advanced.

Our term debt maturities (other than our revolving credit facility) are as follows: $150,000 in 2008; $50,000 in 2010; $125,000 in 2012; $300,000 in 2013 and $300,000 in 2015. As of June 30, 2005, we had one mortgage obligation with a principal balance of $3,796. This mortgage requires monthly payments of principal and interest of $32 and is expected to have a principal balance of $3,326 at maturity in 2011. The mortgage note is prepayable at a premium beginning on

September 1, 2005. None of our other debt obligations require principal or sinking fund payments prior to their maturity date.

On December 1, 2004, a distribution of $0.5546875 per Series B preferred share was declared with respect to fourth quarter 2004 and was paid to shareholders on January 18, 2005. On March 1, 2005 and June 1, 2005, distributions of $0.5546875 per Series B preferred share were declared with respect to first and second quarters of 2005 and were paid to shareholders on April 15, 2005 and July 15, 2005. On December 9, 2004, a distribution of $0.72 per common share was declared with respect to fourth quarter 2004 results and was paid to shareholders on January 31, 2005. On April 7, 2005, a distribution of $0.72 per common share was declared with respect to first quarter 2005 results and was paid to shareholders on May 19, 2005, using cash on hand and borrowings under our revolving credit facility. On July 7, 2005, a distribution of $0.72 per common share was declared with respect to second quarter 2005 results and will be paid to shareholders of record at July 21, 2005, on or about August 18, 2005, using cash on hand and borrowings under our revolving credit facility.

On February 15, 2005, we issued $300,000 of 5.125% senior notes due 2015. Net proceeds after underwriting and other offering expenses were approximately $297,048. As described above, these proceeds were used to partially fund our acquisition of 12 hotels from InterContinental on February 16, 2005.

On June 5, 2005, we sold 4,500,000 of our common shares of beneficial interest at a price of $44.39 per share in a public offering. On June 24, 2005, we sold an additional 200,000 common shares of beneficial interest at a price of $44.39 pursuant to an over allotment option granted to the underwriters. Net proceeds, from both these sales, after underwriting and other offering expenses, were $199,233. We used these proceeds to reduce borrowings outstanding under our revolving credit facility.

When amounts are outstanding on our revolving credit facility and as the maturity dates of our credit facility and term debt approach over the longer term, we will explore alternatives for the repayment of amounts due. Such alternatives in the short term and long term may include incurring additional long term debt and issuing new equity securities. As of June 30, 2005, we had $1,578,439 available on our shelf registration. An effective shelf registration allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for those securities. Although there can be no assurance that we will consummate any debt or equity offerings or other financings, we believe we will have access to various types of financing, including investment grade debt or equity offerings with which to finance future acquisitions and to pay our debt and other obligations.

As of June 30, 2005, our contractual obligations were as follows:

	Payment due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt Obligations	$	928,796	$	30	$	137	$	150,161	$	778,468
Purchase Obligation (1)	25,000		10,000		15,000		—		—
Ground Lease Obligations (2)	18,526		559		2,237		2,027		13,703
Capital improvements (3)	31,373		31,373		—		—		—
Total	$	1,003,695	$	41,962	$	17,374	$	152,188	$	792,171

(1) On December 17, 2004, we announced our agreement to purchase 13 hotels from InterContinental. The remaining balance of our negotiated purchase price is to fund capital improvements over the course of the next two years.

(2) Thirteen of our hotels are on leased land. In each case the ground lessors are unrelated to us. Generally, payments of ground lease obligations are made by our managers or tenants. However, if a manager or tenant fails to perform obligations under a ground lease or elects not to renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected hotel.

(3) Represents known amounts we expect to fund in addition to recurring FF&E reserve funding from hotel operations.

As of June 30, 2005, we had no off-balance sheet arrangements, commercial paper, derivatives, swaps, hedges, guarantees, joint ventures or partnerships. As of June 30, 2005, our secured debt obligations were limited to one

mortgage note of $3,796 secured by a single property. None of our debt documentation requires us to provide collateral security in the event of a ratings downgrade.

