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☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2017
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or
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Maryland
(State of Organization)
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04-3262075
(IRS Employer Identification No.)
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Two Newton Place,
255 Washington Street, Suite 300,
Newton, Massachusetts
(Address of Principal Executive Offices)
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02458-1634
(Zip Code)
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Title Of Each Class
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Name Of Each Exchange On Which Registered
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Common Shares of Beneficial Interest
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The Nasdaq Stock Market LLC
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Large accelerated filer
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company ☐
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(Do not check if a smaller reporting company)
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Emerging growth company ☐
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OUR HOTEL MANAGERS’ OR TENANTS’ ABILITIES TO PAY THE CONTRACTUAL AMOUNTS OF RETURNS OR RENTS DUE TO US,
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OUR ABILITY TO COMPETE FOR ACQUISITIONS EFFECTIVELY,
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OUR POLICIES AND PLANS REGARDING INVESTMENTS, FINANCINGS AND DISPOSITIONS,
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OUR ABILITY TO PAY DISTRIBUTIONS TO OUR SHAREHOLDERS AND TO SUSTAIN THE AMOUNT OF SUCH DISTRIBUTIONS,
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OUR ABILITY TO RAISE DEBT OR EQUITY CAPITAL,
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OUR ABILITY TO APPROPRIATELY BALANCE OUR USE OF DEBT AND EQUITY CAPITAL,
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OUR INTENT TO MAKE IMPROVEMENTS TO CERTAIN OF OUR PROPERTIES AND THE SUCCESS OF OUR HOTEL RENOVATIONS TO IMPROVE OUR HOTELS' RATES AND OCCUPANCIES,
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OUR ABILITY TO ENGAGE AND RETAIN QUALIFIED MANAGERS AND TENANTS FOR OUR HOTELS AND TRAVEL CENTERS ON SATISFACTORY TERMS,
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THE FUTURE AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY,
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OUR ABILITY TO PAY INTEREST ON AND PRINCIPAL OF OUR DEBT,
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OUR CREDIT RATINGS,
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THE ABILITY OF TRAVELCENTERS OF AMERICA LLC, OR TA, TO PAY CURRENT AND DEFERRED RENT AMOUNTS AND OTHER OBLIGATIONS DUE TO US,
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OUR EXPECTATION THAT WE BENEFIT FROM OUR OWNERSHIP INTEREST IN AND OTHER RELATIONSHIPS WITH THE RMR GROUP INC., OR RMR INC.,
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OUR EXPECTATION THAT WE BENEFIT FROM OUR OWNERSHIP INTEREST IN AND OTHER RELATIONSHIPS WITH AFFILIATES INSURANCE COMPANY, OR AIC, AND FROM OUR PARTICIPATION IN INSURANCE PROGRAMS ARRANGED BY AIC,
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OUR QUALIFICATION FOR TAXATION AS A REAL ESTATE INVESTMENT TRUST, OR REIT, AND
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OTHER MATTERS.
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THE IMPACT OF CONDITIONS AND CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS ON US AND OUR MANAGERS AND TENANTS,
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COMPETITION WITHIN THE REAL ESTATE, HOTEL, TRANSPORTATION AND TRAVEL CENTER INDUSTRIES, PARTICULARLY IN THOSE MARKETS IN WHICH OUR PROPERTIES ARE LOCATED,
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COMPLIANCE WITH, AND CHANGES TO, FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS AFFECTING THE REAL ESTATE, HOTEL, TRANSPORTATION AND TRAVEL CENTER INDUSTRIES, ACCOUNTING RULES, TAX LAWS AND SIMILAR MATTERS,
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LIMITATIONS IMPOSED ON OUR BUSINESS AND OUR ABILITY TO SATISFY COMPLEX RULES IN ORDER FOR US TO QUALIFY FOR TAXATION AS A REIT FOR U.S. FEDERAL INCOME TAX PURPOSES,
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ACTS OF TERRORISM, OUTBREAKS OF SO CALLED PANDEMICS OR OTHER MANMADE OR NATURAL DISASTERS BEYOND OUR CONTROL, AND
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ACTUAL AND POTENTIAL CONFLICTS OF INTEREST WITH OUR RELATED PARTIES, INCLUDING OUR MANAGING TRUSTEE, TA, SONESTA INTERNATIONAL HOTELS CORPORATION, OR SONESTA, RMR INC., THE RMR GROUP LLC, OR RMR LLC, AIC AND OTHERS AFFILIATED WITH THEM.
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OUR ABILITY TO MAKE FUTURE DISTRIBUTIONS TO OUR SHAREHOLDERS AND TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON OUR INDEBTEDNESS DEPENDS UPON A NUMBER OF FACTORS, INCLUDING OUR FUTURE EARNINGS, THE CAPITAL COSTS WE INCUR TO MAINTAIN OUR PROPERTIES AND OUR WORKING CAPITAL REQUIREMENTS. WE MAY BE UNABLE TO PAY OUR DEBT OBLIGATIONS OR TO MAINTAIN OUR CURRENT RATE OF DISTRIBUTIONS ON OUR COMMON SHARES AND FUTURE DISTRIBUTIONS MAY BE REDUCED OR ELIMINATED.
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THE SECURITY DEPOSITS WHICH WE HOLD ARE NOT IN SEGREGATED CASH ACCOUNTS OR OTHERWISE SEPARATE FROM OUR OTHER ASSETS AND LIABILITIES. ACCORDINGLY, WHEN WE RECORD INCOME BY REDUCING OUR SECURITY DEPOSIT LIABILITIES, WE DO NOT RECEIVE ANY ADDITIONAL CASH PAYMENT. BECAUSE WE DO NOT RECEIVE ANY ADDITIONAL CASH PAYMENT AS WE APPLY SECURITY DEPOSITS TO COVER PAYMENT SHORTFALLS, THE FAILURE OF OUR MANAGERS OR TENANTS TO PAY MINIMUM RETURNS OR RENTS DUE TO US MAY REDUCE OUR CASH FLOWS AND OUR ABILITY TO PAY DISTRIBUTIONS TO SHAREHOLDERS.
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AS OF
DECEMBER 31, 2017
, APPROXIMATELY
74%
OF OUR AGGREGATE ANNUAL MINIMUM RETURNS AND RENTS WERE SECURED BY GUARANTEES OR SECURITY DEPOSITS FROM OUR MANAGERS AND TENANTS. THIS MAY IMPLY THAT THESE MINIMUM RETURNS AND RENTS WILL BE PAID. IN FACT, CERTAIN OF THESE GUARANTEES AND SECURITY DEPOSITS ARE LIMITED IN AMOUNT AND DURATION AND ALL THE GUARANTEES ARE SUBJECT TO THE GUARANTORS’ ABILITIES AND WILLINGNESS TO PAY. WE CANNOT BE SURE OF THE FUTURE FINANCIAL PERFORMANCE OF OUR PROPERTIES AND WHETHER SUCH PERFORMANCE WILL COVER OUR MINIMUM RETURNS AND RENTS, WHETHER THE GUARANTEES OR SECURITY DEPOSITS WILL BE ADEQUATE TO COVER FUTURE SHORTFALLS IN THE MINIMUM RETURNS OR RENTS DUE TO US WHICH THEY GUARANTY OR SECURE, OR REGARDING OUR MANAGERS’, TENANTS’ OR GUARANTORS’ FUTURE ACTIONS IF AND WHEN THE GUARANTEES AND SECURITY DEPOSITS EXPIRE OR ARE DEPLETED OR THEIR ABILITIES OR WILLINGNESS TO PAY MINIMUM RETURNS AND RENTS OWED TO US. MOREOVER, THE SECURITY DEPOSITS WE HOLD ARE NOT SEGREGATED FROM OUR OTHER ASSETS AND THE APPLICATION OF SECURITY DEPOSITS TO COVER PAYMENT SHORTFALLS WILL RESULT IN US RECORDING INCOME, BUT WILL NOT RESULT IN US RECEIVING ADDITIONAL CASH. THE BALANCE OF OUR ANNUAL MINIMUM RETURNS AND RENTS AS OF
DECEMBER 31, 2017
WAS NOT GUARANTEED.
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WYNDHAM'S
$35.7
MILLION LIMITED GUARANTY WAS DEPLETED DURING THE YEAR ENDED
DECEMBER 31, 2017
. WE DO NOT HOLD A SECURITY DEPOSIT WITH RESPECT TO AMOUNTS DUE UNDER THE WYNDHAM AGREEMENT. WYNDHAM HAS PAID 85% OF THE MINIMUM RETURNS DUE TO US FOR JANUARY AND FEBRUARY 2018. WE CAN PROVIDE NO ASSURANCE AS TO WHETHER WYNDHAM WILL CONTINUE TO PAY AT LEAST THE GREATER OF AVAILABLE HOTEL CASH FLOWS AND 85% OF THE MINIMUM RETURNS DUE TO US OR IF WYNDHAM WILL DEFAULT ON ITS PAYMENTS.
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WE HAVE NO GUARANTEES OR SECURITY DEPOSITS FOR THE MINIMUM RETURNS DUE TO US FROM OUR MARRIOTT NO. 1 OR OUR SONESTA HOTEL AGREEMENTS. ACCORDINGLY, WHEN WE RECEIVE THE CONTRACTUAL AMOUNTS DUE TO US UNDER THESE CONTRACTS, SUCH AMOUNTS MAY BE LESS THAN THE MINIMUM RETURNS STATED IN THOSE MANAGEMENT CONTRACTS.
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WE HAVE RECENTLY RENOVATED CERTAIN HOTELS AND ARE CURRENTLY RENOVATING ADDITIONAL HOTELS. WE CURRENTLY EXPECT TO FUND APPROXIMATELY
$180.1
MILLION IN 2018 AND APPROXIMATELY
$105.6
MILLION IN 2019 FOR RENOVATIONS AND OTHER CAPITAL IMPROVEMENT COSTS AT CERTAIN OF OUR HOTELS. THE COST OF CAPITAL PROJECTS ASSOCIATED WITH SUCH RENOVATIONS MAY BE GREATER THAN WE NOW ANTICIPATE. OPERATING RESULTS AT OUR HOTELS MAY DECLINE AS A RESULT OF HAVING ROOMS OUT OF SERVICE OR OTHER DISRUPTIONS DURING RENOVATIONS. ALSO, WHILE OUR FUNDING OF THESE CAPITAL PROJECTS WILL CAUSE OUR CONTRACTUAL MINIMUM RETURNS TO INCREASE, THE HOTELS’ OPERATING RESULTS MAY NOT INCREASE OR MAY NOT INCREASE TO THE EXTENT THAT THE MINIMUM RETURNS INCREASE. ACCORDINGLY, COVERAGE OF OUR MINIMUM RETURNS AT THESE HOTELS MAY REMAIN DEPRESSED FOR AN EXTENDED PERIOD.
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WE CURRENTLY EXPECT TO PURCHASE FROM TA DURING
2018
APPROXIMATELY
$51.5
MILLION OF CAPITAL IMPROVEMENTS TA EXPECTS TO MAKE TO THE TRAVEL CENTERS WE LEASE TO TA. PURSUANT TO THE TERMS OF THE APPLICABLE LEASES, THE ANNUAL RENT PAYABLE TO US BY TA WILL INCREASE AS A RESULT OF ANY SUCH PURCHASES. WE MAY ULTIMATELY PURCHASE MORE OR LESS THAN THIS BUDGETED AMOUNT. TA MAY NOT REALIZE RESULTS FROM ANY OF THESE CAPITAL IMPROVEMENTS WHICH EQUAL OR EXCEED THE INCREASED ANNUAL RENTS IT WILL BE OBLIGATED TO PAY TO US, WHICH COULD INCREASE THE RISK OF TA BEING UNABLE TO PAY AMOUNTS DUE TO US.
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HOTEL ROOM DEMAND AND TRUCKING ACTIVITY ARE OFTEN REFLECTIONS OF THE GENERAL ECONOMIC ACTIVITY IN THE COUNTRY AND IN THE GEOGRAPHIC AREAS WHERE OUR PROPERTIES ARE LOCATED. IF ECONOMIC ACTIVITY DECLINES, HOTEL ROOM DEMAND AND TRUCKING ACTIVITY MAY DECLINE AND THE OPERATING RESULTS OF OUR HOTELS AND TRAVEL CENTERS MAY DECLINE, THE FINANCIAL RESULTS OF OUR HOTEL MANAGERS AND OUR TENANTS, INCLUDING TA, MAY SUFFER AND THESE MANAGERS AND TENANTS MAY BE UNABLE TO PAY OUR RETURNS OR RENTS. ALSO, DEPRESSED OPERATING RESULTS FROM OUR PROPERTIES FOR EXTENDED PERIODS MAY RESULT IN THE OPERATORS OF SOME OR ALL OF OUR HOTELS AND OUR TRAVEL CENTERS BECOMING UNABLE OR UNWILLING TO MEET THEIR OBLIGATIONS OR THEIR GUARANTEES AND SECURITY DEPOSITS WE HOLD MAY BE EXHAUSTED.
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HOTEL AND OTHER COMPETITIVE FORMS OF TEMPORARY LODGING SUPPLY (FOR EXAMPLE, AIRBNB) HAVE BEEN INCREASING AND MAY AFFECT OUR HOTEL OPERATORS' ABILITY TO GROW AVERAGE DAILY RATE, OR ADR, AND OCCUPANCY, AND ADR AND OCCUPANCY COULD DECLINE DUE TO INCREASED COMPETITION WHICH MAY CAUSE OUR HOTEL OPERATORS TO BECOME UNABLE TO PAY OUR RETURNS OR RENTS.
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IF THE CURRENT LEVEL OF COMMERCIAL ACTIVITY IN THE COUNTRY DECLINES, IF THE PRICE OF DIESEL FUEL INCREASES SIGNIFICANTLY, IF FUEL CONSERVATION MEASURES ARE INCREASED, IF FREIGHT BUSINESS IS DIRECTED AWAY FROM TRUCKING, IF TA IS UNABLE TO EFFECTIVELY COMPETE OR OPERATE ITS BUSINESS, IF FUEL EFFICIENCIES, THE USE OF ALTERNATIVE FUELS OR TRANSPORTATION TECHNOLOGIES REDUCE THE DEMAND FOR PRODUCTS AND SERVICES TA SELLS OR FOR VARIOUS OTHER REASONS, TA MAY BECOME UNABLE TO PAY CURRENT AND DEFERRED RENTS DUE TO US.
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OUR ABILITY TO GROW OUR BUSINESS AND INCREASE OUR DISTRIBUTIONS DEPENDS IN LARGE PART UPON OUR ABILITY TO BUY PROPERTIES THAT GENERATE RETURNS OR CAN BE LEASED FOR RENTS WHICH EXCEED THEIR OPERATING AND CAPITAL COSTS. WE MAY BE UNABLE TO IDENTIFY PROPERTIES THAT WE WANT TO ACQUIRE OR TO NEGOTIATE ACCEPTABLE PURCHASE PRICES, ACQUISITION FINANCING, MANAGEMENT CONTRACTS OR LEASE TERMS FOR NEW PROPERTIES.
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CONTINGENCIES IN OUR ACQUISITION AND SALE AGREEMENTS MAY NOT BE SATISFIED AND OUR PENDING ACQUISITIONS AND SALES AND ANY RELATED MANAGEMENT OR LEASE ARRANGEMENTS
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AT
DECEMBER 31, 2017
, WE HAD
$24.1
MILLION OF CASH AND CASH EQUIVALENTS,
$602.0
MILLION AVAILABLE UNDER OUR $1.0 BILLION REVOLVING CREDIT FACILITY AND SECURITY DEPOSITS AND GUARANTEES COVERING SOME OF OUR MINIMUM RETURNS AND RENTS. THESE STATEMENTS MAY IMPLY THAT WE HAVE ABUNDANT WORKING CAPITAL AND LIQUIDITY. HOWEVER, OUR MANAGERS AND TENANTS MAY NOT BE ABLE TO FUND MINIMUM RETURNS AND RENTS DUE TO US FROM OPERATING OUR PROPERTIES OR FROM OTHER RESOURCES; IN THE PAST AND CURRENTLY, CERTAIN OF OUR TENANTS AND HOTEL MANAGERS HAVE IN FACT NOT PAID THE MINIMUM AMOUNTS DUE TO US FROM THEIR OPERATIONS OF OUR LEASED OR MANAGED PROPERTIES. ALSO, CERTAIN OF THE SECURITY DEPOSITS AND GUARANTEES WE HAVE TO COVER ANY SUCH SHORTFALLS ARE LIMITED IN AMOUNT AND DURATION, AND ANY SECURITY DEPOSITS WE APPLY FOR SUCH SHORTFALLS DO NOT RESULT IN ADDITIONAL CASH FLOWS TO US. OUR PROPERTIES REQUIRE, AND WE HAVE AGREED TO PROVIDE, SIGNIFICANT FUNDING FOR CAPITAL IMPROVEMENTS, RENOVATIONS AND OTHER MATTERS. ACCORDINGLY, WE MAY NOT HAVE SUFFICIENT WORKING CAPITAL OR LIQUIDITY.
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WE MAY BE UNABLE TO REPAY OUR DEBT OBLIGATIONS WHEN THEY BECOME DUE.
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CONTINUED AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY IS SUBJECT TO OUR SATISFYING CERTAIN FINANCIAL COVENANTS AND OTHER CREDIT FACILITY CONDITIONS THAT WE MAY BE UNABLE TO SATISFY.
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ACTUAL COSTS UNDER OUR REVOLVING CREDIT FACILITY OR OTHER FLOATING RATE DEBT WILL BE HIGHER THAN LIBOR PLUS A PREMIUM BECAUSE OF FEES AND EXPENSES ASSOCIATED WITH SUCH DEBT.
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THE MAXIMUM BORROWING AVAILABILITY UNDER OUR REVOLVING CREDIT FACILITY AND TERM LOAN MAY BE INCREASED TO UP TO $2.3 BILLION ON A COMBINED BASIS IN CERTAIN CIRCUMSTANCES; HOWEVER, INCREASING THE MAXIMUM BORROWING AVAILABILITY UNDER OUR REVOLVING CREDIT FACILITY AND TERM LOAN IS SUBJECT TO OUR OBTAINING ADDITIONAL COMMITMENTS FROM LENDERS, WHICH MAY NOT OCCUR.
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THE PREMIUMS USED TO DETERMINE THE INTEREST RATE PAYABLE ON OUR REVOLVING CREDIT FACILITY AND TERM LOAN AND THE FACILITY FEE PAYABLE ON OUR REVOLVING CREDIT FACILITY ARE BASED ON OUR CREDIT RATINGS. FUTURE CHANGES IN OUR CREDIT RATINGS MAY CAUSE THE INTEREST AND FEES WE PAY TO INCREASE.
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WE HAVE THE OPTION TO EXTEND THE MATURITY DATE OF OUR REVOLVING CREDIT FACILITY UPON PAYMENT OF A FEE AND MEETING OTHER CONDITIONS; HOWEVER, THE APPLICABLE CONDITIONS MAY NOT BE MET.
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THE BUSINESS AND PROPERTY MANAGEMENT AGREEMENTS BETWEEN US AND RMR LLC HAVE CONTINUING 20 YEAR TERMS. HOWEVER, THOSE AGREEMENTS PERMIT EARLY TERMINATION IN CERTAIN CIRCUMSTANCES. ACCORDINGLY, WE CANNOT BE SURE THAT THESE AGREEMENTS WILL REMAIN IN EFFECT FOR CONTINUING 20 YEAR TERMS.
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WE BELIEVE THAT OUR RELATIONSHIPS WITH OUR RELATED PARTIES, INCLUDING RMR LLC, RMR INC., TA, SONESTA, AIC AND OTHERS AFFILIATED WITH THEM MAY BENEFIT US AND PROVIDE US WITH COMPETITIVE ADVANTAGES IN OPERATING AND GROWING OUR BUSINESS. HOWEVER, THE ADVANTAGES WE BELIEVE WE MAY REALIZE FROM THESE RELATIONSHIPS MAY NOT MATERIALIZE.
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RMR INC. MAY REDUCE THE AMOUNT OF ITS DISTRIBUTIONS TO ITS SHAREHOLDERS, INCLUDING US.
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MARRIOTT INTERNATIONAL, INC., OR MARRIOTT, HAS NOTIFIED US THAT IT DOES NOT INTEND TO EXTEND ITS LEASE FOR OUR RESORT HOTEL ON KAUAI, HAWAII WHEN THAT LEASE EXPIRES ON DECEMBER 31, 2019 AND WE INTEND TO HAVE DISCUSSIONS WITH MARRIOTT ABOUT THE FUTURE
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WE HAVE ADVISED MORGANS HOTEL GROUP, OR MORGANS, THAT THE CLOSING OF ITS MERGER WITH SBE ENTERTAINMENT GROUP, LLC, OR SBE, WAS A VIOLATION OF OUR AGREEMENT WITH MORGANS, WE BEGAN A LITIGATION FOR UNLAWFUL DETAINER AGAINST MORGANS AND SBE TO COMPEL MORGANS AND SBE TO SURRENDER POSSESSION OF THE SAN FRANCISCO HOTEL WHICH MORGANS LEASES FROM US, AND WE ARE IN DISCUSSIONS WITH MORGANS AND SBE REGARDING THIS MATTER. THE OUTCOME OF THIS PENDING LITIGATION AND OF OUR DISCUSSIONS WITH MORGANS AND SBE IS NOT ASSURED BUT WE BELIEVE THAT MORGANS MAY SURRENDER POSSESSION OF THIS HOTEL OR THAT THE COURT WILL DETERMINE THAT MORGANS AND SBE HAVE BREACHED THE LEASE. WE ALSO BELIEVE THAT THIS HOTEL MAY REQUIRE SUBSTANTIAL CAPITAL INVESTMENT TO REMAIN COMPETITIVE IN ITS MARKET. THE CONTINUATION OF OUR DISPUTE WITH MORGANS AND SBE REQUIRES US TO EXPEND LEGAL FEES AND THE RESULT OF THIS DISPUTE MAY CAUSE US SOME LOSS OF RENT AT LEAST UNTIL THIS HOTEL MAY BE RENOVATED AND OPERATIONS IMPROVE. LITIGATION AND DISPUTES WITH TENANTS OFTEN PRODUCE UNEXPECTED RESULTS AND WE CAN PROVIDE NO ASSURANCE REGARDING THE RESULTS OF THIS DISPUTE.
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Page
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1
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32
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52
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52
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54
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54
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55
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56
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57
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79
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80
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80
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80
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81
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81
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81
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81
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82
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82
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83
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89
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Service Level
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Chain Scale
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Full
Service
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Select
Service
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Extended
Stay
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Total
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Luxury
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4
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—
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—
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4
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Upper Upscale
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6
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—
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—
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6
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Upscale
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29
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95
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54
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178
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Upper Midscale
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7
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—
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51
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58
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Midscale
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—
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—
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77
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77
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Totals
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46
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95
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182
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323
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Minimum Returns or Minimum Rent
. All of our agreements require our managers or tenants to pay to us annual minimum returns or minimum rent.
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Additional Returns or Percentage Rent
. In addition, our hotel management agreements provide for payment of additional returns to us generally based on excess cash flows after payment of hotel operating expenses, funding of the required property maintenance reserve, if any, payment of our minimum returns, payment of management fees and in certain instances, replenishment of the security deposit or guarantee. Certain of our lease agreements require payment of percentage rent to us based on increases in gross property revenues over threshold amounts.
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Long Terms
. Our management agreements and leases generally have initial terms of 15 years or more. The weighted average term remaining for our agreements (weighted by our investment) as of
December 31, 2017
is 15.1 years, without giving effect to any renewal options our managers or tenants may have.
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Pooled Agreements
. All but two of our properties are included in one of 12 portfolio agreements. In all but one of our portfolio agreements, the manager’s or tenant’s obligations to us with respect to each property in a portfolio
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Geographic Diversification
. The properties included in each portfolio agreement are geographically diversified.
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Strategic Locations
. Our properties are located in the vicinity of major demand generators such as large suburban office parks, urban centers, airports, medical or educational facilities or major tourist attractions for hotels and typically at or near exits along interstate highways for travel centers.
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All or None Renewals
. All manager or tenant renewal options for each portfolio agreement of our properties may only be exercised on an all or none basis and not for separate properties.
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Property Maintenance
. Most of our hotel agreements require the deposit of 5% to 6% of annual gross hotel revenues into escrows to fund periodic renovations. Our travel center leases require the tenants to maintain the leased travel centers, including structural and non-structural components.
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Security Features
. Most of our management agreements or leases include various terms intended to secure the payments to us, including some or all of the following: cash security deposits which we receive but do not escrow; subordination of management fees payable to the operator to some or all of our minimum return or rent; and full or limited guarantees from the manager’s or tenant’s parent company. As of
December 31, 2017
, nine of our 12 portfolio agreements and one hotel leased to a third party, a total of
198
hotels and
199
travel centers, have minimum returns or minimum rent payable to us which are subject to full or limited guarantees or are backed by security deposits. These properties represent
74.4%
of our total minimum returns and minimum rents at
December 31, 2017
. We do not have any security deposits or guarantees for three of our seven hotel portfolio agreements or one hotel we lease to a third party, a total of
125
hotels, representing
25.6%
of our total annual minimum returns and minimum rents as of
December 31, 2017
. Accordingly, the minimum returns we are paid under these agreements will depend exclusively upon the performance of the hotels.
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Management Fees
. Management fees under most of our management agreements are subordinate to payment of our annual minimum returns. Our managers also have the ability to earn incentive management fees generally based on excess cash flows after payment of hotel operating expenses, funding of the required property maintenance reserve, if any, payment of our minimum returns, payment of management fees and in certain instances, replenishment of the security deposit or guarantee.
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Historical and projected cash flows;
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The competitive market environment and the current or potential market position of each property;
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The tax and regulatory circumstances of the market area in which the property is located;
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The availability of a qualified manager or lessee;
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The financial strength of the proposed manager or lessee;
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The amount and type of financial support available from the proposed manager or lessee;
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The property’s design, construction quality, physical condition and age and expected capital expenditures that may be needed to maintain the property or to enhance its operation;
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The size of the property;
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The location and type of property;
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The estimated replacement cost, capital improvement requirements and proposed acquisition price of the property;
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Our weighted average long term cost of capital compared to projected returns we may realize by owning the property;
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The reputation of any operator with which the property is or may become affiliated;
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The level of services and amenities offered at the property;
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The proposed management agreement or lease terms;
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The brand under which the property operates or is expected to operate;
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The strategic fit of the property or investment with the rest of our portfolio and our own plans; and
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The existence of alternative sources, uses or needs for our capital and our debt leverage.
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The property’s current and expected future performance;
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The proposed or expected sale price;
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The capital required to maintain the property;
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The strategic fit of the property with the rest of our portfolio and with our plans;
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The manager’s or tenant’s desire to operate the property;
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The manager’s or tenant’s desire to cease operation of the property;
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Our intended use of the proceeds we may realize from the sale of a property;
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The existence of alternative sources, uses or needs for our capital and our debt leverage; and
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The tax implications to us and our shareholders of any proposed disposition.
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a bank, insurance company or other financial institution;
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a regulated investment company or REIT;
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a subchapter S corporation;
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a broker, dealer or trader in securities or foreign currency;
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a person who marks-to-market our shares for U.S. federal income tax purposes;
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a U.S. shareholder (as defined below) that has a functional currency other than the U.S. dollar;
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a person who acquires or owns our shares in connection with employment or other performance of services;
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a person subject to alternative minimum tax;
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a person who acquires or owns our shares as part of a straddle, hedging transaction, constructive sale transaction, constructive ownership transaction or conversion transaction, or as part of a “synthetic security” or other integrated financial transaction;
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a person who owns 10% or more (by vote or value, directly or constructively under the IRC) of any class of our shares;
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a U.S. expatriate;
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a non-U.S. shareholder (as defined below) whose investment in our shares is effectively connected with the conduct of a trade or business in the United States;
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a nonresident alien individual present in the United States for 183 days or more during an applicable taxable year;
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a “qualified shareholder” (as defined in Section 897(k)(3)(A) of the IRC);
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a “qualified foreign pension fund” (as defined in Section 897(l)(2) of the IRC) or any entity wholly owned by one or more qualified foreign pension funds;
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a person subject to special tax accounting rules as a result of their use of applicable financial statements (within the meaning of Section 451(b)(3) of the IRC); or
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except as specifically described in the following summary, a trust, estate, tax-exempt entity or foreign person.
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an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under the federal income tax laws;
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an entity treated as a corporation for federal income tax purposes that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to federal income taxation regardless of its source; or
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a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or, to the extent provided in Treasury regulations, a trust in existence on August 20, 1996 that has elected to be treated as a domestic trust;
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We will be taxed at regular corporate income tax rates on any undistributed “real estate investment trust taxable income,” determined by including our undistributed ordinary income and net capital gains, if any.
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If we have net income from the disposition of “foreclosure property,” as described in Section 856(e) of the IRC, that is held primarily for sale to customers in the ordinary course of a trade or business or other nonqualifying income from foreclosure property, we will be subject to tax on this income at the highest regular corporate income tax rate.
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If we have net income from “prohibited transactions”—that is, dispositions at a gain of inventory or property held primarily for sale to customers in the ordinary course of a trade or business other than dispositions of foreclosure
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If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to tax at a 100% rate on the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year.
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If we fail to satisfy any of the REIT asset tests described below (other than a de minimis failure of the 5% or 10% asset tests) due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to a tax equal to the greater of $50,000 or the highest regular corporate income tax rate multiplied by the net income generated by the nonqualifying assets that caused us to fail the test.
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If we fail to satisfy any provision of the IRC that would result in our failure to qualify for taxation as a REIT (other than violations of the REIT gross income tests or violations of the REIT asset tests described below) due to reasonable cause and not due to willful neglect, we may retain our qualification for taxation as a REIT but will be subject to a penalty of $50,000 for each failure.
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If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year and any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the amounts actually distributed.
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If we acquire a REIT asset where our adjusted tax basis in the asset is determined by reference to the adjusted tax basis of the asset in the hands of a C corporation, under specified circumstances we may be subject to federal income taxation on all or part of the built-in gain (calculated as of the date the property ceased being owned by the C corporation) on such asset. We generally have not sold and do not expect to sell assets if doing so would result in the imposition of a material built-in gains tax liability; but if and when we do sell assets that may have associated built-in gains tax exposure, then we expect to make appropriate provision for the associated tax liabilities on our financial statements.
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If we acquire a corporation in a transaction where we succeed to its tax attributes, to preserve our qualification for taxation as a REIT we must generally distribute all of the C corporation earnings and profits inherited in that acquisition, if any, no later than the end of our taxable year in which the acquisition occurs. However, if we fail to do so, relief provisions would allow us to maintain our qualification for taxation as a REIT provided we distribute any subsequently discovered C corporation earnings and profits and pay an interest charge in respect of the period of delayed distribution.
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Our subsidiaries that are C corporations, including our TRSs, generally will be required to pay federal corporate income tax on their earnings, and a 100% tax may be imposed on any transaction between us and one of our TRSs that does not reflect arm’s length terms.
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that is managed by one or more trustees or directors;
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the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest;
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that would be taxable, but for Sections 856 through 859 of the IRC, as a domestic C corporation;
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that is not a financial institution or an insurance company subject to special provisions of the IRC;
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the beneficial ownership of which is held by 100 or more persons;
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that is not “closely held,” meaning that during the last half of each taxable year, not more than 50% in value of the outstanding shares are owned, directly or indirectly, by five or fewer “individuals” (as defined in the IRC to include specified tax-exempt entities); and
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that meets other tests regarding the nature of its income and assets and the amount of its distributions, all as described below.
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not directly or indirectly operate or manage a lodging facility or a health care facility; and
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not directly or indirectly provide to any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated, except that in limited circumstances a subfranchise, sublicense or similar right can be granted to an independent contractor to operate or manage a lodging facility or a health care facility.
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At least 75% of our gross income for each taxable year (excluding: (a) gross income from sales or other dispositions of property subject to the 100% tax on prohibited transactions; (b) any income arising from “clearly identified” hedging transactions that we enter into to manage interest rate or price changes or currency fluctuations with respect to borrowings we incur to acquire or carry real estate assets; (c) any income arising from “clearly identified” hedging transactions that we enter into primarily to manage risk of currency fluctuations relating to any item that qualifies under the 75% gross income test or the 95% gross income test (or any property that generates such income or gain); (d) beginning with our 2016 taxable year, any income from “clearly identified” hedging transactions that we enter into to manage risk associated with extant, qualified hedges of liabilities or properties that have been extinguished or disposed; (e) real estate foreign exchange gain (as defined in Section 856(n)(2) of the IRC); and (f) income from the repurchase or discharge of indebtedness) must be derived from investments relating to real property, including “rents from real property” as defined under
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At least 95% of our gross income for each taxable year (excluding: (a) gross income from sales or other dispositions of property subject to the 100% tax on prohibited transactions; (b) any income arising from “clearly identified” hedging transactions that we enter into to manage interest rate or price changes or currency fluctuations with respect to borrowings we incur to acquire or carry real estate assets; (c) any income arising from “clearly identified” hedging transactions that we enter into primarily to manage risk of currency fluctuations relating to any item that qualifies under the 75% gross income test or the 95% gross income test (or any property that generates such income or gain); (d) beginning with our 2016 taxable year, any income from “clearly identified” hedging transactions that we enter into to manage risk associated with extant, qualified hedges of liabilities or properties that have been extinguished or disposed; (e) passive foreign exchange gain (as defined in Section 856(n)(3) of the IRC); and (f) income from the repurchase or discharge of indebtedness) must be derived from a combination of items of real property income that satisfy the 75% gross income test described above, dividends, interest, or gains from the sale or disposition of stock, securities or real property (but excluding in all cases any gains subject to the 100% tax on prohibited transactions).
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The amount of rent received generally must not be based on the income or profits of any person, but may be based on a fixed percentage or percentages of receipts or sales.
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Rents do not qualify if the REIT owns 10% or more by vote or value of stock of the tenant (or 10% or more of the interests in the assets or net profits of the tenant, if the tenant is not a corporation), whether directly or after application of attribution rules. We generally do not intend to lease property to any party if rents from that property would not qualify as “rents from real property,” but application of the 10% ownership rule is dependent upon complex attribution rules and circumstances that may be beyond our control. In this regard, we already own close to, but less than, 10% of the outstanding common shares of TA, and TA has undertaken to limit its redemptions and repurchases of outstanding common shares so that we do not come to own 10% or more of its outstanding common shares. Our declaration of trust and bylaws generally disallow transfers or purported acquisitions, directly or by attribution, of our shares to the extent necessary to maintain our qualification for taxation as a REIT under the IRC. Nevertheless, we cannot be sure that these restrictions will be effective to prevent our qualification for taxation as a REIT from being jeopardized under the 10% affiliated tenant rule. Furthermore, we cannot be sure that we will be able to monitor and enforce these restrictions, nor will our shareholders necessarily be aware of ownership of our shares attributed to them under the IRC’s attribution rules.
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There is a limited exception to the above prohibition on earning “rents from real property” from a 10% affiliated tenant where the tenant is a TRS. If at least 90% of the leased space of a property is leased to tenants other than TRSs and 10% affiliated tenants, and if the TRS’s rent to the REIT for space at that property is substantially comparable to the rents paid by nonaffiliated tenants for comparable space at the property, then otherwise qualifying rents paid by the TRS to the REIT will not be disqualified on account of the rule prohibiting 10% affiliated tenants.
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There is an additional exception to the above prohibition on earning “rents from real property” from a 10% affiliated tenant. For this additional exception to apply, a real property interest in a “qualified lodging facility” must be leased by the REIT to its TRS, and the facility must be operated on behalf of the TRS by a person who is an “eligible independent contractor,” all as described in Sections 856(d)(8)-(9) of the IRC. As described below, we believe our leases with our TRSs have satisfied and will continue to satisfy these requirements.
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In order for rents to qualify, we generally must not manage the property or furnish or render services to the tenants of the property, except through an independent contractor from whom we derive no income or through one of our TRSs. There is an exception to this rule permitting a REIT to perform customary management and tenant services of the sort that a tax-exempt organization could perform without being considered in receipt of “unrelated business taxable income,” or UBTI, under Section 512(b)(3) of the IRC. In addition, a de minimis amount of
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If rent attributable to personal property leased in connection with a lease of real property is 15% or less of the total rent received under the lease, then the rent attributable to personal property qualifies as “rents from real property.” None of the rent attributable to personal property received under a lease will qualify if this 15% threshold is exceeded. The portion of rental income treated as attributable to personal property is determined according to the ratio of the fair market value of the personal property to the total fair market value of the real and personal property that is rented.
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In addition, “rents from real property” includes both charges we receive for services customarily rendered in connection with the rental of comparable real property in the same geographic area, even if the charges are separately stated, as well as charges we receive for services provided by our TRSs when the charges are not separately stated. Whether separately stated charges received by a REIT for services that are not geographically customary and provided by a TRS are included in “rents from real property” has not been addressed clearly by the IRS in published authorities; however, our counsel, Sullivan & Worcester LLP, is of the opinion that, although the matter is not free from doubt, “rents from real property” also includes charges we receive for services provided by our TRSs when the charges are separately stated, even if the services are not geographically customary. Accordingly, we believe that our revenues from TRS-provided services, whether the charges are separately stated or not, qualify as “rents from real property” because the services satisfy the geographically customary standard, because the services have been provided by a TRS, or for both reasons.
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that is acquired by a REIT as a result of the REIT having bid on such property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default or when default was imminent on a lease of such property or on indebtedness that such property secured;
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for which any related loan acquired by the REIT was acquired at a time when the default was not imminent or anticipated; and
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for which the REIT makes a proper election to treat the property as foreclosure property.
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on which a lease is entered into for the property that, by its terms, will give rise to income that does not qualify for purposes of the 75% gross income test, or any amount is received or accrued, directly or indirectly, pursuant to a
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on which any construction takes place on the property, other than completion of a building or any other improvement where more than 10% of the construction was completed before default became imminent and other than specifically exempted forms of maintenance or deferred maintenance; or
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which is more than 90 days after the day on which the REIT acquired the property and the property is used in a trade or business which is conducted by the REIT, other than through an independent contractor from whom the REIT itself does not derive or receive any income or a TRS.
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own our assets for investment with a view to long-term income production and capital appreciation;
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engage in the business of developing, owning, leasing and managing our existing properties and acquiring, developing, owning, leasing and managing new properties; and
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make occasional dispositions of our assets consistent with our long-term investment objectives.
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our failure to meet the test is due to reasonable cause and not due to willful neglect; and
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after we identify the failure, we file a schedule describing each item of our gross income included in the 75% gross income test or the 95% gross income test for that taxable year.
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At least 75% of the value of our total assets must consist of “real estate assets,” defined as real property (including interests in real property and interests in mortgages on real property or on interests in real property), ancillary personal property to the extent that rents attributable to such personal property are treated as rents from real property in accordance with the rules described above (beginning with our 2016 taxable year), cash and cash items, shares in other REITs, debt instruments issued by “publicly offered REITs” as defined in Section 562(c)(2) of the IRC (beginning with our 2016 taxable year), government securities and temporary investments of new
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Not more than 25% of the value of our total assets may be represented by securities other than those securities that count favorably toward the preceding 75% asset test.
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Of the investments included in the preceding 25% asset class, the value of any one non-REIT issuer’s securities that we own may not exceed 5% of the value of our total assets. In addition, we may not own more than 10% of the vote or value of any one non-REIT issuer’s outstanding securities, unless the securities are “straight debt” securities or otherwise excepted as discussed below. Our stock and other securities in a TRS are exempted from these 5% and 10% asset tests.
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Not more than 20% (25% before our 2018 taxable year) of the value of our total assets may be represented by stock or other securities of our TRSs.
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Beginning with our 2016 taxable year, not more than 25% of the value of our total assets may be represented by “nonqualified publicly offered REIT debt instruments” as defined in Section 856(c)(5)(L)(ii) of the IRC.
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(1)
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the sum of 90% of our “real estate investment trust taxable income” and 90% of our net income after tax, if any, from property received in foreclosure, over
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(2)
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the amount by which our noncash income (e.g., imputed rental income or income from transactions inadvertently failing to qualify as like-kind exchanges) exceeds 5% of our “real estate investment trust taxable income.”
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(1)
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long-term capital gains, if any, recognized on the disposition of our shares;
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(2)
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our distributions designated as long-term capital gain dividends (except to the extent attributable to real estate depreciation recapture, in which case the distributions are subject to a maximum 25% federal income tax rate);
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(3)
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our dividends attributable to dividend income, if any, received by us from C corporations such as TRSs;
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(4)
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our dividends attributable to earnings and profits that we inherit from C corporations; and
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(5)
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our dividends to the extent attributable to income upon which we have paid federal corporate income tax (such as taxes on built-in gains), net of the corporate income taxes thereon.
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we will be taxed at regular corporate capital gains tax rates on retained amounts;
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(2)
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each of our U.S. shareholders will be taxed on its designated proportionate share of our retained net capital gains as though that amount were distributed and designated as a capital gain dividend;
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(3)
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each of our U.S. shareholders will receive a credit or refund for its designated proportionate share of the tax that we pay;
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(4)
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each of our U.S. shareholders will increase its adjusted basis in our shares by the excess of the amount of its proportionate share of these retained net capital gains over the U.S. shareholder’s proportionate share of the tax that we pay; and
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(5)
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both we and our corporate shareholders will make commensurate adjustments in our respective earnings and profits for federal income tax purposes.
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provides the U.S. shareholder’s correct taxpayer identification number;
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certifies that the U.S. shareholder is exempt from backup withholding because (a) it comes within an enumerated exempt category, (b) it has not been notified by the IRS that it is subject to backup withholding, or (c) it has been notified by the IRS that it is no longer subject to backup withholding; and
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certifies that it is a U.S. citizen or other U.S. person.
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their investment in our shares or other securities satisfies the diversification requirements of ERISA;
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the investment is prudent in light of possible limitations on the marketability of our shares;
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they have authority to acquire our shares or other securities under the applicable governing instrument and Title I of ERISA; and
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the investment is otherwise consistent with their fiduciary responsibilities.
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any restriction on or prohibition against any transfer or assignment that would result in a termination or reclassification for federal or state tax purposes, or would otherwise violate any state or federal law or court order;
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any requirement that advance notice of a transfer or assignment be given to the issuer and any requirement that either the transferor or transferee, or both, execute documentation setting forth representations as to compliance
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any administrative procedure that establishes an effective date, or an event prior to which a transfer or assignment will not be effective; and
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any limitation or restriction on transfer or assignment that is not imposed by the issuer or a person acting on behalf of the issuer.