Debt Covenants

Our debt obligations at June 30, 2005 were our revolving credit facility, our $925,000 of publicly issued term debt and our $3,796 mortgage note. Our public debt is governed by an indenture. This indenture and related supplements and our credit facility agreement contain a number of financial ratio covenants which generally restrict our ability to incur debts, including debts secured by mortgages on our properties in excess of calculated amounts, require us to maintain a minimum net worth, restrict our ability to make distributions under certain circumstances and require us to maintain other ratios. As of June 30, 2005, we were in compliance with all of our covenants under our indenture and its supplements and our credit facility agreement.

Neither our indenture and its supplements nor our bank credit facility contain provisions for acceleration which could be triggered by our debt ratings. However, under our credit facility agreement, our senior debt rating is used to determine the fees and interest rate applied to borrowings.

Our public debt indenture and its supplements contain cross default provisions to any other debts of $20,000 or more. Similarly, a default on our public debt indenture would be a default on our credit facility.

Management Agreements, Leases and Operating Statistics

As of June 30, 2005, we own 298 hotels which are grouped into ten combinations and managed by, or leased to, separate affiliates of hotel operating companies including InterContinental, Marriott, Host Marriott Corporation or Host, Barcelo Crestline Corporation or Barcelo Crestline, Hyatt, Carlson and BRE/Homestead Village, LLC or Homestead.

The tables on the following pages summarize the key terms of our leases and management agreements and include statistics reported to us or derived from information reported to us by our managers and tenants. These statistics include occupancy, average daily rate, or ADR, revenue per day per available room, or RevPAR, and coverage of our owner’s priority returns or minimum rents. We consider these statistics and the management agreement or lease security features also presented in the tables on the following pages, to be important measures of our managers’ and tenants’ success in operating our hotels and their ability to continue to pay us. However, none of this third party reported information is a direct measure of our financial performance and none of it has been independently verified by us.

Hotel Brand	Courtyard by Marriott^®	Residence Inn by Marriott^®	Marriott^®/Residence Inn by Marriott^®/ Courtyard by Marriott^®/ TownePlace Suites by Marriott^®/SpringHill Suites by Marriott^®	Residence Inn by Marriott^®/Courtyard by Marriott^®/ TownePlace Suites by Marriott^®/SpringHill Suites by Marriott^®	Homestead Studio Suites^®
Management Agreements and Leases

Number of Hotels	53	18	35	19	18

Number of Rooms/Suites	7,610	2,178	5,382	2,756	2,399

Number of States	24	14	15	14	5

Tenant	Subsidiary of Host Subleased to Subsidiary of Barcelo Crestline	Subsidiary of Host Subleased to Subsidiary of Barcelo Crestline	Our TRS	Subsidiary of Barcelo Crestline	Subsidiary of BRE/Homestead Village LLC

Manager	Subsidiary of Marriott	Subsidiary of Marriott	Subsidiary of Marriott	Subsidiary of Marriott	Subsidiary of BRE/Homestead Village LLC

Investment at June 30, 2005 (000s) (1)	$558,247	$186,687	$455,655	$274,222	$145,000

Security Deposit (000s)	$50,540	$17,220	$36,204	$28,508	$15,960

End of Current Term	2012	2010	2019	2015	2015

Renewal Options (2)	3 for 12 years each	1 for 10 years, 2 for 15 years each	2 for 15 years each	2 for 10 years each	2 for 15 years each

Current Annual Minimum Return/Rent (000s)	$55,713	$18,650	$47,291	$28,508	$15,960

Percentage Return/Rent (3)	5.0%	7.5%	7.0%	7.0%	10.0%

Other Security Features	HPT controlled lockbox with minimum balance maintenance requirement; subtenant and subtenant parent minimum net worth requirement.	HPT controlled lockbox with minimum balance maintenance requirement; subtenant and subtenant parent minimum net worth requirement.	Limited guarantee provided by Marriott.	Tenant minimum net worth requirement.	Homestead parent guarantee and $15,960 letter of credit.

Operating Statistics

Return/Rent Coverage (4) (5):

Year ended 12/31/04	1.29x	1.00x	0.87x	0.85x	1.21x
Twelve months ended 6/30/05	1.33x	1.07x	0.95x	0.90x	1.36x
Quarter ended 6/30/05	1.52x	1.23x	1.19x	1.06x	1.57x

(1) Excludes expenditures made from FF&E reserves funded from hotel operations, but includes amounts separately funded by us.