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Increasing truck fuel efficiency may adversely impact TA’s business. Government regulation and increasing fuel prices are causing truck manufacturers and TA’s trucking customers to focus on fuel efficiency. The largest part of TA’s business consists of selling motor fuel. If TA’s trucking customers purchase less motor fuel because their trucks are operated more fuel efficiently, TA’s financial results will decline unless it is sufficiently able to offset those declines by selling substitute or other products or services, gaining market share, increasing its gross margins per gallon of fuel sold or reducing its operating costs.
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TA’s operating margins are narrow, and fuel sales comprise the majority of TA’s revenues. Historically, TA’s fuel margins per gallon have declined during periods of rising fuel prices, and during the recent U.S. recession and periods of historically high and volatile fuel prices, TA realized large operating losses.
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The trucking industry is the primary customer for TA’s goods and services. When the U.S. economy declines, demand for goods moved by trucks declines, and in turn demand for TA’s products and services typically declines.
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TA’s indebtedness and rent obligations are substantial. A decline in TA’s revenues or an increase in its expenses may make it difficult or impossible for TA to make payments of interest and principal on its debt or meet all of its rent obligations. TA’s substantial indebtedness and rent obligations may also place TA at a disadvantage in relation to competitors that have lower relative debt levels.
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Increasing fuel prices and fuel price volatility have various adverse impacts upon TA’s business. For example, high fuel prices result in higher truck shipping costs, which causes shippers to consider alternative means for transporting freight and therefore reduces trucking business and, in turn, TA’s business. Higher fuel prices may also result in less disposable income for TA’s customers to purchase TA’s non-fuel goods and services. Higher and more volatile fuel commodity prices increase the working capital needed to maintain TA’s fuel inventory and receivables, and this increases TA’s costs of doing business. Further, increases in fuel prices may place TA at a cost disadvantage to its competitors that may have larger fuel inventory or forward contracts executed during periods of lower fuel prices.
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Climate change and other environmental legislation and regulation, and market reaction to such legislation and regulation, may decrease demand for TA’s major product, diesel fuel, and require TA to make significant changes to its business and to make capital or other expenditures, which may adversely affect its business.
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If the trucking industry fails to satisfy market demands for transporting goods, other means for transporting goods may be chosen, which may result in reduced business for the trucking industry and may negatively impact TA’s business, results of operations and liquidity.
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To mitigate the risks arising from fuel price volatility, TA generally maintains limited fuel inventory. Accordingly, an interruption in TA’s fuel supplies, which may be caused by local conditions, such as a malfunction in a particular pipeline or terminal, by weather related events, such as hurricanes in the areas where petroleum or natural gas is extracted or refined, or by national or international conditions, such as government rationing, acts of terrorism, wars and the like, would materially adversely affect TA’s business.
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TA’s business is subject to laws relating to the protection of the environment. The travel centers and convenience stores TA operates include fueling areas, truck repair and maintenance facilities and tanks for the storage and dispensing of petroleum products, natural gas, waste and other hazardous substances, all of which create the potential for environmental damage. As a result, TA regularly incurs environmental clean up costs. TA cannot predict what environmental legislation or regulations may be enacted or how existing laws or regulations will be administered or interpreted; more stringent laws, more vigorous enforcement policies or stricter interpretation of existing laws in the future could cause TA to expend significant amounts or experience losses.
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The travel center industry is highly competitive and principally consists of a small number of large competitors. These competitive pressures could result in a reduction of TA’s gross margins or an increase in TA’s expenses or capital improvement costs, which could negatively affect TA’s profitability and liquidity.
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Increased use of efficient and alternative fuels and any widespread adoption of alternative transportation technologies may reduce demand for TA's products and services; for example, electronic or battery powered trucks may reduce the demand for petroleum based fuels which are TA's principal products or driverless trucks may reduce the number of people who are employed as professional drivers who are TA's principal customers.
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The convenience store and restaurant industries are also highly competitive and fragmented with ease of entry and constant change in the number and types of retailers offering products and services and restaurants similar to those TA provides. Increased competition or new entrants to the convenience store and restaurant industries could reduce TA’s gross margins.
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competition from other hotels in our markets, or an oversupply or over building of hotels in our markets;
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competition from alternative lodging options such as cruise ships, timeshares, vacation rentals or sharing services such as Airbnb, in our markets;
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changes in marketing and distribution for the industry including the ability of third party internet and other travel intermediaries to attract and retain customers;
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increased operating costs, including wages, benefits, insurance, property taxes and energy, due to inflation and other factors, which may not be offset in the future by increased room rates;
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labor strikes, disruptions or lockouts that may impact operating performance;
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dependence on demand from business and leisure travelers, which may fluctuate and be seasonal;
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increases in energy costs, airline fares and other expenses related to travel, which may negatively affect traveling;
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decreases in demand for business and leisure travel due to terrorism, terrorism alerts and warnings, military actions, pandemics or other medical events; and
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changes in customer preferences for various types of hotels or hotel locations.
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As noted above under the risk factor “Current government policies regarding interest rates and trade policies may cause a recession,” increasing market interest rates may cause a decline in general economic conditions and adversely impact our managers, tenants, hotels, travel centers and arrangements with our managers and tenants.
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Investors may consider whether to buy or sell our common shares based upon the distribution rate on our common shares relative to the then prevailing market interest rates. If market interest rates go up, investors may expect a
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Amounts outstanding under our revolving credit facility and term loan require interest to be paid at variable interest rates. When interest rates increase, our interest costs will increase, which could adversely affect our cash flows, our ability to pay principal and interest on our debt, our cost of refinancing our fixed rate debts when they become due and our ability to make or sustain distributions to our shareholders.
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Property values are often determined, in part, based upon a capitalization of rental income formula. When market interest rates increase, property investors often demand higher capitalization rates and that causes property values to decline. Increases in interest rates could lower the value of our properties and cause the value of our securities to decline.
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competition from other investors, including publicly traded and private REITs, numerous financial institutions, individuals, foreign investors and other public and private companies;
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our long term cost of capital;
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contingencies in our acquisition agreements; and
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the availability and terms of financing.
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we do not believe that it is possible to understand fully a property before it is owned and operated for a reasonable period of time, and, notwithstanding pre-acquisition due diligence, we could acquire a property that contains undisclosed defects in design or construction or which was not properly staffed;
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the market in which an acquired property is located may experience unexpected changes that adversely affect the property’s value;
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the occupancy of and rents and returns from properties that we acquire may decline during our ownership;
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property operating costs for our acquired properties may be higher than anticipated and our acquired properties may not yield expected returns;
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we may acquire properties subject to unknown liabilities and without any recourse, or with limited recourse, such as liability for the clean up of undisclosed environmental contamination or for claims by tenants, vendors or other persons related to actions taken by former owners of the properties; and
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acquired properties might require significant management attention that would otherwise be devoted to our other business activities.
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the illiquid nature of real estate markets, which limits our ability to sell our assets rapidly to respond to changing market conditions;
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the subjectivity of real estate valuations and changes in such valuations over time;
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costs that may be incurred relating to property maintenance and repair, and the need to make expenditures due to changes in government regulations; and
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liabilities and litigations arising from injuries on our properties or otherwise incidental to the ownership of our properties.
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Laws affecting the operations of hotels in foreign countries may require us to assume responsibility for payments due to employees of hotels we own or in which we invest.
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Foreign laws affecting real estate may restrict the ability of entities organized or controlled by persons outside those countries, like us, to own or make management decisions affecting the properties in which we invest.
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In most foreign countries, we will not have the same or similar tax status as we have in the United States, we will be subject to local taxes, and our net earnings may be less than we would realize by making investments in the United States.
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Most of the hotels located in foreign countries in which we would invest will conduct business in local currencies rather than in U.S. dollars. We may be able to mitigate some of the risk of changing comparative currency valuations by funding our foreign investments in local currencies; however, it is unlikely we will be able to completely mitigate such foreign currency exchange rate risk.
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Some foreign countries do not have judicial dispute resolution processes which are as efficient or impartial as the U.S. judicial system generally. We may mitigate this risk by making the resolution of disputes which may arise from our foreign investments subject to arbitration; however, the enforcement of arbitration awards will remain subject to local judicial processes and there may be no way for us to mitigate the risks of our dealings in a foreign legal system.
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Investments by U.S. entities like us in foreign countries may be particularly subject to terrorism risks as it relates to the ownership of prominently identified properties such as hotels.
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The political systems in certain foreign countries are less stable than in the United States, and certain foreign governments have in the past expropriated properties owned by U.S. entities like us without paying fair compensation.
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the division of our Trustees into three classes, with the term of one class expiring each year, which could delay a change of control of us;
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the authority of our Board of Trustees, and not our shareholders, to adopt, amend or repeal our bylaws and to fill vacancies on our Board of Trustees;
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shareholder voting standards which require a supermajority for approval of certain actions;
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the fact that only our Board of Trustees, or, if there are no Trustees, our officers, may call shareholder meetings and that shareholders are not entitled to act without a meeting;
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required qualifications for an individual to serve as a Trustee and a requirement that certain of our Trustees be “Managing Trustees” and other Trustees be “Independent Trustees,” as defined in our governing documents;
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limitations on the ability of our shareholders to propose nominees for election as Trustees and propose other business to be considered at a meeting of our shareholders;
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limitations on the ability of our shareholders to remove our Trustees;
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requirements that shareholders comply with regulatory requirements (including Nevada and Louisiana gaming and Indiana insurance licensing requirements) affecting us which could effectively limit share ownership of us, including in some cases, to 5% of our outstanding shares; and
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the authority of our Board of Trustees to create and issue new classes or series of shares (including shares with voting rights and other rights and privileges that may deter a change in control) and issue additional common shares.
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actual receipt of an improper benefit or profit in money, property or services; or
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|
active and deliberate dishonesty by the Trustee or officer that was established by a final judgment as being material to the cause of action adjudicated.
|
•
|
our TRSs may not directly or indirectly operate or manage a lodging facility, as defined by the IRC;
|
•
|
the leases to our TRSs must be respected as true leases for federal income tax purposes and not as service contracts, partnerships, joint ventures, financings or other types of arrangements;
|
•
|
the leased properties must constitute qualified lodging facilities (including customary amenities and facilities) under the IRC;
|
•
|
our leased properties must be managed and operated on behalf of the TRSs by independent contractors who are less than 35% affiliated with us and who are actively engaged (or have affiliates so engaged) in the trade or business of managing and operating qualified lodging facilities for persons unrelated to us; and
|
•
|
the rental and other terms of the leases must be arm’s length.
|
•
|
our ability to make or sustain the rate of distributions will be adversely affected if any of the risks described in this Annual Report on Form 10-K occur;
|
•
|
our making of distributions is subject to compliance with restrictions contained in our credit agreement and may be subject to restrictions in future debt obligations we may incur; and
|
•
|
the timing and amount of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including our financial condition, our results of operations, our liquidity, our capital requirements, our funds from operations, or FFO, our Normalized FFO, restrictive covenants in our financial or other contractual arrangements, general economic conditions in the United States, requirements under the IRC to remain qualified for taxation as a REIT and restrictions under the laws of Maryland.
|
•
|
the extent of investor interest in our securities;
|
•
|
the general reputation of REITs and externally managed companies and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate based companies or by other issuers less sensitive to rises in interest rates;
|
•
|
our underlying asset value;
|
•
|
investor confidence in the stock and bond markets, generally;
|
•
|
market interest rates;
|
•
|
national economic conditions;
|
•
|
changes in tax laws;
|
•
|
changes in our credit ratings; and
|
•
|
general market conditions.
|
|
|
Hotels
|
|
Travel Centers
|
|
All Properties
|
|||||||||||||||||||||||||||
|
|
Number of
Properties
|
|
Undepreciated Carrying Value
|
|
Depreciated Carrying Value
|
|
Number of
Properties
|
|
Undepreciated Carrying Value
|
|
Depreciated Carrying Value
|
|
Total Number of Properties
|
|
Total Undepreciated Carrying Value
|
|
Total Depreciated Carrying Value
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Location of Properties
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Alabama
|
|
6
|
|
|
$
|
45,979
|
|
|
$
|
33,872
|
|
|
4
|
|
|
$
|
77,422
|
|
|
$
|
52,429
|
|
|
10
|
|
|
$
|
123,401
|
|
|
$
|
86,301
|
|
Arkansas
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
94,698
|
|
|
58,149
|
|
|
4
|
|
|
94,698
|
|
|
58,149
|
|
||||||
Arizona
|
|
14
|
|
|
168,651
|
|
|
102,128
|
|
|
7
|
|
|
160,931
|
|
|
110,395
|
|
|
21
|
|
|
329,582
|
|
|
212,523
|
|
||||||
California
|
|
36
|
|
|
882,024
|
|
|
606,282
|
|
|
11
|
|
|
200,003
|
|
|
161,612
|
|
|
47
|
|
|
1,082,027
|
|
|
767,894
|
|
||||||
Colorado
|
|
6
|
|
|
148,063
|
|
|
124,008
|
|
|
3
|
|
|
43,236
|
|
|
28,424
|
|
|
9
|
|
|
191,299
|
|
|
152,432
|
|
||||||
Connecticut
|
|
1
|
|
|
5,061
|
|
|
3,806
|
|
|
3
|
|
|
35,733
|
|
|
17,802
|
|
|
4
|
|
|
40,794
|
|
|
21,608
|
|
||||||
Delaware
|
|
2
|
|
|
28,557
|
|
|
21,502
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
28,557
|
|
|
21,502
|
|
||||||
Florida
|
|
14
|
|
|
267,528
|
|
|
186,768
|
|
|
7
|
|
|
144,627
|
|
|
104,706
|
|
|
21
|
|
|
412,155
|
|
|
291,474
|
|
||||||
Georgia
|
|
23
|
|
|
424,500
|
|
|
314,575
|
|
|
8
|
|
|
120,550
|
|
|
85,774
|
|
|
31
|
|
|
545,050
|
|
|
400,349
|
|
||||||
Hawaii
|
|
1
|
|
|
92,189
|
|
|
51,229
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
92,189
|
|
|
51,229
|
|
||||||
Iowa
|
|
2
|
|
|
19,052
|
|
|
10,336
|
|
|
1
|
|
|
11,074
|
|
|
7,483
|
|
|
3
|
|
|
30,126
|
|
|
17,819
|
|
||||||
Idaho
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
16,393
|
|
|
11,992
|
|
|
1
|
|
|
16,393
|
|
|
11,992
|
|
||||||
Illinois
|
|
16
|
|
|
385,263
|
|
|
308,305
|
|
|
10
|
|
|
133,810
|
|
|
100,365
|
|
|
26
|
|
|
519,073
|
|
|
408,670
|
|
||||||
Indiana
|
|
3
|
|
|
33,259
|
|
|
18,334
|
|
|
11
|
|
|
155,889
|
|
|
124,133
|
|
|
14
|
|
|
189,148
|
|
|
142,467
|
|
||||||
Kansas
|
|
4
|
|
|
30,443
|
|
|
17,659
|
|
|
1
|
|
|
14,620
|
|
|
12,841
|
|
|
5
|
|
|
45,063
|
|
|
30,500
|
|
||||||
Kentucky
|
|
1
|
|
|
3,007
|
|
|
2,176
|
|
|
3
|
|
|
47,523
|
|
|
30,200
|
|
|
4
|
|
|
50,530
|
|
|
32,376
|
|
||||||
Louisiana
|
|
2
|
|
|
215,671
|
|
|
180,320
|
|
|
7
|
|
|
127,989
|
|
|
87,748
|
|
|
9
|
|
|
343,660
|
|
|
268,068
|
|
||||||
Massachusetts
|
|
14
|
|
|
324,124
|
|
|
233,485
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
324,124
|
|
|
233,485
|
|
||||||
Maryland
|
|
7
|
|
|
159,221
|
|
|
111,587
|
|
|
3
|
|
|
52,402
|
|
|
32,821
|
|
|
10
|
|
|
211,623
|
|
|
144,408
|
|
||||||
Michigan
|
|
12
|
|
|
95,871
|
|
|
69,759
|
|
|
5
|
|
|
52,250
|
|
|
39,842
|
|
|
17
|
|
|
148,121
|
|
|
109,601
|
|
||||||
Minnesota
|
|
4
|
|
|
47,561
|
|
|
32,658
|
|
|
1
|
|
|
7,270
|
|
|
5,396
|
|
|
5
|
|
|
54,831
|
|
|
38,054
|
|
||||||
Missouri
|
|
7
|
|
|
152,516
|
|
|
127,567
|
|
|
5
|
|
|
63,643
|
|
|
39,927
|
|
|
12
|
|
|
216,159
|
|
|
167,494
|
|
||||||
Mississippi
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
22,536
|
|
|
13,415
|
|
|
1
|
|
|
22,536
|
|
|
13,415
|
|
||||||
North Carolina
|
|
14
|
|
|
170,615
|
|
|
123,794
|
|
|
3
|
|
|
43,127
|
|
|
30,350
|
|
|
17
|
|
|
213,742
|
|
|
154,144
|
|
||||||
Nebraska
|
|
2
|
|
|
12,207
|
|
|
10,027
|
|
|
3
|
|
|
43,789
|
|
|
23,743
|
|
|
5
|
|
|
55,996
|
|
|
33,770
|
|
||||||
New Hampshire
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
6,741
|
|
|
4,904
|
|
|
1
|
|
|
6,741
|
|
|
4,904
|
|
||||||
New Jersey
|
|
15
|
|
|
302,973
|
|
|
221,421
|
|
|
4
|
|
|
112,198
|
|
|
77,663
|
|
|
19
|
|
|
415,171
|
|
|
299,084
|
|
||||||
New Mexico
|
|
2
|
|
|
26,098
|
|
|
14,394
|
|
|
6
|
|
|
97,830
|
|
|
55,283
|
|
|
8
|
|
|
123,928
|
|
|
69,677
|
|
||||||
Nevada
|
|
3
|
|
|
50,750
|
|
|
31,768
|
|
|
5
|
|
|
158,858
|
|
|
122,032
|
|
|
8
|
|
|
209,608
|
|
|
153,800
|
|
||||||
New York
|
|
5
|
|
|
120,409
|
|
|
74,007
|
|
|
6
|
|
|
51,044
|
|
|
37,932
|
|
|
11
|
|
|
171,453
|
|
|
111,939
|
|
||||||
Ohio
|
|
11
|
|
|
153,185
|
|
|
133,393
|
|
|
14
|
|
|
188,515
|
|
|
128,004
|
|
|
25
|
|
|
341,700
|
|
|
261,397
|
|
||||||
Oklahoma
|
|
3
|
|
|
32,119
|
|
|
22,680
|
|
|
4
|
|
|
46,949
|
|
|
31,324
|
|
|
7
|
|
|
79,068
|
|
|
54,004
|
|
||||||
Oregon
|
|
1
|
|
|
114,783
|
|
|
108,205
|
|
|
3
|
|
|
42,028
|
|
|
29,711
|
|
|
4
|
|
|
156,811
|
|
|
137,916
|
|
||||||
Pennsylvania
|
|
10
|
|
|
196,824
|
|
|
127,401
|
|
|
9
|
|
|
137,264
|
|
|
92,792
|
|
|
19
|
|
|
334,088
|
|
|
220,193
|
|
||||||
Rhode Island
|
|
2
|
|
|
24,733
|
|
|
18,013
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
24,733
|
|
|
18,013
|
|
||||||
South Carolina
|
|
3
|
|
|
75,844
|
|
|
49,417
|
|
|
4
|
|
|
77,081
|
|
|
62,737
|
|
|
7
|
|
|
152,925
|
|
|
112,154
|
|
||||||
Tennessee
|
|
9
|
|
|
149,271
|
|
|
88,412
|
|
|
8
|
|
|
111,361
|
|
|
84,395
|
|
|
17
|
|
|
260,632
|
|
|
172,807
|
|
||||||
Texas
|
|
36
|
|
|
512,956
|
|
|
326,051
|
|
|
18
|
|
|
398,427
|
|
|
262,465
|
|
|
54
|
|
|
911,383
|
|
|
588,516
|
|
||||||
Utah
|
|
3
|
|
|
65,701
|
|
|
35,771
|
|
|
2
|
|
|
19,684
|
|
|
11,531
|
|
|
5
|
|
|
85,385
|
|
|
47,302
|
|
||||||
Virginia
|
|
15
|
|
|
182,283
|
|
|
108,535
|
|
|
3
|
|
|
55,316
|
|
|
39,784
|
|
|
18
|
|
|
237,599
|
|
|
148,319
|
|
||||||
Vermont
|
|
1
|
|
|
14,381
|
|
|
12,981
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
14,381
|
|
|
12,981
|
|
||||||
Washington
|
|
8
|
|
|
177,839
|
|
|
139,768
|
|
|
2
|
|
|
10,675
|
|
|
5,073
|
|
|
10
|
|
|
188,514
|
|
|
144,841
|
|
||||||
Wisconsin
|
|
1
|
|
|
14,434
|
|
|
8,879
|
|
|
2
|
|
|
19,098
|
|
|
12,604
|
|
|
3
|
|
|
33,532
|
|
|
21,483
|
|
||||||
West Virginia
|
|
1
|
|
|
11,061
|
|
|
6,551
|
|
|
2
|
|
|
15,848
|
|
|
11,573
|
|
|
3
|
|
|
26,909
|
|
|
18,124
|
|
||||||
Wyoming
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
72,184
|
|
|
43,039
|
|
|
4
|
|
|
72,184
|
|
|
43,039
|
|
||||||
|
|
320
|
|
|
5,937,006
|
|
|
4,217,824
|
|
|
199
|
|
|
3,290,616
|
|
|
2,292,393
|
|
|
519
|
|
|
9,227,622
|
|
|
6,510,217
|
|
||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Ontario, Canada
|
|
2
|
|
|
44,734
|
|
|
29,320
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
44,734
|
|
|
29,320
|
|
||||||
Puerto Rico
|
|
1
|
|
|
155,303
|
|
|
103,644
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
155,303
|
|
|
103,644
|
|
||||||
|
|
3
|
|
|
200,037
|
|
|
132,964
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
200,037
|
|
|
132,964
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Grand Total
|
|
323
|
|
|
$
|
6,137,043
|
|
|
$
|
4,350,788
|
|
|
199
|
|
|
$
|
3,290,616
|
|
|
$
|
2,292,393
|
|
|
522
|
|
|
$
|
9,427,659
|
|
|
$
|
6,643,181
|
|
14 hotels
(1)
|
$
|
187,588
|
|
15 travel centers
(2)
|
95,079
|
|
|
Total
|
$
|
282,667
|
|
2016
|
|
High
|
|
Low
|
||||
First Quarter
|
|
$
|
26.66
|
|
|
$
|
20.69
|
|
Second Quarter
|
|
28.80
|
|
|
24.62
|
|
||
Third Quarter
|
|
32.32
|
|
|
28.20
|
|
||
Fourth Quarter
|
|
32.00
|
|
|
26.06
|
|
2017
|
|
High
|
|
Low
|
||||
First Quarter
|
|
$
|
32.63
|
|
|
$
|
29.71
|
|
Second Quarter
|
|
32.68
|
|
|
27.84
|
|
||
Third Quarter
|
|
29.90
|
|
|
26.64
|
|
||
Fourth Quarter
|
|
31.27
|
|
|
27.88
|
|
|
Cash
Distributions
Per
Common Share
|
||||||
|
|||||||
|
|||||||
|
2017
|
|
2016
|
||||
First Quarter
|
$
|
0.51
|
|
|
$
|
0.50
|
|
Second Quarter
|
0.52
|
|
|
0.51
|
|
||
Third Quarter
|
0.52
|
|
|
0.51
|
|
||
Fourth Quarter
|
0.52
|
|
|
0.51
|
|
||
Total
|
$
|
2.07
|
|
|
$
|
2.03
|
|
|
For the Year Ended December 31,
|
|||||||||||||
|
|
|
|
|
Increase
(Decrease)
|
|
% Increase
(Decrease)
|
|||||||
|
2017
|
|
2016
|
|
|
|||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||||
Hotel operating revenues
|
$
|
1,843,501
|
|
|
$
|
1,733,103
|
|
|
$
|
110,398
|
|
|
6.4
|
%
|
Rental income - hotels
|
30,491
|
|
|
30,425
|
|
|
66
|
|
|
0.2
|
%
|
|||
Rental income - travel centers
|
293,273
|
|
|
279,175
|
|
|
14,098
|
|
|
5.0
|
%
|
|||
Total rental income
|
323,764
|
|
|
309,600
|
|
|
14,164
|
|
|
4.6
|
%
|
|||
FF&E reserve income
|
4,670
|
|
|
4,508
|
|
|
162
|
|
|
3.6
|
%
|
|||
|
|
|
|
|
|
|
|
|||||||
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Hotel operating expenses
|
1,279,547
|
|
|
1,202,538
|
|
|
77,009
|
|
|
6.4
|
%
|
|||
Depreciation and amortization - hotels
|
242,829
|
|
|
224,335
|
|
|
18,494
|
|
|
8.2
|
%
|
|||
Depreciation and amortization - travel centers
|
143,830
|
|
|
133,007
|
|
|
10,823
|
|
|
8.1
|
%
|
|||
Total depreciation and amortization
|
386,659
|
|
|
357,342
|
|
|
29,317
|
|
|
8.2
|
%
|
|||
General and administrative
|
125,402
|
|
|
99,105
|
|
|
26,297
|
|
|
26.5
|
%
|
|||
Acquisition related costs
|
—
|
|
|
1,367
|
|
|
(1,367
|
)
|
|
(100.0
|
)%
|
|||
|
|
|
|
|
|
|
|
|||||||
Operating income
|
380,327
|
|
|
386,859
|
|
|
(6,532
|
)
|
|
(1.7
|
)%
|
|||
|
|
|
|
|
|
|
|
|||||||
Dividend income
|
2,504
|
|
|
2,001
|
|
|
503
|
|
|
25.1
|
%
|
|||
Interest income
|
798
|
|
|
274
|
|
|
524
|
|
|
191.2
|
%
|
|||
Interest expense
|
(181,579
|
)
|
|
(161,913
|
)
|
|
(19,666
|
)
|
|
12.1
|
%
|
|||
Loss on early extinguishment of debt
|
(146
|
)
|
|
(228
|
)
|
|
82
|
|
|
(36.0
|
)%
|
|||
Income before income taxes, equity earnings of an investee and gain on sale of real estate
|
201,904
|
|
|
226,993
|
|
|
(25,089
|
)
|
|
(11.1
|
)%
|
|||
Income tax benefit (expense)
|
3,284
|
|
|
(4,020
|
)
|
|
7,304
|
|
|
n/m
|
|
|||
Equity in earnings of an investee
|
607
|
|
|
137
|
|
|
470
|
|
|
343.1
|
%
|
|||
Income before gain on sale of real estate
|
205,795
|
|
|
223,110
|
|
|
(17,315
|
)
|
|
(7.8
|
)%
|
|||
Gain on sale of real estate
|
9,348
|
|
|
—
|
|
|
9,348
|
|
|
n/m
|
|
|||
Net income
|
215,143
|
|
|
223,110
|
|
|
(7,967
|
)
|
|
(3.6
|
)%
|
|||
Preferred distributions
|
(1,435
|
)
|
|
(20,664
|
)
|
|
19,229
|
|
|
(93.1
|
)%
|
|||
Excess of liquidation preference over carrying value of preferred shares redeemed
|
(9,893
|
)
|
|
—
|
|
|
(9,893
|
)
|
|
n/m
|
|
|||
Net income available for common shareholders
|
$
|
203,815
|
|
|
$
|
202,446
|
|
|
$
|
1,369
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|||||||
Weighted average shares outstanding (basic)
|
164,146
|
|
|
156,062
|
|
|
8,084
|
|
|
5.2
|
%
|
|||
Weighted average shares outstanding (diluted)
|
164,175
|
|
|
156,088
|
|
|
8,087
|
|
|
5.2
|
%
|
|||
|
|
|
|
|
|
|
|
|||||||
Net income available for common shareholders per common share: basic and diluted
|
$
|
1.24
|
|
|
$
|
1.30
|
|
|
$
|
(0.06
|
)
|
|
(4.6
|
)%
|
|
For the Year Ended December 31,
|
|||||||||||||
|
|
|
|
|
Increase
(Decrease)
|
|
% Increase
(Decrease)
|
|||||||
|
2016
|
|
2015
|
|
|
|||||||||
Revenues:
|
|
|
|
|
|
|
|
|||||||
Hotel operating revenues
|
$
|
1,733,103
|
|
|
$
|
1,636,834
|
|
|
$
|
96,269
|
|
|
5.9
|
%
|
Rental income—hotels
|
30,425
|
|
|
30,353
|
|
|
72
|
|
|
0.2
|
%
|
|||
Rental income—travel centers
|
279,175
|
|
|
250,582
|
|
|
28,593
|
|
|
11.4
|
%
|
|||
Total rental income
|
309,600
|
|
|
280,935
|
|
|
28,665
|
|
|
10.2
|
%
|
|||
FF&E reserve income
|
4,508
|
|
|
4,135
|
|
|
373
|
|
|
9.0
|
%
|
|||
|
|
|
|
|
|
|
|
|||||||
Expenses:
|
|
|
|
|
|
|
|
|
||||||
Hotel operating expenses
|
1,202,538
|
|
|
1,143,981
|
|
|
58,557
|
|
|
5.1
|
%
|
|||
Depreciation and amortization—hotels
|
224,335
|
|
|
213,964
|
|
|
10,371
|
|
|
4.8
|
%
|
|||
Depreciation and amortization—travel centers
|
133,007
|
|
|
115,812
|
|
|
17,195
|
|
|
14.8
|
%
|
|||
Total depreciation and amortization
|
357,342
|
|
|
329,776
|
|
|
27,566
|
|
|
8.4
|
%
|
|||
General and administrative
|
99,105
|
|
|
109,837
|
|
|
(10,732
|
)
|
|
(9.8
|
)%
|
|||
Acquisition related costs
|
1,367
|
|
|
2,375
|
|
|
(1,008
|
)
|
|
(42.4
|
)%
|
|||
|
|
|
|
|
|
|
|
|||||||
Operating income
|
386,859
|
|
|
335,935
|
|
|
50,924
|
|
|
15.2
|
%
|
|||
|
|
|
|
|
|
|
|
|||||||
Dividend income
|
2,001
|
|
|
2,640
|
|
|
(639
|
)
|
|
(24.2
|
)%
|
|||
Interest income
|
274
|
|
|
44
|
|
|
230
|
|
|
522.7
|
%
|
|||
Interest expense
|
(161,913
|
)
|
|
(144,898
|
)
|
|
(17,015
|
)
|
|
11.7
|
%
|
|||
Loss on distribution to shareholders of The RMR Group Inc. common stock
|
—
|
|
|
(36,773
|
)
|
|
36,773
|
|
|
(100.0
|
)%
|
|||
Loss on early extinguishment of debt
|
(228
|
)
|
|
—
|
|
|
(228
|
)
|
|
n/m
|
|
|||
Income before income taxes and equity in earnings of an investee
|
226,993
|
|
|
156,948
|
|
|
70,045
|
|
|
44.6
|
%
|
|||
Income tax expense
|
(4,020
|
)
|
|
(1,566
|
)
|
|
(2,454
|
)
|
|
156.7
|
%
|
|||
Equity in earnings of an investee
|
137
|
|
|
21
|
|
|
116
|
|
|
552.4
|
%
|
|||
Income before gain on sale of real estate
|
223,110
|
|
|
155,403
|
|
|
67,707
|
|
|
43.6
|
%
|
|||
Gain on sale of real estate
|
—
|
|
|
11,015
|
|
|
(11,015
|
)
|
|
(100.0
|
)%
|
|||
Net income
|
223,110
|
|
|
166,418
|
|
|
56,692
|
|
|
34.1
|
%
|
|||
Preferred distributions
|
(20,664
|
)
|
|
(20,664
|
)
|
|
—
|
|
|
—
|
|
|||
Net income available for common shareholders
|
$
|
202,446
|
|
|
$
|
145,754
|
|
|
$
|
56,692
|
|
|
38.9
|
%
|
|
|
|
|
|
|
|
|
|||||||
Weighted average shares outstanding (basic)
|
156,062
|
|
|
150,709
|
|
|
5,353
|
|
|
3.6
|
%
|
|||
Weighted average shares outstanding (diluted)
|
156,088
|
|
|
151,002
|
|
|
5,086
|
|
|
3.4
|
%
|
|||
|
|
|
|
|
|
|
|
|||||||
Net income available for common shareholders per common share: (basic and diluted)
|
$
|
1.30
|
|
|
$
|
0.97
|
|
|
$
|
0.33
|
|
|
34.0
|
%
|
•
|
During the year ended
December 31, 2017
, we funded
$5,959
for capital improvements to hotels under our Marriott No. 1 agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately
$6,000
for capital improvements under this agreement during 2018 using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase.
|
•
|
During the year ended
December 31, 2017
, we funded
$1,975
for capital improvements to hotels under our Marriott No. 234 agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately
$8,680
for capital improvements under this agreement during 2018 using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase.
|
•
|
During the year ended
December 31, 2017
, we funded
$4,272
for capital improvements to hotels under our InterContinental agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately
$28,000
during 2018 and approximately
$20,000
during 2019 for capital improvements under this agreement using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase.
|
•
|
Our Sonesta agreement does not require FF&E escrow deposits. Under our Sonesta agreement, we are required to fund capital expenditures made at our hotels. During the year ended
December 31, 2017
, we funded
$34,933
for capital improvements to hotels included in our Sonesta agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately
$126,000
during 2018 and approximately
$57,000
during 2019 for capital improvements under this agreement using cash on hand or borrowings under our revolving credit facility. These investments primarily relate to planned renovations to the 15 hotels we acquired in 2017 and converted to Sonesta brands. As we fund these improvements, the contractual minimum returns payable to us increase to the extent amounts funded exceed threshold amounts, as defined in our Sonesta agreement.
|
•
|
Our Wyndham agreement requires FF&E escrow deposits only if there are excess cash flows after payment of our minimum returns. No FF&E escrow deposits were required during the year ended
December 31, 2017
. During the year ended
December 31, 2017
, we funded
$7,041
for capital improvements to hotels included in our Wyndham agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately
$5,000
for capital improvements under this agreement during 2018 using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase.
|
•
|
Pursuant to an agreement we entered into with Carlson in June 2017, during the year ended
December 31, 2017
, we deposited
$23,438
of net proceeds from the sales of three hotels into the FF&E reserve escrow account for our Carlson agreement. These net proceeds will be used to fund certain renovations to the remaining hotels operated under our Carlson agreement. We have agreed to fund up to $35,000 for renovation costs in excess of the net sales proceeds and available FF&E reserves. We currently expect to fund approximately
$6,400
during 2018 and approximately
$28,600
during 2019 for these renovations. As we fund these excess renovation costs, the contractual minimum returns payable to us will increase.
|
|
|
Payment due by period
|
||||||||||||||||||
Contractual Obligations
|
|
Total
|
|
Less than
1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than
5 years
|
||||||||||
Long-term debt obligations
|
|
$
|
4,048,000
|
|
|
$
|
398,000
|
|
|
$
|
400,000
|
|
|
$
|
900,000
|
|
|
$
|
2,350,000
|
|
Ground lease obligations
(1)
|
|
110,216
|
|
|
11,806
|
|
|
19,292
|
|
|
11,648
|
|
|
67,470
|
|
|||||
Security deposits
(2)
|
|
126,078
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
126,078
|
|
|||||
Capital improvements
(3)
|
|
337,174
|
|
|
231,574
|
|
|
105,600
|
|
|
—
|
|
|
—
|
|
|||||
Projected interest expense
(4)
|
|
1,058,069
|
|
|
163,232
|
|
|
303,987
|
|
|
275,500
|
|
|
315,350
|
|
|||||
Business management incentive fee expense
(5)
|
|
74,573
|
|
|
74,573
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
|
$
|
5,754,110
|
|
|
$
|
879,185
|
|
|
$
|
828,879
|
|
|
$
|
1,187,148
|
|
|
$
|
2,858,898
|
|
(1)
|
14 of our hotels and 15 of our travel centers are on land leased partially or in its entirety. In each case the ground lessors are unrelated to us. Pursuant to the terms of our management agreements and leases, payments of ground lease obligations are generally 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 or travel center. We have included the future rent expense under these ground leases in the table above.
|
(2)
|
Represents the security deposit balance as of
December 31, 2017
. We may draw upon security deposits to cover any rent or return shortfalls thereby decreasing the potential obligation to repay some of these deposits.
|
(3)
|
Represents amounts we expect to fund for capital improvements to our hotels in excess of amounts available in FF&E reserves and to our travel centers as of
December 31, 2017
.
|
(4)
|
Projected interest expense is interest attributable to only debt obligations listed above at existing rates as of
December 31, 2017
and is not intended to project future interest costs which may result from debt prepayments, additional borrowings under our revolving credit facility, new debt issuances or changes in interest rates.
|
(5)
|
Represents business management incentive fees due to RMR LLC under our business management agreement for 2017. This fee was paid to RMR LLC in January
2018
.
|
•
|
variable interest entities, or VIEs;
|
•
|
allocation of purchase prices between various asset categories and the related impact on the recognition of depreciation and amortization expenses;
|
•
|
assessment of the carrying values and impairments of real estate, intangible assets and equity investments;
|
•
|
classification of leases and the related impact on the recognition of rental income; and
|
•
|
income taxes.
|
|
|
|
|
Number of
Rooms or
Suites (Hotels) / Land Acreage (Travel Centers)
|
|
|
|
|
|
Rent / Return Coverage
(3)
|
||||||||
|
|
|
|
|
|
|
Annual
Minimum
Return/Rent
(2)
|
|
Year Ended
December 31,
|
|||||||||
Operating Agreement
|
|
Number of
Properties
|
|
|
|
|
|
|||||||||||
Reference Name
|
|
|
|
Investment
(1)
|
|
|
2017
|
|
2016
|
|||||||||
Marriott (No. 1)
(4)
|
|
53
|
|
|
7,610
|
|
|
$
|
697,258
|
|
|
$
|
69,232
|
|
|
1.25x
|
|
1.37x
|
Marriott (No. 234)
(5)
|
|
68
|
|
|
9,120
|
|
|
1,003,364
|
|
|
106,538
|
|
|
1.13x
|
|
1.14x
|
||
Marriott (No. 5)
(6)
|
|
1
|
|
|
356
|
|
|
90,078
|
|
|
10,159
|
|
|
0.91x
|
|
0.74x
|
||
Subtotal / Average Marriott
|
|
122
|
|
|
17,086
|
|
|
1,790,700
|
|
|
185,929
|
|
|
1.16x
|
|
1.20x
|
||
InterContinental
(7)
|
|
99
|
|
|
16,237
|
|
|
2,040,085
|
|
|
189,261
|
|
|
1.15x
|
|
1.20x
|
||
Sonesta
(8)
|
|
49
|
|
|
8,326
|
|
|
1,457,479
|
|
|
109,632
|
|
|
0.77x
|
|
0.80x
|
||
Wyndham
(9)
|
|
22
|
|
|
3,579
|
|
|
393,800
|
|
|
29,010
|
|
|
0.84x
|
|
0.90x
|
||
Hyatt
(10)
|
|
22
|
|
|
2,724
|
|
|
301,942
|
|
|
22,037
|
|
|
1.13x
|
|
1.16x
|
||
Carlson
(11)
|
|
8
|
|
|
1,579
|
|
|
195,101
|
|
|
12,920
|
|
|
1.36x
|
|
1.26x
|
||
Morgans
(12)
|
|
1
|
|
|
372
|
|
|
120,000
|
|
|
7,595
|
|
|
0.82x
|
|
1.01x
|
||
Subtotal / Average Hotels
|
|
323
|
|
|
49,903
|
|
|
6,299,107
|
|
|
556,384
|
|
|
1.06x
|
|
1.10x
|
||
TA (No. 1)
(13)
|
|
40
|
|
|
826
|
|
|
677,032
|
|
|
52,763
|
|
|
1.57x
|
|
1.64x
|
||
TA (No. 2)
(14)
|
|
40
|
|
|
923
|
|
|
681,055
|
|
|
53,681
|
|
|
1.49x
|
|
1.52x
|
||
TA (No. 3)
(15)
|
|
39
|
|
|
913
|
|
|
636,016
|
|
|
54,005
|
|
|
1.49x
|
|
1.57x
|
||
TA (No. 4)
(16)
|
|
40
|
|
|
1,093
|
|
|
618,615
|
|
|
54,437
|
|
|
1.37x
|
|
1.55x
|
||
TA (No. 5)
(17)
|
|
40
|
|
|
1,168
|
|
|
885,695
|
|
|
69,527
|
|
|
1.55x
|
|
1.58x
|
||
Subtotal / Average Travel Centers
|
|
199
|
|
|
4,923
|
|
|
3,498,413
|
|
|
284,413
|
|
|
1.50x
|
|
1.57x
|
||
Total / Average
|
|
522
|
|
|
49,903 / 4,923
|
|
|
$
|
9,797,520
|
|
|
$
|
840,797
|
|
|
1.21x
|
|
1.26x
|
(1)
|
Represents the historical cost of our properties plus capital improvements funded by us less impairment writedowns, if any, and excludes capital improvements made from FF&E reserves funded from hotel operations which do not result in increases in minimum returns or rents.
|
(2)
|
Each of our management agreements or leases provides for payment to us of an annual minimum return or rent, respectively. Certain of these minimum payment amounts are secured by full or limited guarantees or security deposits as more fully described below. In addition, certain of our hotel management agreements provide for payment to us of additional amounts to the extent of available cash flows as defined in the management agreement. Payments of these additional amounts are not guaranteed or secured by deposits. Annualized minimum rent amounts represent cash rent amounts due to us and exclude adjustments necessary to record rent on a straight line basis.
|
(3)
|
We define coverage as combined total property level revenues minus all property level expenses and FF&E reserve escrows which are not subordinated to minimum returns or rents due to us (which data is provided to us by our managers or tenants), divided by the minimum returns or rents due to us. Coverage amounts for our InterContinental and Sonesta agreements and our TA Nos. 1, 2, 3 and 4 leases include data for periods prior to our ownership of certain properties. Coverage amounts for our Carlson agreement exclude data for periods prior to our sale of certain hotels.
|
(4)
|
We lease
53
Courtyard by Marriott
®
branded hotels in 24 states to one of our TRSs. The hotels are managed by a subsidiary of Marriott under a combination management agreement which expires in 2024; Marriott has two renewal options for 12 years each for all, but not less than all, of the hotels.
|
(5)
|
We lease
68
of our Marriott
®
branded hotels (one full service Marriott
®
,
35
Residence Inn by Marriott
®
, 18 Courtyard by Marriott
®
,
12
TownePlace Suites by Marriott
®
and
two
SpringHill Suites by Marriott
®
hotels) in 22 states to one of our TRSs. The hotels are managed by subsidiaries of Marriott under a combination management agreement which expires in 2025; Marriott has two renewal options for 10 years each for all, but not less than all, of the hotels.