(2) Renewal options may be exercised by the manager or tenant for all, but not less than all, of the hotels within each combination of hotels.

(3) Each management contract or lease provides for payment to us of a percentage of increases in total hotel sales over base year levels as additional return or rent.

(4) We define coverage as combined total hotel sales minus all expenses which are not subordinated to minimum payments to us and the required FF&E reserve contributions (which data is provided to us by our operators or tenants), divided by the minimum return payments or minimum rent due to us.

(5) Represents data for comparable fiscal periods for the hotels managed by Marriott.

Hotel Brand	Staybridge Suites^®	Candlewood Suites^®	InterContinental^®/ Crowne Plaza^®/ Holiday Inn^®/ Staybridge Suites^®	AmeriSuites^®	Radisson Hotels & Resorts^® / Park Plaza^® Hotels & Resorts / Country Inn & Suites by Carlson^SM / Prime Hotel^SM (1)	Total/ Range/ Average (all investments)
Management Agreements and Leases

Number of Hotels	30	76	13	24	12	298

Number of Rooms/Suites	3,694	9,220	3,946	2,929	2,321	42,435

Number of States	16	29	6 plus Ontario and Puerto Rico	14	8	38 plus Ontario and Puerto Rico

Tenant	Our TRS	Our TRS	Our TRS and a subsidiary of InterContinental	Our TRS	Our TRS

Manager	Subsidiary of InterContinental	Subsidiary of InterContinental	Subsidiaries of InterContinental	Subsidiary of Hyatt	Subsidiary of Carlson

Investment at June 30, 2005 (000s) (2)	$415,708	$590,250	$425,000	$243,350	$175,270	$3,469,389

Security Deposit (000s)	$36,872	—	—	—	—	$185,304

End of Current Term	2023	2028	2029	2030	2030	2010-2030 (average 14.3 years)

Renewal Options (3)	2 for 12.5 years each	2 for 15 years each	2 for 15 years each	2 for 15 years each	2 for 15 years each

Current Annual Minimum Return/Rent (000s)	$36,097	$60,000	$37,750	$18,000	$8,000	$325,969

Percentage Return/Rent (4)	7.5%	7.5%	7.5%	(5)	(5)	5%-10%

Other Security Features	Limited guarantee provided by InterContinental.	Limited guarantee provided by InterContinental.	Limited guarantees provided by InterContinental.	Limited guarantee provided by Hyatt.	Limited guarantee provided by Carlson.

Operating Statistics

Return/Rent Coverage (6):

Year ended 12/31/04	0.77x	0.83x	0.91x	0.91x	1.44x	0.77x -1.44x
Twelve months ended 6/30/05	0.81x	0.92x	1.00x	1.00x	1.00x	0.81x -1.36x
Quarter ended 6/30/05	1.02x	1.11x	1.23x	1.15x	1.22x	1.02x -1.57x

(1) In June 2005, we authorized Carlson to pursue the sale of our Prime Hotel^SM in Atlanta, GA. In connection with this decision we recorded a $7,300 loss on asset impairment to reduce the carrying value of the hotel to its estimated net realizable value less cost to sell.

(2) Excludes expenditures made from FF&E reserves funded from hotel operations, but includes amounts separately funded by us.

(3) Renewal options may be exercised by the manager or tenant for all, but not less than all, of the hotels within each combination of hotels.

(4) Each management contract or lease provides for payment to us of a percentage of increases in total hotel sales over base year levels as additional return or rent.

(5) Agreement provides for payment to us of 50% of cash flow after payment of operating costs, funding the capital reserve, payment of our priority return and reimbursement to the manager of working capital and guaranty advances, if any.

(6) We define coverage as combined total hotel sales minus all expenses which are not subordinated to minimum payments to us and the required FF&E reserve contributions (which data is provided to us by our operators or tenants), divided by the minimum return payments or minimum rent due to us. For some combinations, amounts have been calculated using data for periods prior to our ownership of certain hotels and prior to commencement of management agreements.

The following tables summarize the operating statistics, including occupancy, ADR and RevPAR reported to us by our hotel operators by management agreement or lease for the periods indicated:

Management/Lease	No. of	No. of Rooms	Second Quarter(1)					Year to Date(1)
Agreement	Hotels	/Suites	2005		2004		Change	2005		2004		Change
ADR
Host (no. 1)	53	7,610	$	107.79	$	100.09	7.7%	$	107.95	$	99.99	8.0%
Host (no. 2)	18	2,178	102.39		94.43		8.4%	99.46		94.19		5.6%
Marriott	35	5,382	103.02		95.19		8.2%	101.10		94.67		6.8%
Barcelo Crestline	19	2,756	99.94		91.81		8.9%	102.66		93.34		10.0%
InterContinental (no. 1)(2)	30	3,694	96.27		89.97		7.0%	95.46		89.29		6.9%
InterContinental (no. 2)	76	9,220	61.13		57.72		5.9%	60.22		56.72		6.2%
InterContinental (no. 3)(3)	13	3,946	116.68		110.40		5.7%	118.30		112.54		5.1%
Hyatt(4)	24	2,929	76.82		70.08		9.6%	75.71		69.23		9.4%
Carlson(4)(5)	12	2,321	77.64		80.45		-3.5%	79.66		81.83		-2.7%
Homestead	18	2,399	56.57		49.03		15.4%	57.08		49.21		16.0%
Total/Average	298	42,435	$	89.13	$	83.44	6.8%	$	88.70	$	83.35	6.4%

OCCUPANCY
Host (no. 1)	53	7,610	73.7%		74.2%		-0.5 pt	70.1%		71.1%		-1.0 pt
Host (no. 2)	18	2,178	82.9%		81.4%		1.5 pt	80.5%		78.1%		2.4 pt
Marriott	35	5,382	79.7%		79.2%		0.5 pt	76.7%		75.6%		1.1 pt
Barcelo Crestline	19	2,756	77.6%		78.8%		-1.2 pt	73.7%		75.5%		-1.8 pt
InterContinental (no. 1)(2)	30	3,694	81.1%		78.5%		2.6 pt	77.5%		75.3%		2.2 pt
InterContinental (no. 2)	76	9,220	77.4%		70.3%		7.1 pt	74.9%		67.8%		7.1 pt
InterContinental (no. 3)(3)	13	3,946	77.9%		75.6%		2.3 pt	74.4%		72.4%		2.0 pt
Hyatt(4)	24	2,929	68.2%		67.4%		0.8 pt	66.7%		64.1%		2.6 pt
Carlson(4)(5)	12	2,321	52.0%		62.1%		-10.1 pt	51.9%		65.2%		-13.3 pt
Homestead	18	2,399	79.6%		84.5%		-4.9 pt	78.6%		81.4%		-2.8 pt
Total/Average	298	42,435	75.8%		74.5%		1.3 pt	73.0%		71.8%		1.2 pt

RevPAR
Host (no. 1)	53	7,610	$	79.44	$	74.27	7.0%	$	75.67	$	71.09	6.4%
Host (no. 2)	18	2,178	84.88		76.87		10.4%	80.07		73.56		8.8%
Marriott	35	5,382	82.11		75.39		8.9%	77.54		71.57		8.3%
Barcelo Crestline	19	2,756	77.55		72.35		7.2%	75.66		70.47		7.4%
InterContinental (no. 1)(2)	30	3,694	78.07		70.63		10.5%	73.98		67.24		10.0%
InterContinental (no. 2)	76	9,220	47.31		40.58		16.6%	45.10		38.46		17.3%
InterContinental (no. 3)(3)	13	3,946	90.89		83.46		8.9%	88.02		81.48		8.0%
Hyatt(4)	24	2,929	52.39		47.23		10.9%	50.50		44.38		13.8%
Carlson(4)(5)	12	2,321	40.37		49.96		-19.2%	41.34		53.35		-22.5%
Homestead	18	2,399	45.03		41.43		8.7%	44.86		40.06		12.0%
Total/Average	298	42,435	$	67.56	$	62.16	8.7%	$	64.75	$	59.85	8.2%

(1) Includes data for the calendar periods indicated, except for our Marriott^® branded hotels, which include data for comparable fiscal periods.