|
(6)
|
We lease one Marriott
®
branded hotel in Kauai, HI to a subsidiary of Marriott under a lease that expires in 2019. Marriott has four renewal options for 15 years each. On August 31, 2016, Marriott notified us that it will not exercise its renewal option at the expiration of the current lease term ending on December 31, 2019. This lease is guaranteed by Marriott and provides for increases in the annual minimum rent payable to us based on changes in the consumer price index.
|
(7)
|
We lease
98
InterContinental branded hotels (
19
Staybridge Suites
®
,
61
Candlewood Suites
®
, two InterContinental
®
,
10
Crowne Plaza
®
,
three
Holiday Inn
®
and
three
Kimpton
®
Hotels & Restaurants) in 28 states in the U.S. and Ontario, Canada to one of our TRSs. These
98
hotels are managed by subsidiaries of InterContinental under a combination management agreement. We lease one additional InterContinental
®
branded hotel in Puerto Rico to a subsidiary of InterContinental. The annual minimum return amount presented in the table on page
72
includes
$7,912
of minimum rent related to the leased Puerto Rico hotel. The management agreement and the lease expire in 2036; InterContinental has two renewal options for 15 years each for all, but not less than all, of the hotels.
|
(8)
|
We lease our
49
Sonesta branded hotels (
five
Royal Sonesta
®
Hotels,
five
Sonesta Hotels & Resorts
®
and
39
Sonesta ES Suites
®
hotels) in 26 states to one of our TRSs. The hotels are managed by Sonesta under a combination management agreement which expires in 2037; Sonesta has two renewal options for 15 years each for all, but not less than all, of the hotels.
|
(9)
|
We lease our
22
Wyndham branded hotels (
six
Wyndham Hotels and Resorts
®
and
16
Hawthorn Suites
®
hotels) in 14 states to one of our TRSs. The hotels are managed by a subsidiary of Wyndham under a combination management agreement which expires in 2038; Wyndham has two renewal options for 15 years each for all, but not less than all, of the hotels. We also lease 48 vacation units in one of the hotels to Wyndham Vacation Resorts, Inc., a subsidiary of Wyndham, or Wyndham Vacation, under a lease that expires in 2037; Wyndham Vacation has two renewal options for 15 years each for all, but not less than all, of the vacation units. The lease is guaranteed by Wyndham and provides for rent increases of 3% per annum. The annual minimum return amount presented in the table on page
72
includes $1,449 of minimum rent related to the Wyndham Vacation lease.
|
(10)
|
We lease our
22
Hyatt Place
®
branded hotels in 14 states to one of our TRSs. The hotels are managed by a subsidiary of Hyatt under a combination management agreement that expires in 2030; Hyatt has two renewal options for 15 years each for all, but not less than all, of the hotels.
|
(11)
|
In June 2017, we amended our agreement with Carlson whereby we and Carlson agreed to sell three of our then 11 Carlson hotels with an aggregate of 511 rooms. We sold the three Carlson branded hotels during the year ended
December 31, 2017
. The net proceeds from
|
(12)
|
We lease The Clift Hotel
®
in San Francisco, CA to a subsidiary of Morgans. This lease is scheduled to expire in 2103 and requires annual rent to us of $7,595, which amount is scheduled to increase on October 14, 2019 and every five years thereafter based upon consumer price index increases, but no less than 10% and no more than 20% at the time of each increase. Although the terms of this lease might have qualified it as a direct financing lease under GAAP, we recognize the rental income we receive from Morgans on a cash basis because of uncertainty regarding our collection of future rent increases. In December 2016, we notified Morgans that the closing of its merger with SBE without our consent was a breach of its lease obligations and shortly thereafter we commenced an unlawful detainer action in the California state courts to compel Morgans and SBE to surrender possession of this hotel to us. We are pursuing this litigation and are in discussions with Morgans and SBE regarding this hotel. The outcome of this pending litigation and our discussions with Morgans and SBE is not assured, but we believe Morgans may surrender to us possession of this hotel or that the court will determine that Morgans and SBE have breached the lease. We also believe that this hotel may require substantial capital investment to remain competitive in its market. The continuation of our dispute with Morgans and SBE is causing us to incur legal fees. Despite the continuation of this dispute, Morgans has paid the rents due to us through
February 28, 2018
; however, we believe that we may suffer some loss of future rent from this hotel, at least until this hotel is renovated and operations improve.
|
(13)
|
We lease
40
travel centers (36 TravelCenters of America
®
branded travel centers and four Petro Stopping Centers
®
branded travel centers) in 29 states to a subsidiary of TA under a lease that expires in 2029; TA has two renewal options for 15 years each for all, but not less than all, of these travel centers. In addition to the payment of our minimum rent, this lease provides for payment to us of percentage rent based on increases in total non-fuel revenues over base year levels (3% of non-fuel revenues above 2015 non-fuel revenues). TA’s previously deferred rent of $27,421 is due at the expiration of the initial term of this lease. This lease is guaranteed by TA.
|
(14)
|
We lease
40
travel centers (38 TravelCenters of America
®
branded travel centers and two Petro Stopping Centers
®
branded travel centers) in 27 states to a subsidiary of TA under a lease that expires in 2028; TA has two renewal options for 15 years each for all, but not less than all, of these travel centers. In addition to the payment of our minimum rent, this lease provides for payment to us of percentage rent based on increases in total non-fuel revenues over base year levels (3% of non-fuel revenues above 2015 non-fuel revenues). TA’s previously deferred rent of $29,107 is due at the expiration of the initial term of this lease. This lease is guaranteed by TA.
|
(15)
|
We lease
39
travel centers (38 TravelCenters of America
®
branded travel centers and one Petro Stopping Centers
®
branded travel center) in 29 states to a subsidiary of TA under a lease that expires in 2026; TA has two renewal options for 15 years each for all, but not less than all, of these travel centers. In addition to the payment of our minimum rent, this lease provides for payment to us of percentage rent based on increases in total non-fuel revenues over base year levels (3% of non-fuel revenues above 2015 non-fuel revenues). TA’s previously deferred rent of $29,324 is due at the expiration of the initial term of this lease. This lease is guaranteed by TA.
|
(16)
|
We lease
40
travel centers (37 TravelCenters of America
®
branded travel centers and three Petro Stopping Centers
®
branded travel centers) in 28 states to a subsidiary of TA under a lease that expires in 2030; TA has two renewal options for 15 years each for all, but not less than all, of these travel centers. In addition to the payment of our minimum rent, this lease provides for payment to us of percentage rent based on increases in total non-fuel revenues over base year levels (3% of non-fuel revenues above 2015 non-fuel revenues). TA’s previously deferred rent of $21,233 is due at the expiration of the initial term of this lease. This lease is guaranteed by TA.
|
(17)
|
We lease
40
Petro Stopping Centers
®
branded travel centers in 25 states to a subsidiary of TA under a lease that expires in 2032; TA has two renewal options for 15 years each for all, but not less than all, of these travel centers. In addition to the payment of our minimum rent, this lease provides for payment to us of percentage rent based on increases in total non-fuel revenues over base year levels (3% of non-fuel revenues above 2012 non-fuel revenues). TA’s previously deferred rent of $42,915 is due on June 30, 2024. This lease is guaranteed by TA.
|
|
|
|
|
No. of
Rooms/
Suites
|
|
Year Ended December 31,
|
|||||||||||
|
|
No. of
Hotels
|
|
|
2017
|
|
2016
|
|
Change
|
||||||||
ADR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Marriott (No. 1)
|
|
53
|
|
|
7,610
|
|
|
$
|
130.44
|
|
|
$
|
131.72
|
|
|
(1.0
|
)%
|
Marriott (No. 234)
|
|
68
|
|
|
9,120
|
|
|
131.93
|
|
|
129.78
|
|
|
1.7
|
%
|
||
Marriott (No. 5)
|
|
1
|
|
|
356
|
|
|
268.41
|
|
|
252.03
|
|
|
6.5
|
%
|
||
Subtotal / Average Marriott
|
|
122
|
|
|
17,086
|
|
|
134.74
|
|
|
133.58
|
|
|
0.9
|
%
|
||
InterContinental
(1)
|
|
99
|
|
|
16,237
|
|
|
120.07
|
|
|
118.84
|
|
|
1.0
|
%
|
||
Sonesta
(1)
|
|
49
|
|
|
8,326
|
|
|
139.16
|
|
|
138.40
|
|
|
0.5
|
%
|
||
Wyndham
|
|
22
|
|
|
3,579
|
|
|
100.84
|
|
|
98.97
|
|
|
1.9
|
%
|
||
Hyatt
|
|
22
|
|
|
2,724
|
|
|
109.09
|
|
|
108.71
|
|
|
0.3
|
%
|
||
Carlson
(2)
|
|
8
|
|
|
1,579
|
|
|
122.99
|
|
|
117.72
|
|
|
4.5
|
%
|
||
Morgans
|
|
1
|
|
|
372
|
|
|
263.83
|
|
|
267.13
|
|
|
(1.2
|
)%
|
||
All Hotels Total / Average
|
|
323
|
|
|
49,903
|
|
|
$
|
127.29
|
|
|
$
|
126.19
|
|
|
0.9
|
%
|
OCCUPANCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Marriott (No. 1)
|
|
53
|
|
|
7,610
|
|
|
68.9
|
%
|
|
70.2
|
%
|
|
-1.3 pts
|
|
||
Marriott (No. 234)
|
|
68
|
|
|
9,120
|
|
|
75.3
|
%
|
|
76.1
|
%
|
|
-0.8 pts
|
|
||
Marriott (No. 5)
|
|
1
|
|
|
356
|
|
|
87.9
|
%
|
|
86.2
|
%
|
|
1.7 pts
|
|
||
Subtotal / Average Marriott
|
|
122
|
|
|
17,086
|
|
|
72.7
|
%
|
|
73.7
|
%
|
|
-1.0 pts
|
|
||
InterContinental
(1)
|
|
99
|
|
|
16,237
|
|
|
80.5
|
%
|
|
81.0
|
%
|
|
-0.5 pts
|
|
||
Sonesta
(1)
|
|
49
|
|
|
8,326
|
|
|
69.3
|
%
|
|
68.5
|
%
|
|
0.8 pts
|
|
||
Wyndham
|
|
22
|
|
|
3,579
|
|
|
70.3
|
%
|
|
71.7
|
%
|
|
-1.4 pts
|
|
||
Hyatt
|
|
22
|
|
|
2,724
|
|
|
81.3
|
%
|
|
80.3
|
%
|
|
1.0 pts
|
|
||
Carlson
(2)
|
|
8
|
|
|
1,579
|
|
|
74.8
|
%
|
|
75.9
|
%
|
|
-1.1 pts
|
|
||
Morgans
|
|
1
|
|
|
372
|
|
|
86.1
|
%
|
|
91.1
|
%
|
|
-5.0 pts
|
|
||
All Hotels Total / Average
|
|
323
|
|
|
49,903
|
|
|
75.1
|
%
|
|
75.5
|
%
|
|
-0.4 pts
|
|
||
RevPAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Marriott (No. 1)
|
|
53
|
|
|
7,610
|
|
|
$
|
89.87
|
|
|
$
|
92.47
|
|
|
(2.8
|
)%
|
Marriott (No. 234)
|
|
68
|
|
|
9,120
|
|
|
99.34
|
|
|
98.76
|
|
|
0.6
|
%
|
||
Marriott (No. 5)
|
|
1
|
|
|
356
|
|
|
235.93
|
|
|
217.25
|
|
|
8.6
|
%
|
||
Subtotal / Average Marriott
|
|
122
|
|
|
17,086
|
|
|
97.96
|
|
|
98.45
|
|
|
(0.5
|
)%
|
||
InterContinental
(1)
|
|
99
|
|
|
16,237
|
|
|
96.66
|
|
|
96.26
|
|
|
0.4
|
%
|
||
Sonesta
(1)
|
|
49
|
|
|
8,326
|
|
|
96.44
|
|
|
94.80
|
|
|
1.7
|
%
|
||
Wyndham
|
|
22
|
|
|
3,579
|
|
|
70.89
|
|
|
70.96
|
|
|
(0.1
|
)%
|
||
Hyatt
|
|
22
|
|
|
2,724
|
|
|
88.69
|
|
|
87.29
|
|
|
1.6
|
%
|
||
Carlson
(2)
|
|
8
|
|
|
1,579
|
|
|
92.00
|
|
|
89.35
|
|
|
3.0
|
%
|
||
Morgans
|
|
1
|
|
|
372
|
|
|
227.16
|
|
|
243.36
|
|
|
(6.7
|
)%
|
||
All Hotels Total / Average
|
|
323
|
|
|
49,903
|
|
|
$
|
95.59
|
|
|
$
|
95.27
|
|
|
0.3
|
%
|
(1)
|
Operating data includes data for periods prior to our ownership of certain hotels.
|
(2)
|
Operating data excludes data for periods prior to our sale of certain hotels.
|
|
|
For the Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net income available for common shareholders
|
$
|
203,815
|
|
|
$
|
202,446
|
|
|
$
|
145,754
|
|
|
Add (Less):
|
Depreciation and amortization expense
|
386,659
|
|
|
357,342
|
|
|
329,776
|
|
|||
|
Gain on sale of real estate
(1)
|
(9,348
|
)
|
|
—
|
|
|
(11,015
|
)
|
|||
FFO available for common shareholders
|
581,126
|
|
|
559,788
|
|
|
464,515
|
|
||||
Add:
|
Acquisition related costs
(2)
|
—
|
|
|
1,367
|
|
|
2,375
|
|
|||
|
Loss on distribution to common shareholders of The RMR Group Inc. common stock
|
—
|
|
|
—
|
|
|
36,773
|
|
|||
|
Loss on early extinguishment of debt
(3)
|
146
|
|
|
228
|
|
|
—
|
|
|||
|
Excess liquidation preference over carrying value of preferred shares redeemed
(4)
|
9,893
|
|
|
—
|
|
|
—
|
|
|||
|
Deferred tax benefit
(5)
|
$
|
(5,431
|
)
|
|
|
|
|
||||
Normalized FFO available for common shareholders
|
$
|
585,734
|
|
|
$
|
561,383
|
|
|
$
|
503,663
|
|
|
|
|
|
|
|
|
|||||||
Weighted average shares outstanding (basic)
|
164,146
|
|
|
156,062
|
|
|
150,709
|
|
||||
Weighted average shares outstanding (diluted)
(6)
|
164,175
|
|
|
156,088
|
|
|
151,002
|
|
||||
|
|
|
|
|
|
|||||||
Basic and diluted per common share amounts:
|
|
|
|
|
|
|||||||
|
Net income available for common shareholders
|
$
|
1.24
|
|
|
$
|
1.30
|
|
|
$
|
0.97
|
|
|
FFO available for common shareholders
|
$
|
3.54
|
|
|
$
|
3.59
|
|
|
$
|
3.08
|
|
|
Normalized FFO available for common shareholders
|
$
|
3.57
|
|
|
$
|
3.60
|
|
|
$
|
3.34
|
|
|
Distributions declared per share
|
$
|
2.07
|
|
|
$
|
2.03
|
|
|
$
|
1.99
|
|
(1)
|
We recorded a $9,348 gain on sale of real estate during the year ended
December 31, 2017
in connection with the sales of three hotels.
|
(2)
|
Represents costs associated with our acquisition activities. Acquisition related costs incurred during the 2017 periods have been capitalized in purchase accounting pursuant to a change in GAAP.
|
(3)
|
We recorded losses of $146 and $228 on early extinguishment of debt during the years ended
December 31, 2017
and
2016
, respectively, in connection with the redemption of certain senior unsecured notes.
|
(4)
|
In February 2017, we redeemed all 11,600,000 of our outstanding 7.125% Series D cumulative redeemable preferred shares at the stated liquidation preference of $25.00 per share plus accrued and unpaid distributions to the date of redemption. The liquidation preference of the redeemed shares exceeded the carrying amount for the redeemed shares as of the date of redemption by $9,893 and we reduced net income available for common shareholders in the year ended
December 31, 2017
by that excess amount.
|
(5)
|
We realized a
$5,431
tax benefit in the year ended
December 31, 2017
related to the enactment of the Tax Act.
|
(6)
|
Represents weighted average common shares adjusted to reflect the potential dilution of unvested share awards.
|
Principal
Balance
|
|
Annual Interest
Rate
|
|
Annual Interest
Expense
|
|
Maturity
|
|
Interest Payments
Due
|
|||||
400,000
|
|
|
4.250
|
%
|
|
17,000
|
|
|
2021
|
|
Semi-Annually
|
||
500,000
|
|
|
5.000
|
%
|
|
25,000
|
|
|
2022
|
|
Semi-Annually
|
||
500,000
|
|
|
4.500
|
%
|
|
22,500
|
|
|
2023
|
|
Semi-Annually
|
||
350,000
|
|
|
4.650
|
%
|
|
16,275
|
|
|
2024
|
|
Semi-Annually
|
||
350,000
|
|
|
4.500
|
%
|
|
15,750
|
|
|
2025
|
|
Semi-Annually
|
||
350,000
|
|
|
5.250
|
%
|
|
18,375
|
|
|
2026
|
|
Semi-Annually
|
||
400,000
|
|
|
4.950
|
%
|
|
19,800
|
|
|
2027
|
|
Semi-Annually
|
||
400,000
|
|
|
3.950
|
%
|
|
$
|
15,800
|
|
|
2028
|
|
Semi-Annually
|
|
$
|
3,250,000
|
|
|
|
|
|
$
|
150,500
|
|
|
|
|
|
|
Impact of Increase in Interest Rates
|
|
|
|
||||||||||
|
Interest Rate
Per Year
(1)
|
|
Outstanding
Debt
|
|
Total Interest
Expense Per Year
|
|
Annual Per
Share Impact
(2)
|
|||||||
At December 31, 2017
|
2.61
|
%
|
|
$
|
798,000
|
|
|
$
|
20,828
|
|
|
$
|
0.13
|
|
100 basis point increase
|
3.61
|
%
|
|
$
|
798,000
|
|
|
$
|
28,808
|
|
|
$
|
0.18
|
|
(1)
|
Weighted average based on the interest rates and the respective outstanding borrowings as of
December 31, 2017
.
|
(2)
|
Based on diluted weighted average shares outstanding for the year ending
December 31, 2017
.
|
|
Impact of Increase in Interest Rates
|
|||||||||||||
|
Interest Rate
Per Year
(1)
|
|
Outstanding
Debt
|
|
Total Interest
Expense Per Year
|
|
Annual Per
Share Impact
(2)
|
|||||||
At December 31, 2017
|
2.64
|
%
|
|
$
|
1,400,000
|
|
|
$
|
36,960
|
|
|
$
|
0.23
|
|
100 basis point increase
|
3.64
|
%
|
|
$
|
1,400,000
|
|
|
$
|
50,960
|
|
|
$
|
0.31
|
|
(1)
|
Weighted average based on the interest rates and the respective outstanding borrowings (assuming fully drawn) as of
December 31, 2017
.
|
(2)
|
Based on diluted weighted average shares outstanding for the year ending
December 31, 2017
.
|
Plan category
|
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
Number of securities
remaining available for
future issuance under
equity compensation plans (excluding securities reflected in column (a))
|
|
|
(a)
|
|
(b)
|
|
(c)
|
Equity compensation plans approved by security holders—2012 Plan
|
|
None.
|
|
None.
|
|
2,504,585
(1)
|
Equity compensation plans not approved by security holders
|
|
None.
|
|
None.
|
|
None.
|
Total
|
|
None.
|
|
None.
|
|
2,504,585
(1)
|
(1)
|
Consists of common shares available for issuance pursuant to the terms of the 2012 Plan. Share awards that are repurchased or forfeited will be added to the common shares available for issuance under the 2012 Plan.
|
|
|
Page
|
|
|
|
|
F-1
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
S-1
|
|
|
|
|
|
S-3
|
Exhibit Number
|
|
Description
|
|
|
|
|
|
3.1
|
|
|
|
3.2
|
|
|
|
4.1
|
|
|
|
4.2
|
|
|
|
4.3
|
|
|
|
4.4
|
|
|
|
4.5
|
|
|
|
4.6
|
|
|
|
4.7
|
|
|
|
4.8
|
|
|
|
4.9
|
|
|
|
4.10
|
|
|
|
4.11
|
|
|
|
4.12
|
|
|
|
4.13
|
|
|
|
4.14
|
|
|
|
8.1
|
|
|
10.21
|
|
|
|
10.22
|
|
|
|
10.23
|
|
|
|
10.24
|
|
|
|
10.25
|
|
|
|
10.26
|
|
|
|
10.27
|
|
|
|
10.28
|
|
|
|
10.29
|
|
|
|
10.30
|
|
|
|
10.31
|
|
|
|
10.32
|
|
|
|
10.33
|
|
|
|
10.34
|
|
|
|
10.35
|
|
|
|
10.36
|
|
|
|
10.37
|
|
|
|
10.38
|
|
|
10.39
|
|
|
|
10.40
|
|
|
|
10.41
|
|
|
|
10.42
|
|
|
|
10.43
|
|
|
|
10.44
|
|
|
|
10.45
|
|
|
|
10.46
|
|
|
|
10.47
|
|
|
|
10.48
|
|
|
|
10.49
|
|
|
|
10.50
|
|
|
|
10.51
|
|
|
|
10.52
|
|
|
|
10.53
|
|
|
|
10.54
|
|
|
|
10.55
|
|
|
|
10.56
|
|
|
10.57
|
|
|
|
10.58
|
|
|
|
10.59
|
|
|
|
10.60
|
|
|
|
10.61
|
|
|
|
10.62
|
|
|
|
10.63
|
|
|
|
10.64
|
|
|
|
10.65
|
|
|
|
10.66
|
|
|
|
10.67
|
|
|
|
10.68
|
|
|
|
10.69
|
|
|
|
10.70
|
|
|
|
10.71
|
|
|
|
10.72
|
|
|
|
10.73
|
|
|
10.74
|
|
|
|
10.75
|
|
|
|
10.76
|
|
|
|
12.1
|
|
|
|
12.2
|
|
|
|
21.1
|
|
|
|
23.1
|
|
|
|
23.2
|
|
|
|
31.1
|
|
|
|
31.2
|
|
|
|
31.3
|
|
|
|
32.1
|
|
|
|
99.1
|
|
|
|
101.1
|
|
|
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Statements of Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these financial statements, tagged as blocks of text and in detail. (Filed herewith.)