(2) In the calculation of Occupancy and RevPAR, we have reduced the number of available rooms for one hotel, which has been closed temporarily due to fire damage sustained on May 13, 2005.

(3) Includes data for periods prior to our ownership of some hotels.

(4) Includes data for periods some hotels were not operated by the current manager.

(5) We transferred operating responsibility for our Prime Hotels^SM to Carlson on April 4, 2005, and 11 of these 12 hotels were rebranded with Carlson brands during the second quarter of 2005.

Seasonality

Our hotels have historically experienced seasonal differences typical of the U.S. 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 material fluctuations in our income because our contractual management agreements and leases require our managers and tenants to make the substantial portion of our rents and return payments to us in equal amounts throughout a year. Seasonality may affect our hotel operating revenues, but we do not expect seasonal variations to have a material impact upon our financial results of operations or upon our operators’ or tenants’ ability to meet their contractual obligations to us.

Item 3. Quantitative and Qualitative Disclosures About Market Risk (dollar amounts in thousands)

We are exposed to risks associated with market changes in interest rates. Our strategy to manage exposure to changes in interest rates is unchanged from December 31, 2004. Other than as described below we do not foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future. As of June 30, 2005, our outstanding publicly traded debt consisted of five issues of fixed rate, senior unsecured notes:

		Annual	Annual
Principal Balance		Interest Rate	Interest Expense		Maturity	Interest Payments Due
$	150,000	7.000%	$	10,500	2008	Semi-Annually
50,000		9.125%	4,563		2010	Semi-Annually
125,000		6.850%	8,563		2012	Semi-Annually
300,000		6.750%	20,250		2013	Semi-Annually
300,000		5.125%	15,375		2015	Semi-Annually
$	925,000		$	59,251

No principal repayments are due under these notes until maturity. Because these notes bear interest at fixed rates, changes in market interest rates during the term of this debt will not affect our operating results. If at maturity these notes were refinanced at interest rates which are 10% higher than shown above, our per annum interest cost would increase by approximately $5,925. Changes in market interest rates also affect the fair value of our debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt while decreases in market interest rates increase the fair value of our fixed rate debt. Based on the balances outstanding at June 30, 2005, and discounted cash flow analyses, a hypothetical immediate 10% change in interest rates would change the fair value of our fixed rate debt obligations by approximately $27,156.

Each of our fixed rate unsecured debt arrangements allows us to make repayments earlier than the stated maturity date. We are generally allowed to make prepayments only at face value plus a premium equal to a make whole amount, as defined, generally designed to preserve a stated yield to the note holder. These prepayment rights may afford us the opportunity to mitigate the risk of refinancing at maturity at higher rates by refinancing prior to maturity. We have one mortgage payable secured by a hotel in Wichita, Kansas, with a fixed rate of 8.3% that matures on July 1, 2011. This note requires principal and interest payments through maturity pursuant to an amortization schedule and contains a provision that allows us to make repayment at a premium to face value after September 1, 2005.

Our revolving credit facility bears interest at floating rates and matures in June 2009. We can extend the maturity for one year for a fee. At June 30, 2005, we had zero outstanding and $750,000 available for drawing under our revolving credit facility. Repayments under our revolving credit facility may be made at any time without penalty. We borrow in U.S. dollars and borrowings under our revolving bank credit facility are subject to interest at LIBOR plus a premium. Accordingly, we are vulnerable to changes in U.S. dollar based short term interest rates, specifically LIBOR. A change in interest rates would not affect the value of this floating rate debt but would affect our operating results. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amount under our revolving bank credit facility or other floating rate debt.

Item 4. Controls and Procedures

As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our managing trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, our managing trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2005, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND FEDERAL SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS FORM 10-Q AND INCLUDE STATEMENTS REGARDING OUR INTENT, BELIEF OR EXPECTATION, OR THE INTENT, BELIEF OR EXPECTATION OF OUR TRUSTEES AND OFFICERS WITH RESPECT TO OUR TENANTS’ OR OPERATORS’ ABILITY TO PAY RENT OR RETURNS TO US, OUR ABILITY TO PURCHASE ADDITIONAL PROPERTIES, OUR INTENT TO REFURBISH CERTAIN OF OUR PROPERTIES, OUR ABILITY TO PAY INTEREST AND DEBT PRINCIPAL AND MAKE DISTRIBUTIONS, OUR POLICIES AND PLANS REGARDING INVESTMENTS AND FINANCINGS, OUR TAX STATUS AS A REAL ESTATE INVESTMENT TRUST, OUR ABILITY TO APPROPRIATELY BALANCE THE USE OF DEBT AND EQUITY AND TO RAISE CAPITAL AND OTHER MATTERS. HOWEVER, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY THE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE: IF HOTEL ROOM DEMAND BECOMES DEPRESSED, THE OPERATING RESULTS OF OUR HOTELS MAY DECLINE AND OUR TENANTS AND OPERATORS MAY BE UNABLE TO PAY OUR RENTS OR RETURNS. ALSO, WE MAY BE UNABLE TO PROVIDE THE FUNDING REQUIRED BY OUR OPERATORS’ AND TENANTS’ FOR THE REFURBISHMENT OF OUR HOTELS. THESE UNEXPECTED RESULTS COULD OCCUR DUE TO MANY DIFFERENT REASONS, SOME OF WHICH, SUCH AS CHANGES IN OUR TENANTS’ OR OPERATORS’ COSTS OR REVENUES OR CHANGES IN CAPITAL MARKETS OR THE ECONOMY GENERALLY, ARE BEYOND OUR CONTROL. FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS. EXCEPT AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY THE RESULT OF ANY REVISION TO THESE FORWARD LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURENCE OF UNANTICIPATED EVENTS.

STATEMENT CONCERNING LIMITED LIABILITY

OUR AMENDED AND RESTATED DECLARATION OF TRUST, DATED AUGUST 21, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, 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 HOSPITALITY PROPERTIES TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HOSPITALITY PROPERTIES TRUST. ALL PERSONS DEALING WITH HOSPITALITY PROPERTIES TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HOSPITALITY PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

PART II Other Information

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On May 11, 2005, we granted 500 common shares valued at $42.50 per common share, the closing price of the common shares on the New York Stock Exchange on that day, to each of our three independent trustees as part of their annual compensation. We made the grants pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended.

Item 4. Submission of Matters to a Vote of Security Holders

At our regular annual meeting of shareholders held on May 11, 2005, our shareholders re-elected John L. Harrington and Barry M. Portnoy as trustees (48,278,647 and 48,287,763 shares voted in favor of the re-election, and 15,076,531 and 15,067,416 shares withheld for the re-election of Messrs. Harrington and Portnoy, respectively). The term of office of Messrs. Harrington and Portnoy will extend until our annual meeting of shareholders in 2008. Messrs, Gerard M. Martin, Frank J. Bailey and Arthur K. Koumantzelis continue to serve as trustees with current terms of office expiring in 2006, 2006 and 2007, respectively.

Item 6. Exhibits

10.1		Assumption, Termination and Amendment Agreement among InterContinental Hotels Limited (f/k/a InterContinental Hotels Group PLC), InterContinental Hotels Group PLC (f/k/a New InterContinental Hotels Group PLC), HPT TRS IHG-1, Inc., HPT TRS IHG-2, Inc., HPT IHG PR, Inc. and Hospitality Properties Trust dated July 1, 2005. (Filed herewith)
12.1		Computation of Ratio of Earnings to Fixed Charges. (Filed herewith)
12.2		Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Distributions. (Filed herewith)
31.1		Certification Required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)
31.2		Certification Required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)
31.3		Certification Required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)
31.4		Certification Required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)
32		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Furnished herewith)

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


	/s/ John G. Murray
	John G. Murray
	President and Chief Operating Officer
	Dated: August 4, 2005


	/s/ Mark L. Kleifges
	Mark L. Kleifges
	Treasurer and Chief Financial Officer
	(principal financial and accounting officer)
	Dated: August 4, 2005

EX-10.1 2 a05-12641_1ex10d1.htm EX-10.1

EXHIBIT 10.1

ASSUMPTION, TERMINATION AND AMENDMENT AGREEMENT

Reference is made to that certain Amended and Restated Consolidated Guaranty Agreement, dated as of February 16, 2005 (the “Guaranty”) among InterContinental Hotels Group PLC (now known as InterContinental Hotels Limited) (“Old Guarantor”), HPT TRS IHG-1, Inc., HPT TRS IHG-2, Inc.,HPT IHG PR, Inc. and Hospitality Properties Trust. The provisions of the Guaranty are incorporated herein by this reference, as if fully set forth herein.