|
|
As of December 31,
|
||||||
|
2017
|
|
2016
|
||||
ASSETS
|
|
|
|
||||
|
|
|
|
||||
Real estate properties:
|
|
|
|
||||
Land
|
$
|
1,668,797
|
|
|
$
|
1,566,630
|
|
Buildings, improvements and equipment
|
7,758,862
|
|
|
7,156,759
|
|
||
Total real estate properties, gross
|
9,427,659
|
|
|
8,723,389
|
|
||
Accumulated depreciation
|
(2,784,478
|
)
|
|
(2,513,996
|
)
|
||
Total real estate properties, net
|
6,643,181
|
|
|
6,209,393
|
|
||
Cash and cash equivalents
|
24,139
|
|
|
10,896
|
|
||
Restricted cash (FF&E reserve escrow)
|
73,357
|
|
|
60,456
|
|
||
Due from related persons
|
78,513
|
|
|
65,332
|
|
||
Other assets, net
|
331,195
|
|
|
288,151
|
|
||
Total assets
|
$
|
7,150,385
|
|
|
$
|
6,634,228
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
|
|
|
|
||||
Unsecured revolving credit facility
|
$
|
398,000
|
|
|
$
|
191,000
|
|
Unsecured term loan, net
|
399,086
|
|
|
398,421
|
|
||
Senior unsecured notes, net
|
3,203,962
|
|
|
2,565,908
|
|
||
Convertible senior unsecured notes
|
—
|
|
|
8,478
|
|
||
Security deposits
|
126,078
|
|
|
89,338
|
|
||
Accounts payable and other liabilities
|
184,788
|
|
|
188,053
|
|
||
Due to related persons
|
83,049
|
|
|
58,475
|
|
||
Dividends payable
|
—
|
|
|
5,166
|
|
||
Total liabilities
|
4,394,963
|
|
|
3,504,839
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
||||
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Preferred shares of beneficial interest, no par value; 100,000,000 shares authorized:
|
|
|
|
||||
Series D preferred shares; 7 1/8% cumulative redeemable; zero and 11,600,000 shares issued and outstanding, respectively, aggregate liquidation preference of zero and $290,000, respectively
|
—
|
|
|
280,107
|
|
||
Common shares of beneficial interest, $.01 par value; 200,000,000 shares authorized; 164,349,141 and 164,268,199 shares issued and outstanding, respectively
|
1,643
|
|
|
1,643
|
|
||
Additional paid in capital
|
4,542,307
|
|
|
4,539,673
|
|
||
Cumulative net income
|
3,310,017
|
|
|
3,104,767
|
|
||
Cumulative other comprehensive income
|
79,358
|
|
|
39,583
|
|
||
Cumulative preferred distributions
|
(343,412
|
)
|
|
(341,977
|
)
|
||
Cumulative common distributions
|
(4,834,491
|
)
|
|
(4,494,407
|
)
|
||
Total shareholders’ equity
|
2,755,422
|
|
|
3,129,389
|
|
||
Total liabilities and shareholders’ equity
|
$
|
7,150,385
|
|
|
$
|
6,634,228
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Hotel operating revenues
|
$
|
1,843,501
|
|
|
$
|
1,733,103
|
|
|
$
|
1,636,834
|
|
Rental income
|
323,764
|
|
|
309,600
|
|
|
280,935
|
|
|||
FF&E reserve income
|
4,670
|
|
|
4,508
|
|
|
4,135
|
|
|||
Total revenues
|
2,171,935
|
|
|
2,047,211
|
|
|
1,921,904
|
|
|||
|
|
|
|
|
|
||||||
Expenses:
|
|
|
|
|
|
||||||
Hotel operating expenses
|
1,279,547
|
|
|
1,202,538
|
|
|
1,143,981
|
|
|||
Depreciation and amortization
|
386,659
|
|
|
357,342
|
|
|
329,776
|
|
|||
General and administrative
|
125,402
|
|
|
99,105
|
|
|
109,837
|
|
|||
Acquisition related costs
|
—
|
|
|
1,367
|
|
|
2,375
|
|
|||
Total expenses
|
1,791,608
|
|
|
1,660,352
|
|
|
1,585,969
|
|
|||
|
|
|
|
|
|
||||||
Operating income
|
380,327
|
|
|
386,859
|
|
|
335,935
|
|
|||
|
|
|
|
|
|
||||||
Dividend income
|
2,504
|
|
|
2,001
|
|
|
2,640
|
|
|||
Interest income
|
798
|
|
|
274
|
|
|
44
|
|
|||
Interest expense (including amortization of deferred financing costs and debt discounts of $8,871, $8,151 and $5,849, respectively)
|
(181,579
|
)
|
|
(161,913
|
)
|
|
(144,898
|
)
|
|||
Loss on distribution to common shareholders of The RMR Group Inc. common stock
|
—
|
|
|
—
|
|
|
(36,773
|
)
|
|||
Loss on early extinguishment of debt
|
(146
|
)
|
|
(228
|
)
|
|
—
|
|
|||
Income before income taxes, equity in earnings of an investee and gain on sale of real estate
|
201,904
|
|
|
226,993
|
|
|
156,948
|
|
|||
Income tax benefit (expense)
|
3,284
|
|
|
(4,020
|
)
|
|
(1,566
|
)
|
|||
Equity in earnings of an investee
|
607
|
|
|
137
|
|
|
21
|
|
|||
Income before gain on sale of real estate
|
205,795
|
|
|
223,110
|
|
|
155,403
|
|
|||
Gain on sale of real estate
|
9,348
|
|
|
—
|
|
|
11,015
|
|
|||
Net income
|
215,143
|
|
|
223,110
|
|
|
166,418
|
|
|||
Other comprehensive income:
|
|
|
|
|
|
||||||
Unrealized gain (loss) on investment in available for sale securities
|
39,315
|
|
|
54,954
|
|
|
(41,307
|
)
|
|||
Equity interest in investee’s unrealized gains (losses)
|
460
|
|
|
152
|
|
|
(20
|
)
|
|||
Other comprehensive income (loss)
|
39,775
|
|
|
55,106
|
|
|
(41,327
|
)
|
|||
Comprehensive income
|
$
|
254,918
|
|
|
$
|
278,216
|
|
|
$
|
125,091
|
|
|
|
|
|
|
|
||||||
Net income
|
$
|
215,143
|
|
|
$
|
223,110
|
|
|
$
|
166,418
|
|
Preferred distributions
|
(1,435
|
)
|
|
(20,664
|
)
|
|
(20,664
|
)
|
|||
Excess of liquidation preference over carrying value of preferred shares redeemed
|
(9,893
|
)
|
|
—
|
|
|
—
|
|
|||
Net income available for common shareholders
|
$
|
203,815
|
|
|
$
|
202,446
|
|
|
$
|
145,754
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding (basic)
|
164,146
|
|
|
156,062
|
|
|
150,709
|
|
|||
Weighted average common shares outstanding (diluted)
|
164,175
|
|
|
156,088
|
|
|
151,002
|
|
|||
|
|
|
|
|
|
||||||
Net income available for common shareholders per common share: Basic and diluted
|
$
|
1.24
|
|
|
$
|
1.30
|
|
|
$
|
0.97
|
|
|
Series D Preferred Shares
|
|
Common Shares
|
|
Additional
Paid in Capital |
|
Cumulative
Net Income |
|
Cumulative
Other
Comprehensive
Income (Loss)
|
|
|
||||||||||||||||||||||||||
|
Number of
Shares |
|
Preferred
Shares |
|
Cumulative Preferred
|
|
Number of
Shares |
|
Common
Shares |
|
Cumulative
Common
Distributions
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
Distributions
|
|
|
|
|
|
|
|
Total
|
||||||||||||||||||||||||||
Balance at Balance at December 31, 2014
|
11,600,000
|
|
|
$
|
280,107
|
|
|
$
|
(300,649
|
)
|
|
149,920,449
|
|
|
$
|
1,499
|
|
|
$
|
(3,850,398
|
)
|
|
$
|
4,118,551
|
|
|
$
|
2,715,239
|
|
|
$
|
25,804
|
|
|
$
|
2,990,153
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
166,418
|
|
|
—
|
|
|
166,418
|
|
||||||||
Unrealized loss on investment in available for sale securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(41,327
|
)
|
|
(41,327
|
)
|
||||||||
Issuance of common shares, net
|
—
|
|
|
—
|
|
|
—
|
|
|
1,553,119
|
|
|
15
|
|
|
—
|
|
|
45,247
|
|
|
—
|
|
|
—
|
|
|
45,262
|
|
||||||||
Common share grants
|
—
|
|
|
—
|
|
|
—
|
|
|
90,060
|
|
|
1
|
|
|
—
|
|
|
2,531
|
|
|
—
|
|
|
—
|
|
|
2,532
|
|
||||||||
Common share repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,340
|
)
|
|
—
|
|
|
—
|
|
|
(418
|
)
|
|
—
|
|
|
—
|
|
|
(418
|
)
|
||||||||
Distributions
|
—
|
|
|
—
|
|
|
(20,664
|
)
|
|
—
|
|
|
—
|
|
|
(299,963
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(320,627
|
)
|
||||||||
Distribution to common shareholders of The RMR Group Inc. common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29,911
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29,911
|
)
|
||||||||
Balance at December 31, 2015
|
11,600,000
|
|
|
280,107
|
|
|
(321,313
|
)
|
|
151,547,288
|
|
|
1,515
|
|
|
(4,180,272
|
)
|
|
4,165,911
|
|
|
2,881,657
|
|
|
(15,523
|
)
|
|
2,812,082
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
223,110
|
|
|
—
|
|
|
223,110
|
|
||||||||
Unrealized gain on investment in available for sale securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55,106
|
|
|
55,106
|
|
||||||||
Issuance of common shares, net
|
—
|
|
|
—
|
|
|
—
|
|
|
12,650,000
|
|
|
127
|
|
|
—
|
|
|
371,829
|
|
|
—
|
|
|
—
|
|
|
371,956
|
|
||||||||
Common share grants
|
—
|
|
|
—
|
|
|
—
|
|
|
91,600
|
|
|
1
|
|
|
—
|
|
|
2,546
|
|
|
—
|
|
|
—
|
|
|
2,547
|
|
||||||||
Common share repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,689
|
)
|
|
—
|
|
|
—
|
|
|
(613
|
)
|
|
—
|
|
|
—
|
|
|
(613
|
)
|
||||||||
Distributions
|
—
|
|
|
—
|
|
|
(20,664
|
)
|
|
—
|
|
|
—
|
|
|
(314,135
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(334,799
|
)
|
||||||||
Balance at December 31, 2016
|
11,600,000
|
|
|
280,107
|
|
|
(341,977
|
)
|
|
164,268,199
|
|
|
1,643
|
|
|
(4,494,407
|
)
|
|
4,539,673
|
|
|
3,104,767
|
|
|
39,583
|
|
|
3,129,389
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215,143
|
|
|
—
|
|
|
215,143
|
|
||||||||
Unrealized gain on investment in available for sale securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,775
|
|
|
39,775
|
|
||||||||
Redemption of preferred shares, net
|
(11,600,000
|
)
|
|
(280,107
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(280,107
|
)
|
||||||||
Common share grants
|
—
|
|
|
—
|
|
|
—
|
|
|
100,000
|
|
|
1
|
|
|
—
|
|
|
3,168
|
|
|
—
|
|
|
—
|
|
|
3,169
|
|
||||||||
Common share repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,058
|
)
|
|
(1
|
)
|
|
—
|
|
|
(534
|
)
|
|
—
|
|
|
—
|
|
|
(535
|
)
|
||||||||
Excess of liquidation preference over carrying value of preferred shares redeemed
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,893
|
)
|
|
|
|
(9,893
|
)
|
|||||||||
Distributions
|
—
|
|
|
—
|
|
|
(1,435
|
)
|
|
—
|
|
|
—
|
|
|
(340,084
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(341,519
|
)
|
||||||||
Balance at December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
$
|
(343,412
|
)
|
|
164,349,141
|
|
|
$
|
1,643
|
|
|
$
|
(4,834,491
|
)
|
|
$
|
4,542,307
|
|
|
$
|
3,310,017
|
|
|
$
|
79,358
|
|
|
$
|
2,755,422
|
|
|
For the Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
||||
Net income
|
$
|
215,143
|
|
|
$
|
223,110
|
|
|
$
|
166,418
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
386,659
|
|
|
357,342
|
|
|
329,776
|
|
|||
Amortization of deferred financing costs and debt discounts as interest
|
8,871
|
|
|
8,151
|
|
|
5,849
|
|
|||
Straight line rental income
|
(12,378
|
)
|
|
(13,570
|
)
|
|
(9,568
|
)
|
|||
Security deposits replenished
|
36,743
|
|
|
35,759
|
|
|
20,501
|
|
|||
FF&E reserve income and deposits
|
(74,329
|
)
|
|
(73,956
|
)
|
|
(67,967
|
)
|
|||
Loss on early extinguishment of debt
|
146
|
|
|
228
|
|
|
—
|
|
|||
Loss on distribution to common shareholders of The RMR Group Inc. common stock
|
—
|
|
|
—
|
|
|
36,773
|
|
|||
Equity in earnings of an investee
|
(607
|
)
|
|
(137
|
)
|
|
(21
|
)
|
|||
Gain on sale of real estate
|
(9,348
|
)
|
|
—
|
|
|
(11,015
|
)
|
|||
Deferred income taxes
|
(236
|
)
|
|
9
|
|
|
(69
|
)
|
|||
Other non-cash (income) expense, net
|
(3,233
|
)
|
|
(3,250
|
)
|
|
(364
|
)
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Due from related persons
|
(1,215
|
)
|
|
(1,213
|
)
|
|
(2,106
|
)
|
|||
Other assets
|
(13,060
|
)
|
|
(190
|
)
|
|
246
|
|
|||
Accounts payable and other liabilities
|
(572
|
)
|
|
8,752
|
|
|
362
|
|
|||
Due to related persons
|
21,639
|
|
|
(8,515
|
)
|
|
62,078
|
|
|||
Net cash provided by operating activities
|
554,223
|
|
|
532,520
|
|
|
530,893
|
|
|||
|
|
|
|
|
|
||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|||
Real estate acquisitions and deposits
|
(594,693
|
)
|
|
(262,955
|
)
|
|
(449,882
|
)
|
|||
Real estate improvements
|
(131,120
|
)
|
|
(187,652
|
)
|
|
(180,703
|
)
|
|||
FF&E reserve escrow fundings
|
(31,362
|
)
|
|
(3,749
|
)
|
|
(7,299
|
)
|
|||
Net proceeds from sale of real estate
|
23,438
|
|
|
—
|
|
|
—
|
|
|||
Investment in The RMR Group Inc.