Old Guarantor has engaged in a Reorganization and become a Subsidiary of InterContinental Hotels Group PLC (f/k/a New InterContinental Hotels Group PLC) (“New Guarantor”) pursuant to a scheme of arrangement more particularly described in the scheme circular captioned “Recommended proposals for the return of approximately £1 billion to IHG Shareholders by way of a capital reorganization (by means of a scheme of arrangement under Section 425 of the Companies Act of 1985)” sent to Old Guarantor shareholders on or about May 3, 2005 (the “Scheme”). In connection with the Scheme, New Guarantor has agreed to assume all of the obligations of Old Guarantor under the Guaranty to comply with the requirements of the Guaranty and the Management Agreements. Such compliance is a direct material benefit to New Guarantor.

In consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged:

1. Old Guarantor and New Guarantor shall cause there to be delivered to HPT an opinion of counsel satisfactory to HPT with respect to, among other things, the existence of the New Guarantor and the due execution and delivery by New Guarantor of this Agreement and the enforceability against New Guarantor of this Agreement.

2. Upon delivery of this Assumption, Termination and Amendment Agreement: (a) New Guarantor agrees (i) to and does hereby assume the performance of all of the terms, covenants and conditions of the Guaranty and all of the obligations of Old Guarantor under the Guaranty and (ii) to abide by and be bound by all of the terms of the Guaranty, all as though the Guaranty had been made, executed and delivered by New Guarantor; (b) the term “IHG” as used in each of the Management Agreements shall mean New Guarantor, its successors and assigns and (c) the term “Guarantor” as used in the Guaranty shall mean New Guarantor.

3. Provided there is no Manager Default under any of the Management Agreements, immediately upon delivery of this Assumption, Termination and Amendment Agreement, the Old Guarantor’s obligations under the Guaranty shall terminate subject to the second proviso contained in Section 9 of the Guaranty.

4. For purposes of Section 2.4(a) of the Guaranty only, neither the Scheme nor any of the implementing actions taken in furtherance or contemplation of the Scheme shall constitute a “Reorganization.”

5. Old Guarantor and New Guarantor warrant and represent that (a) there are no Manager Defaults and (b) to their best knowledge, there are no (i) defaults by HPT in the performance or observance of any covenant, agreement or condition contained in any Guaranteed Agreement or (ii) circumstances which, with the giving of notice or passage of time or both, would become such a default.

6. HPT warrants and represents that (a) to its best knowledge, there are no Manager Defaults and (b) there are no (i) defaults by HPT in the performance or observance of any covenant, agreement or condition contained in any Guaranteed Agreement or (ii) circumstances which, with the giving of notice or passage of time or both, would become such a default.

7. Except as expressly provided herein, nothing contained herein shall constitute a waiver of any term, covenant or condition contained in any Transaction Document or consent to any non-compliance therewith. The terms of the Transaction Documents, as amended hereby, are hereby ratified and confirmed.

WITNESS the execution hereof under seal as of July 1, 2005.

INTERCONTINENTAL HOTELS GROUP PLC
(formerly known as New InterContinental Hotels Group PLC)


By:	/s/ Richard T. Winter
	Name:		Richard T. Winter
	Title:	Company Secretary

INTERCONTINENTAL HOTELS LIMITED
(formerly known as InterContinental Hotels Group PLC)


By:	/s/ Richard T. Winter
	Name:		Richard T. Winter
	Title:	Director


HPT TRS IHG-1, INC.


By:	/s/ John G. Murray
	John G. Murray
	Vice President


HPT TRS IHG-2, INC.


By:	/s/ John G. Murray
	John G. Murray
	Vice President


HPT IHG PR, INC.


By:	/s/ John G. Murray
	John G. Murray
	Vice President


HOSPITALITY PROPERTIES TRUST


By:	/s/ John G. Murray
	John G. Murray
	Vice President

EX-12.1 3 a05-12641_1ex12d1.htm EX-12.1

EXHIBIT 12.1

HOSPITALITY PROPERTIES TRUST

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(IN THOUSANDS, EXCEPT RATIO AMOUNTS)

	Six Months Ended June 30,				Year Ended December 31,
	2005		2004		2004		2003		2002		2001		2000

Net Income	$	51,117	$	60,528	$	127,091	$	238,213	$	142,202	$	131,956	$	126,271
Fixed Charges	33,020		25,245		50,393		44,536		42,424		41,312		37,682
Adjusted Earnings	$	84,137	$	85,773	$	177,484	$	282,749	$	184,626	$	173,268	$	163,953

Fixed Charges:
Interest on indebtedness and amortization of deferred finance costs	$	33,020	$	25,245	$	50,393	$	44,536	$	42,424	$	41,312	$	37,682

Total Fixed Charges	$	33,020	$	25,245	$	50,393	$	44,536	$	42,424	$	41,312	$	37,682

Ratio of Earnings to Fixed Charges	2.55x		3.40x		3.52x		6.35x		4.35x		4.19x		4.35x

EX-12.2 4 a05-12641_1ex12d2.htm EX-12.2

EXHIBIT 12.2

HOSPITALITY PROPERTIES TRUST

COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
DISTRIBUTIONS

(IN THOUSANDS, EXCEPT RATIO AMOUNTS)

	Six Months Ended June 30,				Year Ended December 31,
	2005		2004		2004		2003		2002		2001		2000

Net Income	$	51,117	$	60,528	$	127,091	$	238,213	$	142,202	$	131,956	$	126,271
Fixed charges	33,020		25,245		50,393		44,536		42,424		41,312		37,682
Adjusted Earnings	$	84,137	$	85,773	$	177,484	$	282,749	$	184,626	$	173,268	$	163,953

Fixed Charges and Preferred Distributions:
Interest on indebtedness and amortization of deferred finance costs	$	33,020	$	25,245	$	50,393	$	44,536	$	42,424	$	41,312	$	37,682
Preferred Distributions	3,828		5,846		9,674		14,780		7,572		7,125		7,125

Combined Fixed Charges and Preferred Distributions	$	36,848	$	31,091	$	60,067	$	59,316	$	49,996	$	48,437	$	44,807

Ratio of Earnings to Combined Fixed Charges and Preferred Distributions	2.28x		2.76x		2.95x		4.77x		3.69x		3.58x		3.66x

EX-31.1 5 a05-12641_1ex31d1.htm EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, Barry M. Portnoy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hospitality Properties Trust;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	Date: August 4, 2005	/s/ Barry M. Portnoy
		Barry M. Portnoy
		Managing Trustee

EX-31.2 6 a05-12641_1ex31d2.htm EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, Gerard M. Martin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hospitality Properties Trust;

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	Date: August 4, 2005	/s/ Gerard M. Martin
		Gerard M. Martin
		Managing Trustee

EX-31.3 7 a05-12641_1ex31d3.htm EX-31.3

EXHIBIT 31.3

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, John G. Murray, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hospitality Properties Trust;

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	Date: August 4, 2005	/s/ John G. Murray
		John G. Murray
		President and Chief Operating Officer

EX-31.4 8 a05-12641_1ex31d4.htm EX-31.4

EXHIBIT 31.4

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, Mark L. Kleifges, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hospitality Properties Trust;

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2005	/s/ Mark L. Kleifges
	Mark L. Kleifges
	Treasurer and Chief Financial Officer

EX-32 9 a05-12641_1ex32.htm EX-32

EXHIBIT 32

Certification Required by 18 U.S.C. Sec. 1350

(Section 906 of the Sarbanes–Oxley Act of 2002)

In connection with the filing by Hospitality Properties Trust (the “Company”) of the Quarterly Report on Form 10-Q for the period ending June 30, 2005 (the “Report”), each of the undersigned hereby certifies, to the best of his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Barry M. Portnoy		/s/ John G. Murray
Barry M. Portnoy		John G. Murray
Managing Trustee		President and Chief
		Operating Officer


/s/ Gerard M. Martin		/s/ Mark L. Kleifges
Gerard M. Martin		Mark L. Kleifges
Managing Trustee		Treasurer and Chief
		Financial Officer

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