|
—
|
|
|
—
|
|
|
(15,955
|
)
|
|||
Net cash used in investing activities
|
(733,737
|
)
|
|
(454,356
|
)
|
|
(653,839
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|||
Proceeds from issuance of common shares, net
|
—
|
|
|
371,956
|
|
|
—
|
|
|||
Proceeds from issuance of senior unsecured notes, net of discounts and premiums
|
989,890
|
|
|
737,612
|
|
|
—
|
|
|||
Repayment of senior unsecured notes
|
(350,000
|
)
|
|
(575,000
|
)
|
|
—
|
|
|||
Redemption of preferred shares
|
(290,000
|
)
|
|
—
|
|
|
—
|
|
|||
Repurchase of convertible senior unsecured notes
|
(8,478
|
)
|
|
—
|
|
|
—
|
|
|||
Borrowings under unsecured revolving credit facility
|
1,102,000
|
|
|
764,000
|
|
|
702,000
|
|
|||
Repayments of unsecured revolving credit facility
|
(895,000
|
)
|
|
(1,038,000
|
)
|
|
(255,000
|
)
|
|||
Deferred financing costs
|
(8,437
|
)
|
|
(6,106
|
)
|
|
(1,157
|
)
|
|||
Repurchase of common shares
|
(533
|
)
|
|
(613
|
)
|
|
(418
|
)
|
|||
Distributions to preferred shareholders
|
(6,601
|
)
|
|
(20,664
|
)
|
|
(20,664
|
)
|
|||
Distributions to common shareholders
|
(340,084
|
)
|
|
(314,135
|
)
|
|
(299,967
|
)
|
|||
Net cash provided by (used in) financing activities
|
192,757
|
|
|
(80,950
|
)
|
|
124,794
|
|
|||
Increase (decrease) in cash and cash equivalents
|
13,243
|
|
|
(2,786
|
)
|
|
1,848
|
|
|||
Cash and cash equivalents at beginning of year
|
10,896
|
|
|
13,682
|
|
|
11,834
|
|
|||
Cash and cash equivalents at end of year
|
$
|
24,139
|
|
|
$
|
10,896
|
|
|
$
|
13,682
|
|
|
|
|
|
|
|
|
As of December 31,
|
||||||
|
2017
|
|
2016
|
||||
Assets:
|
|
|
|
||||
Tradenames and trademarks
|
$
|
89,375
|
|
|
$
|
89,375
|
|
Below market ground leases, net of accumulated amortization of $23,648 and $21,508, respectively
|
14,660
|
|
|
16,800
|
|
||
Other, net of accumulated amortization of $1,216 and $542, respectively
|
4,254
|
|
|
2,374
|
|
||
|
$
|
108,289
|
|
|
$
|
108,549
|
|
Liabilities:
|
|
|
|
||||
Above market ground leases, net of accumulated amortization of $6,628 and $4,525, respectively
|
$
|
1,741
|
|
|
$
|
2,196
|
|
|
Below
Market
Ground
Leases &
Other
|
|
Above
Market
Ground
Leases
|
||||
2018
|
$
|
2,558
|
|
|
$
|
(455
|
)
|
2019
|
1,942
|
|
|
(447
|
)
|
||
2020
|
1,591
|
|
|
(443
|
)
|
||
2021
|
1,571
|
|
|
(354
|
)
|
||
2022
|
1,534
|
|
|
(18
|
)
|
||
Thereafter
|
9,718
|
|
|
(24
|
)
|
||
|
$
|
18,914
|
|
|
$
|
(1,741
|
)
|
|
For the Year Ended December 31,
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
|
(in thousands)
|
|||||||
Weighted average common shares for basic earnings per share
|
164,146
|
|
|
156,062
|
|
|
150,709
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|||
Contingently issuable common shares
|
—
|
|
|
—
|
|
|
269
|
|
Unvested share awards
|
29
|
|
|
26
|
|
|
24
|
|
Weighted average common shares for diluted earnings per share
|
164,175
|
|
|
156,088
|
|
|
151,002
|
|
|
2017
|
|
2016
|
|
2015
|
|||||||||||||||
|
Number
of Shares |
|
Weighted
Average Grant Date Fair Value |
|
Number
of Shares |
|
Weighted
Average Grant Date Fair Value |
|
Number
of Shares |
|
Weighted
Average Grant Date Fair Value |
|||||||||
Unvested shares, beginning of year
|
148,535
|
|
|
$
|
29.40
|
|
|
147,004
|
|
|
$
|
25.95
|
|
|
150,192
|
|
|
$
|
28.52
|
|
Shares granted
|
100,000
|
|
|
28.39
|
|
|
91,600
|
|
|
28.15
|
|
|
91,250
|
|
|
26.32
|
|
|||
Shares vested
|
(101,930
|
)
|
|
28.52
|
|
|
(90,069
|
)
|
|
28.07
|
|
|
(93,248
|
)
|
|
27.16
|
|
|||
Shares forfeited
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,190
|
)
|
|
—
|
|
|||
Unvested shares, end of year
|
146,605
|
|
|
$
|
27.93
|
|
|
148,535
|
|
|
$
|
29.40
|
|
|
147,004
|
|
|
$
|
25.95
|
|
|
|
|
|
|
|
|
|
Purchase Price Allocation
|
||||||||||||||||||||
Acquisition Date
|
|
Location
|
|
Type
|
|
Purchase Price
|
|
Land
|
|
Land Improvements
|
|
Building and Improvements
|
|
Furniture, Fixtures and Equipment
|
|
Intangible Assets
|
||||||||||||
2/1/2017
|
|
Chicago, IL
(1)
|
|
Hotel
|
|
$
|
86,201
|
|
|
$
|
13,609
|
|
|
$
|
40
|
|
|
$
|
58,929
|
|
|
$
|
11,926
|
|
|
$
|
1,697
|
|
3/31/2017
|
|
Seattle, WA
(2)
|
|
Hotel
|
|
72,736
|
|
|
24,460
|
|
|
30
|
|
|
46,944
|
|
|
855
|
|
|
447
|
|
||||||
5/3/2017
|
|
Columbia, SC
(3)
|
|
Travel Center
|
|
27,604
|
|
|
4,040
|
|
|
7,172
|
|
|
16,392
|
|
|
—
|
|
|
—
|
|
||||||
6/2/2017
|
|
St. Louis, MO
(4)
|
|
Hotel
|
|
88,080
|
|
|
4,250
|
|
|
161
|
|
|
79,737
|
|
|
3,394
|
|
|
538
|
|
||||||
6/29/2017
|
|
Atlanta, GA
(5)
|
|
Hotel
|
|
88,748
|
|
|
16,612
|
|
|
483
|
|
|
68,864
|
|
|
2,789
|
|
|
—
|
|
||||||
8/1/2017
|
|
Columbus, OH
(6)
|
|
Hotel
|
|
49,188
|
|
|
6,100
|
|
|
49
|
|
|
40,678
|
|
|
2,361
|
|
|
—
|
|
||||||
8/23/2017
|
|
Charlotte, NC
(7)
|
|
Hotel
|
|
44,000
|
|
|
2,684
|
|
|
1,012
|
|
|
35,288
|
|
|
5,016
|
|
|
—
|
|
||||||
9/8/2017
|
|
Atlanta, GA
(8)
|
|
Land
|
|
940
|
|
|
940
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
9/26/2017
|
|
Various
(9)
|
|
Hotels
|
|
139,885
|
|
|
30,712
|
|
|
6,390
|
|
|
93,872
|
|
|
8,911
|
|
|
—
|
|
||||||
9/28/2017
|
|
Sayre, OK
(10)
|
|
Travel Center
|
|
8,672
|
|
|
1,031
|
|
|
—
|
|
|
7,641
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
$
|
606,054
|
|
|
$
|
104,438
|
|
|
$
|
15,337
|
|
|
$
|
448,345
|
|
|
$
|
35,252
|
|
|
$
|
2,682
|
|
Acquisition Date
|
|
Location
|
|
Type
|
|
Purchase Price
(11)
|
|
Land
|
|
Land Improvements
|
|
Building and Improvements
|
|
Furniture, Fixtures and Equipment
|
|
Intangible Assets
|
||||||||||||
2/1/2016
|
|
Various
(12)(13)
|
|
Hotels
|
|
$
|
12,000
|
|
|
$
|
1,953
|
|
|
$
|
654
|
|
|
$
|
8,153
|
|
|
$
|
1,240
|
|
|
$
|
—
|
|
3/16/2016
|
|
Portland, OR
(12)(14)
|
|
Hotel
|
|
114,000
|
|
|
5,657
|
|
|
3
|
|
|
100,535
|
|
|
7,805
|
|
|
—
|
|
||||||
3/31/2016
|
|
Hillsboro, TX
(3)
|
|
Travel Center
|
|
19,683
|
|
|
4,834
|
|
|
4,196
|
|
|
10,653
|
|
|
—
|
|
|
—
|
|
||||||
6/22/2016
|
|
Various
(3)
|
|
Travel Centers
|
|
23,876
|
|
|
3,170
|
|
|
9,280
|
|
|
11,426
|
|
|
—
|
|
|
—
|
|
||||||
6/30/2016
|
|
Wilmington, IL
(3)
|
|
Travel Center
|
|
22,297
|
|
|
6,523
|
|
|
3,364
|
|
|
12,410
|
|
|
—
|
|
|
—
|
|
||||||
9/14/2016
|
|
Holbrook, AZ
(15)
|
|
Land
|
|
325
|
|
|
325
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
9/30/2016
|
|
Caryville, TN
(3)
|
|
Travel Center
|
|
16,557
|
|
|
2,068
|
|
|
6,082
|
|
|
8,407
|
|
|
—
|
|
|
—
|
|
||||||
12/5/2016
|
|
Milpitas, CA
(12)(16)
|
|
Hotel
|
|
46,000
|
|
|
$
|
13,089
|
|
|
$
|
823
|
|
|
$
|
29,748
|
|
|
$
|
2,340
|
|
|
—
|
|
||
|
|
|
|
|
|
$
|
254,738
|
|
|
$
|
37,619
|
|
|
$
|
24,402
|
|
|
$
|
181,332
|
|
|
$
|
11,385
|
|
|
$
|
—
|
|
Acquisition Date
|
|
Location
|
|
Type
|
|
Purchase Price
(11)
|
|
Land
|
|
Land Improvements
|
|
Building and Improvements
|
|
Furniture, Fixtures and Equipment
|
|
Intangible Assets
|
||||||||||||
3/16/2015
|
|
Rosemont, IL
(12)(17)
|
|
Hotel
|
|
$
|
35,500
|
|
|
$
|
2,375
|
|
|
$
|
219
|
|
|
$
|
31,182
|
|
|
$
|
1,463
|
|
|
$
|
261
|
|
4/28/2015
|
|
Ft. Lauderdale, FL
(18)
|
|
Land
|
|
750
|
|
|
165
|
|
|
—
|
|
|
585
|
|
|
—
|
|
|
—
|
|
||||||
5/15/2015
|
|
Denver, CO
(12)(19)
|
|
Hotel
|
|
77,250
|
|
|
8,193
|
|
|
181
|
|
|
61,005
|
|
|
7,871
|
|
|
—
|
|
||||||
6/1/2015
|
|
Various
(3)
|
|
Travel Centers
|
|
227,877
|
|
|
26,286
|
|
|
67,161
|
|
|
134,388
|
|
|
42
|
|
|
—
|
|
||||||
7/23/2015
|
|
Various
(12)(20)
|
|
Hotels
|
|
85,000
|
|
|
13,165
|
|
|
—
|
|
|
64,338
|
|
|
7,497
|
|
|
—
|
|
||||||
9/23/2015
|
|
Various
(3)
|
|
Travel Centers
|
|
51,506
|
|
|
9,165
|
|
|
21,266
|
|
|
21,075
|
|
|
—
|
|
|
—
|
|
||||||
10/30/2015
|
|
Waterloo, NY
(21)
|
|
Land
|
|
15,000
|
|
|
1,500
|
|
|
4,500
|
|
|
9,000
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
$
|
492,883
|
|
|
$
|
60,849
|
|
|
$
|
93,327
|
|
|
$
|
321,573
|
|
|
$
|
16,873
|
|
|
$
|
261
|
|
(1)
|
On February 1, 2017, we acquired the
483
room Hotel Allegro in Chicago, IL for a purchase price of
$86,201
, including capitalized acquisition costs of
$707
. We added this Kimpton
®
branded hotel to our management agreement with InterContinental.
|
(2)
|
On March 31, 2017, we acquired the
121
room Hotel Alexis in Seattle, WA for a purchase price of
$72,736
, including capitalized acquisition costs of
$1,111
. We added this Kimpton
®
branded hotel to our management agreement with InterContinental.
|
(3)
|
We and TA were parties to a transaction agreement that we entered into on June 1, 2015, and which we and TA subsequently amended. Pursuant to that agreement, among other things, we agreed to acquire from, and lease back to, TA
14
travel centers then owned by TA and certain assets then owned by TA at
11
properties we own and lease to TA for an aggregate purchase price of
$279,383
, excluding acquisition related costs. As of December 31, 2015, we had completed these acquisitions. Simultaneously with these acquisitions, we leased these travel centers and assets back to TA under leases that we and TA entered into pursuant to the transaction agreement, which replaced our previously existing leases with TA.
|
(4)
|
On June 2, 2017, we acquired the
389
room Chase Park Plaza Hotel in St. Louis, MO for a purchase price of
$88,080
, including capitalized acquisition costs of
$466
. We converted this hotel to the Royal Sonesta
®
hotel brand and entered into a management agreement for this hotel with Sonesta.
|
(5)
|
On June 29, 2017, we acquired the
495
room Crowne Plaza Ravinia hotel located in Atlanta, GA for a purchase price of
$88,748
, including capitalized acquisition costs of
$144
. We added this Crowne Plaza
®
branded hotel to our management agreement with InterContinental.
|
(6)
|
On August 1, 2017, we acquired the
419
room Crowne Plaza & Lofts hotel in Columbus, OH for a purchase price of
$49,188
, including capitalized acquisition costs of
$198
. We added this Crowne Plaza
®
branded hotel to our management agreement with InterContinental.
|
(7)
|
On August 23, 2017, we acquired the
300
room Crowne Plaza hotel in Charlotte, NC for a purchase price of
$44,000
, including capitalized acquisition costs of
$143
. We added this Crowne Plaza
®
branded hotel to our management agreement with InterContinental.
|
(8)
|
On September 8, 2017, we acquired a land parcel adjacent to our Crowne Plaza hotel located in Atlanta, GA for a purchase price of
$940
, including capitalized acquisition costs of
$40
.
|
(9)
|
On September 26, 2017, we acquired
14
extended stay hotels with
1,653
suites located in
12
states for a purchase price of
$139,885
, including capitalized acquisition costs of
$1,885
. In connection with this acquisition, we converted these hotels to the Sonesta ES Suites
®
brand and entered into management agreements for these hotels with Sonesta.
|
(10)
|
On September 28, 2017, we acquired land and certain improvements at a travel center located in Sayre, OK that we previously leased from a third party and subleased to TA for a purchase price of
$8,672
, including capitalized acquisition costs of
$72
. Effective as of that date, rent due to that third party and TA’s sublease rental obligations to pay the third party rent ceased, and we amended our lease with TA to document a direct lease to TA of that land and those improvements and to increase the annual minimum rent payable by TA to us by
$731
, which was
8.5%
of our purchase price.
|
(11)
|
Excludes acquisition related costs.
|
(12)
|
We accounted for these transactions as business combinations under previous GAAP guidance. The pro forma impact of including the results of operations of these acquisitions from the beginning of the year is not material to our consolidated financial statements.
|
(13)
|
On February 1, 2016, we acquired
two
extended stay hotels with
262
suites located in Cleveland and Westlake, OH for an aggregate purchase price of
$12,000
. We converted these hotels to the Sonesta ES Suites
®
brand and entered into management agreements for these hotels with Sonesta.
|
(14)
|
On March 16, 2016, we acquired the Kimpton Hotel Monaco, a full service hotel with
221
rooms located in Portland, OR for a purchase price of
$114,000
. We added this hotel to our management agreement with InterContinental.
|
(15)
|
On September 14, 2016, we acquired land adjacent to a travel center that we own in Holbrook, AZ for
$325
. We and TA added this property to our TA No. 4 lease and annual rent payable by TA to us increased by
$28
as a result. We capitalized acquisition related costs of
$7
related to this transaction.
|
(16)
|
On December 5, 2016, we acquired a full service hotel with
236
rooms located in Milpitas, CA for a purchase price of
$46,000
. We converted this hotel to the Sonesta
®
brand and entered a management agreement for this hotel with Sonesta.
|
(17)
|
On March 16, 2015, we acquired a
300
room hotel located in Rosemont, IL for a purchase price of
$35,500
. We added this Holiday Inn and Suites
®
branded hotel to our management agreement with InterContinental.
|
(18)
|
On April 28, 2015, we acquired land and improvements adjacent to a Sonesta hotel that we own in Fort Lauderdale, FL for a purchase price of
$750
, including capitalized acquisition costs of
$41
. This land and these improvements are included with the Fort Lauderdale hotel under our Sonesta agreement.
|
(19)
|
On May 15, 2015, we acquired a
364
room full service hotel located in Denver, CO for a purchase price of
$77,250
. We added this Crowne Plaza
®
branded hotel to our management agreement with InterContinental.
|
(20)
|
On July 23, 2015, we acquired a portfolio of
nine
extended stay hotels with
1,095
suites located in
eight
states for an aggregate purchase price of
$85,000
. We converted these hotels to Sonesta ES Suites
®
branded hotels and entered into management agreements for these hotels with Sonesta.
|
(21)
|
On October 30, 2015, we acquired land and certain improvements at a travel center located in Waterloo, NY that we previously leased from a third party and subleased to TA for a purchase price of
$15,000
. Effective as of that date, rent due to that third party and TA’s sublease rental obligations to pay the third party rent ceased, and we amended our lease with TA to document a direct lease to TA of that land and those improvements and to increase the annual minimum rent payable by TA to us by
$1,275
, which was
8.5%
of our purchase price.
|
|
Number of Travel Centers
|
Initial Term End
(1)
|
Annual Minimum Rent as of December 31, 2017
|
Deferred Rent
(2)
|
||||
TA No. 1 Lease
|
40
|
December 31, 2029
|
$
|
52,763
|
|
$
|
27,421
|
|
TA No. 2 Lease
|
40
|
December 31, 2028
|
53,681
|
|
29,107
|
|
||
TA No. 3 Lease
|
39
|
December 31, 2026
|
54,005
|
|
29,324
|
|
||
TA No. 4 Lease
|
40
|
December 31, 2030
|
54,437
|
|
21,233
|
|
||
TA No. 5 Lease
|
40
|
June 30, 2032
|
69,527
|
|
42,915
|
|
||
|
199
|
|
$
|
284,413
|
|
$
|
150,000
|
|
(1)
|
TA has
two
renewal options of
15 years
each under each of our TA leases.
|
(2)
|
Pursuant to a rent deferral agreement with TA, TA previously deferred as of December 31, 2010 a total of
$150,000
of rent payable to us, which remained outstanding as of
December 31, 2017
. This deferred rent obligation was allocated among our TA leases and is due at the end of the initial terms of the respective leases as noted above, except for our TA No. 5 lease, in which case the applicable deferred rent is due and payable on June 30, 2024. These deferred rent obligations are subject to acceleration at our option upon an uncured default or a change in control of TA.
|
|
|
||
2018
|
$
|
311,625
|
|
2019
|
311,861
|
|
|
2020
|
302,319
|
|
|
2021
|
301,832
|
|
|
2022
|
300,272
|
|
|
Thereafter
|
3,910,613
|
|
|
Total
|
$
|
5,438,522
|
|
•
|
Base Management Fee
. The annual base management fee payable to RMR LLC by us for each applicable period is equal to the lesser of:
|
◦
|
the sum of (a)
0.7%
of the average aggregate historical cost of our real estate investments up to
$250,000
, plus (b)
0.5%
of the average aggregate historical cost of our real estate investments exceeding
$250,000
; and
|
◦
|
the sum of (a)
0.7%
of the average closing price per share of our common shares on the stock exchange on which such shares are principally traded, during such period, multiplied by the average number of our common shares outstanding during such period, plus the daily weighted average of the aggregate liquidation preference of each class of our preferred shares outstanding during such period, plus the daily weighted average of the aggregate principal amount of our consolidated indebtedness during such period, or, together, our Average Market Capitalization, up to
$250,000
, plus (b)
0.5%
of our Average Market Capitalization exceeding
$250,000
.
|
•
|
Incentive Management Fee
. The incentive management fee which may be earned by RMR LLC for an annual period is calculated as follows:
|
◦
|
An amount, subject to a cap based on the value of our common shares outstanding, equal to
12%
of the product of:
|
-
|
our equity market capitalization on the last trading day of the year immediately prior to the relevant three year measurement period (or, for purposes of calculating any incentive fee for 2015, our equity market capitalization on December 31, 2013), and
|
-
|
the amount (expressed as a percentage) by which the total return per share, as defined in the business management agreement and further described below, of our common shareholders (i.e., share price appreciation plus dividends) exceeds the total shareholder return of the SNL U.S. REIT Hotel Index, or the benchmark return per share, for the relevant measurement period.
|
◦
|
The calculation of the incentive management fee (including the determinations of our equity market capitalization and the total return per share of our common shareholders) is subject to adjustments if additional common shares are issued during the measurement period.
|
◦
|
No incentive management fee is payable by us unless our total return per share during the measurement period is positive.
|
◦
|
The measurement periods are three year periods ending with the year for which the incentive management fee is being calculated, with a shorter period applicable in the case of the calculation of the incentive management fee for 2015 (
two years
).
|
◦
|
If our total return per share exceeds
12%
per year in any measurement period, the benchmark return per share is adjusted to be the lesser of the total shareholder return of the SNL U.S. REIT Hotel Index for such measurement period and
12%
per year, or the adjusted benchmark return per share. In instances where the adjusted benchmark return per share applies, the incentive management fee will be reduced if our total return per share is between
200
basis points and
500
basis points below the SNL U.S. REIT Hotel Index by a low return factor, as defined in the business management agreement, and there will be no incentive management
|
◦
|
The incentive management fee is subject to a cap. The cap is equal to the value of the number of our common shares which would, after issuance, represent
1.5%
of the number of our common shares then outstanding multiplied by the average closing price of our common shares during the
10
consecutive trading days having the highest average closing prices during the final
30
trading days of the relevant measurement period.
|
◦
|
Incentive management fees we paid to RMR LLC for any period may be subject to “clawback” if our financial statements for that period are restated due to material non-compliance with any financial reporting requirements under the securities laws as a result of the bad faith, fraud, willful misconduct or gross negligence of RMR LLC and the amount of the incentive management fee we paid was greater than the amount we would have paid based on the restated financial statements.
|
•
|
Property Management and Construction Supervision Fees.
The property management fees payable to RMR LLC by us for each applicable period are equal to
3%
of gross collected rents and the construction supervision fees payable to RMR LLC by us for each applicable period are equal to
5%
of construction costs for the office building component of one of our hotels that is subject to our property management agreement with RMR LLC.
|
•
|
Expense Reimbursement.
We are generally responsible for all of our operating expenses, including certain expenses incurred by RMR LLC on our behalf. Our property level operating expenses are generally incorporated into rents charged to our tenants, including certain payroll and related costs incurred by RMR LLC. We reimbursed RMR LLC
$206
,
$171
and
$134
for property management related expenses related to the office building component of one of our hotels for the years ended
December 31, 2017
,
2016
and
2015
, respectively. These amounts are included in hotel operating expenses in our consolidated statements of comprehensive income for these periods. We are generally not responsible for payment of RMR LLC’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR LLC employees assigned to work exclusively or partly at the office building component of one of our hotels, our share of the wages, benefits and other related costs of centralized accounting personnel and our share of RMR LLC’s costs for providing our internal audit function. Our Audit Committee appoints our Director of Internal Audit and our Compensation Committee approves the costs of our internal audit function. The amounts recognized as expense for internal audit costs were
$276
,
$235
and
$254
for the years ended
December 31, 2017
,
2016
and
2015
, respectively. These amounts are included in general and administrative expenses in our consolidated statements of comprehensive income for these periods.
|
•
|
Term.
Our management agreements with RMR LLC have terms that end on December 31, 2037, and automatically extend on December 31st of each year for an additional year, so that the terms of our management agreements thereafter end on the 20th anniversary of the date of the extension.
|
•
|
Termination Rights
. We have the right to terminate one or both of our management agreements with RMR LLC: (1) at any time on written notice for convenience, (2) immediately on written notice for cause, as defined therein, (3) on written notice given within
60
days after the end of an applicable calendar year for a performance reason, as defined therein, and (4) by written notice during the
12 months
following a change of control of RMR LLC, as defined therein. RMR LLC has the right to terminate the management agreements for good reason, as defined therein.
|
•
|
Termination Fee
. If we terminate one or both of our management agreements with RMR LLC for convenience, or if RMR LLC terminates one or both of our management agreements for good reason, we have agreed to pay RMR LLC a termination fee in an amount equal to the sum of the present values of the monthly future fees, as defined therein, for the terminated management agreement(s) for the term that was remaining prior to such termination, which, depending on the time of termination would be between
19
and
20
years. If we terminate one or both of our management agreements with RMR LLC for a performance reason, we have agreed to pay RMR LLC the termination fee calculated as described above, but assuming a
10
year term was remaining prior to the termination. We are not required to pay any termination fee if we terminate our management agreements with RMR LLC for cause or as a result of a change of control of RMR LLC.
|
•
|
Transition Services.
RMR LLC has agreed to provide certain transition services to us for
120 days
following an applicable termination by us or notice of termination by RMR LLC, including cooperating with us and using commercially reasonable efforts to facilitate the orderly transfer of the management and real estate investment services provided under our business management agreement and to facilitate the orderly transfer of the management of the managed properties under our property management agreement, as applicable.
|
•
|
Vendors.
Pursuant to our management agreements with RMR LLC, RMR LLC may from time to time negotiate on our behalf with certain third party vendors and suppliers for the procurement of goods and services to us. As part of this arrangement, we may enter agreements with RMR LLC and other companies to which RMR LLC provides management services for the purpose of obtaining more favorable terms from such vendors and suppliers.
|
•
|
Investment Opportunities
. Under our business management agreement with RMR LLC, we acknowledge that RMR LLC may engage in other activities or businesses and act as the manager to any other person or entity (including other REITs) even though such person or entity has investment policies and objectives similar to ours and we are not entitled to preferential treatment in receiving information, recommendations and other services from RMR LLC.
|
2018
|
$
|
398,000
|
|
2019
|
400,000
|
|
|
2020
|
—
|
|
|
2021
|
400,000
|
|
|
2022
|
500,000
|
|
|
Thereafter
|
2,350,000
|
|
|
|
$
|
4,048,000
|
|
|
For the Year Ended
December 31,
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
Taxes at statutory U.S. federal income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Nontaxable income of HPT
|
(35.0
|
)%
|
|
(35.0
|
)%
|
|
(35.0
|
)%
|
Minimum Tax Credit Refund
|
(2.6
|
)%
|
|
0.0
|
%
|
|
0.0
|
%
|
State and local income taxes, net of federal tax benefit
|
0.8
|
%
|
|
0.8
|
%
|
|
0.8
|
%
|
Foreign taxes
|
0.3
|
%
|
|
1.0
|
%
|
|
0.1
|
%
|
Tax Act adjustment
|
21.8
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
Change in valuation allowance
|
(23.5
|
)%
|
|
0.8
|
%
|
|
3.7
|
%
|
Other differences, net
|
1.6
|
%
|
|
(0.8
|
)%
|
|
(3.7
|
)%
|
Effective tax rate
|
(1.6
|
)%
|
|
1.8
|
%
|
|
0.9
|
%
|
|
For the Year Ended
December 31,
|
||||||
|
2017
|
|
2016
|
||||
Deferred tax assets:
|
|
|
|
||||
Tax credits
|
$
|
5,984
|
|
|
$
|
11,727
|
|
Tax loss carryforwards
|
85,661
|
|
|
129,808
|
|
||
Other
|
3,894
|
|
|
3,686
|
|
||
|
95,539
|
|
|
145,221
|
|
||
Valuation allowance
|
(94,692
|
)
|
|
(144,593
|
)
|
||
|
847
|
|
|
628
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Property basis difference
|
(9,068
|
)
|
|
(9,086
|
)
|
||
Net deferred tax liabilities
|
$
|
(8,221
|
)
|
|
$
|
(8,458
|
)
|
•
|
We contributed
1,490,000
of our common shares and
$12,622
in cash to RMR Inc. and RMR Inc. issued
5,019,121
shares of its class A common stock to us.
|
•
|
We agreed to distribute approximately half of the shares of class A common stock of RMR Inc. issued to us in the Up-C Transaction to our shareholders as a special distribution.
|
•
|
We entered into amended and restated business and property management agreements with RMR LLC which, among other things, amended the term, termination and termination fee provisions of those agreements. See Note 7 for further information regarding our management agreements with RMR LLC.
|
•
|
We entered into a registration rights agreement with RMR Inc. covering the shares of class A common stock of RMR Inc. issued to us in the Up-C Transaction, pursuant to which we received demand and piggyback registration rights, subject to certain limitations.
|
•
|
We entered into a lock up and registration rights agreement with ABP Trust, Adam Portnoy and Barry Portnoy pursuant to which they agreed not to transfer the
1,490,000
of our common shares ABP Trust received in the Up-
|
Agreement Reference Name
|
|
Number of
Properties
|
|
Annual Minimum
Returns/Rents
|
|
% of Total
|
|
Investment
(1)
|
|
% of Total
|
|||||||
Marriott (No. 1)
|
|
53
|
|
|
$
|
69,232
|
|
|
8
|
%
|
|
$
|
697,258
|
|
|
7
|
%
|
Marriott (No. 234)
|
|
68
|
|
|
106,538
|
|
|
13
|
%
|
|
1,003,364
|
|
|
10
|
%
|
||
Marriott (No. 5)
|
|
1
|
|
|
10,159
|
|
|
1
|
%
|
|
90,078
|
|
|
1
|
%
|
||
Subtotal Marriott
|
|
122
|
|
|
185,929
|
|
|
22
|
%
|
|
1,790,700
|
|
|
18
|
%
|
||
InterContinental
(2)
|
|
99
|
|
|
189,261
|
|
|
23
|
%
|
|
2,040,085
|
|
|
21
|
%
|
||
Sonesta
|
|
49
|
|
|
109,632
|
|
|
13
|
%
|
|
1,457,479
|
|
|
15
|
%
|
||
Wyndham
(3)
|
|
22
|
|
|
29,010
|
|
|
4
|
%
|
|
393,800
|
|
|
4
|
%
|
||
Hyatt
|
|
22
|
|
|
22,037
|
|
|
3
|
%
|
|
301,942
|
|
|
3
|
%
|
||
Carlson
|
|
8
|
|
|
12,920
|
|
|
2
|
%
|
|
195,101
|
|
|
2
|
%
|
||
Morgans
|
|
1
|
|
|
7,595
|
|
|
1
|
%
|
|
120,000
|
|
|
1
|
%
|
||
Subtotal Hotels
|
|
323
|
|
|
556,384
|
|
|
68
|
%
|
|
6,299,107
|
|
|
64
|
%
|
||
TA (No. 1)
|
|
40
|
|
|
52,763
|
|
|
6
|
%
|
|
677,032
|
|
|
7
|
%
|
||
TA (No. 2)
|
|
40
|
|
|
53,681
|
|
|
6
|
%
|
|
681,055
|
|
|
7
|
%
|
||
TA (No. 3)
|
|
39
|
|
|
54,005
|
|
|
6
|
%
|
|
636,016
|
|
|
7
|
%
|
||
TA (No. 4)
(4)
|
|
40
|
|
|
54,437
|
|
|
6
|
%
|
|
618,615
|
|
|
6
|
%
|
||
TA (No. 5)
|
|
40
|
|
|
69,527
|
|
|
8
|
%
|
|
885,695
|
|
|
9
|
%
|
||
Subtotal TA
|
|
199
|
|
|
284,413
|
|
|
32
|
%
|
|
3,498,413
|
|
|
36
|
%
|
||
Total
|
|
522
|
|
|
$
|
840,797
|
|
|
100
|
%
|
|
$
|
9,797,520
|
|
|
100
|
%
|
(1)
|
Represents historical cost of our properties plus capital improvements funded by us less impairment writedowns, if any, and excludes capital improvements made from FF&E reserves funded from hotel operations.
|
(2)
|
The annual minimum return/minimum rent amount presented includes
$7,912
of rent related to our lease with InterContinental for
one
hotel in Puerto Rico.
|
(3)
|
The annual minimum return/minimum rent amount presented includes
$1,449
of rent related to our lease with Wyndham Vacation for
48
vacation units in one hotel.
|
(4)
|
The annual minimum rent amount for our TA No. 4 agreement includes approximately
$2,147
of ground rent paid by TA for a property we lease and sublease to TA.
|
|
2017
|
||||||||||||||
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Revenues
|
$
|
488,602
|
|
|
$
|
570,603
|
|
|
$
|
577,588
|
|
|
$
|
535,142
|
|
Net income
|
37,171
|
|
|
60,699
|
|
|
85,728
|
|
|
31,545
|
|
||||
Net income available for common shareholders
|
25,843
|
|
|
60,699
|
|
|
85,728
|
|
|
31,545
|
|
||||
Net income available for common shareholders per share (basic and diluted)
(1)
|
0.16
|
|
|
0.37
|
|
|
0.52
|
|
|
0.19
|
|
||||
Distributions per common share
(2)
|
0.51
|
|
|
0.52
|
|
|
0.52
|
|
|
0.52
|
|
|
2016
|
||||||||||||||
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Revenues
|
$
|
474,118
|
|
|
$
|
550,299
|
|
|
$
|
543,516
|
|
|
$
|
479,278
|
|
Net income
|
52,051
|
|
|
56,061
|
|
|
51,812
|
|
|
63,186
|
|
||||
Net income available for common shareholders
|
46,885
|
|
|
50,895
|
|
|
46,646
|
|
|
58,020
|
|
||||
Net income available for common shareholders per share (basic and diluted)
(1)
|
0.31
|
|
|
0.34
|
|
|
0.30
|
|
|
0.35
|
|
||||
Distributions per common share
(2)
|
0.50
|
|
|
0.51
|
|
|
0.51
|
|
|
0.51
|
|
(1)
|
The sum of per common share amounts for the four quarters differs from annual per share amounts due to the required method of computing weighted average number of shares in interim periods and rounding.
|
(2)
|
Amounts represent distributions paid in the periods shown.
|
|
For the Year Ended December 31, 2017
|
||||||||||||||
|
Hotels
|
|
Travel Centers
|
|
Corporate
|
|
Consolidated
|
||||||||
Hotel operating revenues
|
$
|
1,843,501
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,843,501
|
|
Rental income
|
30,491
|
|
|
293,273
|
|
|
—
|
|
|
323,764
|
|
||||
FF&E reserve income
|
4,670
|
|
|
—
|
|
|
—
|
|
|
4,670
|
|
||||
Total revenues
|
1,878,662
|
|
|
293,273
|
|
|
—
|
|
|
2,171,935
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Hotel operating expenses
|
1,279,547
|
|
|
—
|
|
|
—
|
|
|
1,279,547
|
|
||||
Depreciation and amortization
|
242,829
|
|
|
143,830
|
|
|
—
|
|
|
386,659
|
|
||||
General and administrative
|
—
|
|
|
—
|
|
|
125,402
|
|
|
125,402
|
|
||||
Total expenses
|
1,522,376
|
|
|
143,830
|
|
|
125,402
|
|
|
1,791,608
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating income (loss)
|
356,286
|
|
|
149,443
|
|
|
(125,402
|
)
|
|
380,327
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Dividend income
|
—
|
|
|
—
|
|
|
2,504
|
|
|
2,504
|
|
||||
Interest income
|
—
|
|
|
—
|
|
|
798
|
|
|
798
|
|
||||
Interest expense
|
—
|
|
|
—
|
|
|
(181,579
|
)
|
|
(181,579
|
)
|
||||
Loss on early extinguishment of debt
|
—
|
|
|
—
|
|
|
(146
|
)
|
|
(146
|
)
|
||||
Income (loss) before income taxes and equity in earnings of an investee
|
356,286
|
|
|
149,443
|
|
|
(303,825
|
)
|
|
201,904
|
|
||||
Income tax benefit
|
—
|
|
|
—
|
|
|
3,284
|
|
|
3,284
|
|
||||
Equity in earnings of an investee
|
—
|
|
|
—
|
|
|
607
|
|
|
607
|
|
||||
Income (loss) before gain on sale of real estate
|
356,286
|
|
|
149,443
|
|
|
(299,934
|
)
|
|
205,795
|
|
||||
Gain on sale of real estate
|
9,348
|
|
|
—
|
|
|
—
|
|
|
9,348
|
|
||||
Net income (loss)
|
$
|
365,634
|
|
|
$
|
149,443
|
|
|
$
|
(299,934
|
)
|
|
$
|
215,143
|
|
|
As of December 31, 2017
|
||||||||||||||
|
Hotels
|
|
Travel Centers
|
|
Corporate
|
|
Consolidated
|
||||||||
Total assets
|
$
|
4,477,512
|
|
|
$
|
2,476,073
|
|
|
$
|
196,800
|
|
|
$
|
7,150,385
|
|
|
For the Year Ended December 31, 2016
|
||||||||||||||
|
Hotels
|
|
Travel Centers
|
|
Corporate
|
|
Consolidated
|
||||||||
Hotel operating revenues
|
$
|
1,733,103
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,733,103
|
|
Rental income
|
30,425
|
|
|
279,175
|
|
|
—
|
|
|
309,600
|
|
||||
FF&E reserve income
|
4,508
|
|
|
—
|
|
|
—
|
|
|
4,508
|
|
||||
Total revenues
|
1,768,036
|
|
|
279,175
|
|
|
—
|
|
|
2,047,211
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Hotel operating expenses
|
1,202,538
|
|
|
—
|
|
|
—
|
|
|
1,202,538
|
|
||||
Depreciation and amortization
|
224,335
|
|
|
133,007
|
|
|
—
|
|
|
357,342
|
|
||||
General and administrative
|
—
|
|
|
—
|
|
|
99,105
|
|
|
99,105
|
|
||||
Acquisition related costs
|
1,367
|
|
|
—
|
|
|
—
|
|
|
1,367
|
|
||||
Total expenses
|
1,428,240
|
|
|
133,007
|
|
|
99,105
|
|
|
1,660,352
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating income (loss)
|
339,796
|
|
|
146,168
|
|
|
(99,105
|
)
|
|
386,859
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Dividend income
|
—
|
|
|
—
|
|
|
2,001
|
|
|
2,001
|
|
||||
Interest income
|
—
|
|
|
—
|
|
|
274
|
|
|
274
|
|
||||
Interest expense
|
—
|
|
|
—
|
|
|
(161,913
|
)
|
|
(161,913
|
)
|
||||
Loss on early extinguishment of debt
|
—
|
|
|
—
|
|
|
(228
|
)
|
|
(228
|
)
|
||||
Income (loss) before income taxes, equity in earnings of an investee and gain on sale of real estate
|
339,796
|
|
|
146,168
|
|
|
(258,971
|
)
|
|
226,993
|
|
||||
Income tax expense
|
—
|
|
|
—
|
|
|
(4,020
|
)
|
|
(4,020
|
)
|
||||
Equity in earnings of an investee
|
—
|
|
|
—
|
|
|
137
|
|
|
137
|
|
||||
Net income (loss)
|
$
|
339,796
|
|
|
$
|
146,168
|
|
|
$
|
(262,854
|
)
|
|
$
|
223,110
|
|
|
As of December 31, 2016
|
||||||||||||||
|
Hotels
|
|
Travel Centers
|
|
Corporate
|
|
Consolidated
|
||||||||
Total assets
|
$
|
4,005,481
|
|
|
$
|
2,483,718
|
|
|
$
|
145,029
|
|
|
$
|
6,634,228
|
|
|
For the Year Ended December 31, 2015
|
||||||||||||||
|
Hotels
|
|
Travel Centers
|
|
Corporate
|
|
Consolidated
|
||||||||
Hotel operating revenues
|
$
|
1,636,834
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,636,834
|
|
Rental income
|
30,353
|
|
|
250,582
|
|
|
—
|
|
|
280,935
|
|
||||
FF&E reserve income
|
4,135
|
|
|
—
|
|
|
—
|
|
|
4,135
|
|
||||
Total revenues
|
1,671,322
|
|
|
250,582
|
|
|
—
|
|
|
1,921,904
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Hotel operating expenses
|
1,143,981
|
|
|
—
|
|
|
—
|
|
|
1,143,981
|
|
||||
Depreciation and amortization
|
213,964
|
|
|
115,812
|
|
|
—
|
|
|
329,776
|
|
||||
General and administrative
|
—
|
|
|
—
|
|
|
109,837
|
|
|
109,837
|
|
||||
Acquisition related costs
|
2,259
|
|
|
—
|
|
|
116
|
|
|
2,375
|
|
||||
Total expenses
|
1,360,204
|
|
|
115,812
|
|
|
109,953
|
|
|
1,585,969
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating income (loss)
|
311,118
|
|
|
134,770
|
|
|
(109,953
|
)
|
|
335,935
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Dividend income
|
—
|
|
|
—
|
|
|
2,640
|
|
|
2,640
|
|
||||
Interest income
|
—
|
|
|
—
|
|
|
44
|
|
|
44
|
|
||||
Interest expense
|
—
|
|
|
—
|
|
|
(144,898
|
)
|
|
(144,898
|
)
|
||||
Loss on distribution to shareholders of The RMR Group Inc. common stock
|
—
|
|
|
—
|
|
|
(36,773
|
)
|
|
(36,773
|
)
|
||||
Income (loss) before income taxes, equity in earnings of an investee and gain on sale of real estate
|
311,118
|
|
|
134,770
|
|
|
(288,940
|
)
|
|
156,948
|
|
||||
Income tax expense
|
—
|
|
|
—
|
|
|
(1,566
|
)
|
|
(1,566
|
)
|
||||
Equity in earnings of an investee
|
—
|
|
|
—
|
|
|
21
|
|
|
21
|
|
||||
Income (loss) before gain on sale of real estate
|
311,118
|
|
|
134,770
|
|
|
(290,485
|
)
|
|
155,403
|
|
||||
Gain on sale of real estate
|
—
|
|
|
11,015
|
|
|
—
|
|
|
11,015
|
|
||||
Net income (loss)
|
$
|
311,118
|
|
|
$
|
145,785
|
|
|
$
|
(290,485
|
)
|
|
$
|
166,418
|
|
|
As of December 31, 2015
|
||||||||||||||
|
Hotels
|
|
Travel Centers
|
|
Corporate
|
|
Consolidated
|
||||||||
Total assets
|
$
|
3,892,316
|
|
|
$
|
2,440,393
|
|
|
$
|
62,088
|
|
|
$
|
6,394,797
|
|
|
|
|
|
Fair Value at Reporting Date Using
|
||||||||||||
Description
|
|
Carrying Value at
December 31, 2017
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Recurring Fair Value Measurement Assets:
|
|
|
|
|
|
|
||||||||||
Investment in TA
(1)
|
|
$
|
14,022
|
|
|
$
|
14,022
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Investment in RMR Inc.
(2)
|
|
$
|
148,474
|
|
|
$
|
148,474
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
Our
3,420,000
common shares of TA, which are included in other assets in our consolidated balance sheets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our historical cost basis for these shares is
$17,407
as of
December 31, 2017
. The unrealized loss of
($3,385)
for these shares as of
December 31, 2017
is included in cumulative other comprehensive income in our consolidated balance sheets. We evaluated the decline in the fair value of the TA shares and determined that based on the severity and duration of the decline, and our ability and intent to hold the investment for a reasonable period of time sufficient for a recovery of fair value, we do not consider this investment to be other-than-temporarily impaired at
December 31, 2017
.
|
(2)
|
Our
2,503,777
shares of class A common stock of RMR Inc., which are included in other assets in our consolidated balance sheets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our historical cost basis for these shares is
$66,374
as of
|
(1)
|
Carrying value includes unamortized discounts and premiums and certain issuance costs.
|
(2)
|
These senior notes were redeemed at par plus accrued interest in October 2017.
|
(3)
|
These convertible senior notes were redeemed at par plus accrued interest in April 2017.
|
|
Initial Cost to
Company
|
|
Costs Capitalized
Subsequent to Acquisition
|
|
Gross Amount at which Carried
at Close of Period
|
||||||||||||||||||||||||||
|
Land
|
|
Building &
Improvements
|
|
Improvements
|
|
Impairment
|
|
Cost Basis
Adjustment
(1)
|
|
Land
|
|
Building &
Improvements
|
|
Total
(2)
|
||||||||||||||||
149 TravelCenters of America
|
$
|
607
|
|
|
$
|
993
|
|
|
$
|
568
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
607
|
|
|
$
|
1,559
|
|
|
$
|
2,166
|
|
50 Petro Stopping Centers
|
273
|
|
|
553
|
|
|
218
|
|
|
—
|
|
|
—
|
|
|
273
|
|
|
771
|
|
|
1,044
|
|
||||||||
71 Courtyards
|
125
|
|
|
643
|
|
|
223
|
|
|
(8
|
)
|
|
(10
|
)
|
|
125
|
|
|
848
|
|
|
973
|
|
||||||||
35 Residence Inns
|
68
|
|
|
326
|
|
|
124
|
|
|
(3
|
)
|
|
(3
|
)
|
|
68
|
|
|
444
|
|
|
512
|
|
||||||||
61 Candlewood Hotels
|
71
|
|
|
383
|
|
|
73
|
|
|
(14
|
)
|
|
(7
|
)
|
|
71
|
|
|
435
|
|
|
506
|
|
||||||||
10 Crowne Plaza
|
69
|
|
|
348
|
|
|
83
|
|
|
—
|
|
|
—
|
|
|
69
|
|
|
431
|
|
|
500
|
|
||||||||
5 Royal Sonesta
|
68
|
|
|
380
|
|
|
72
|
|
|
(16
|
)
|
|
(9
|
)
|
|
68
|
|
|
427
|
|
|
495
|
|
||||||||
39 Sonesta ES Suites
|
67
|
|
|
297
|
|
|
179
|
|
|
(35
|
)
|
|
(27
|
)
|
|
67
|
|
|
414
|
|
|
481
|
|
||||||||
19 Staybridge Suites
|
51
|
|
|
211
|
|
|
29
|
|
|
|
|
|
|
|
|
51
|
|
|
240
|
|
|
291
|
|
||||||||
5 Sonesta Hotels and Resorts
|
62
|
|
|
151
|
|
|
65
|
|
|
(15
|
)
|
|
(5
|
)
|
|
62
|
|
|
196
|
|
|
258
|
|
||||||||
3 Kimpton Hotels
|
45
|
|
|
207
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
207
|
|
|
252
|
|
||||||||
6 Wyndham Hotels and Resorts and Wyndham Grand
|
35
|
|
|
175
|
|
|
60
|
|
|
(26
|
)
|
|
(8
|
)
|
|
35
|
|
|
201
|
|
|
236
|
|
||||||||
22 Hyatt Place
|
24
|
|
|
185
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
201
|
|
|
225
|
|
||||||||
3 InterContinental
|
14
|
|
|
100
|
|
|
97
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
197
|
|
|
211
|
|
||||||||
2 Marriott Full Service
|
10
|
|
|
69
|
|
|
57
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
126
|
|
|
136
|
|
||||||||
1 Clift Hotel
|
28
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|
80
|
|
|
108
|
|
||||||||
4 Radisson
|
6
|
|
|
80
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
90
|
|
|
96
|
|
||||||||
12 TownePlace Suites
|
17
|
|
|
78
|
|
|
24
|
|
|
(15
|
)
|
|
(18
|
)
|
|
17
|
|
|
69
|
|
|
86
|
|
||||||||
3 Holiday Inn
|
7
|
|
|
33
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
63
|
|
|
70
|
|
||||||||
16 Hawthorn Suites
|
14
|
|
|
77
|
|
|
19
|
|
|
(33
|
)
|
|
(18
|
)
|
|
14
|
|
|
45
|
|
|
59
|
|
||||||||
4 Country Inn and Suites
|
5
|
|
|
52
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
5
|
|
|
50
|
|
|
55
|
|
||||||||
2 SpringHill Suites
|
3
|
|
|
15
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
17
|
|
|
20
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total (522 properties)
|
$
|
1,669
|
|
|
$
|
5,436
|
|
|
$
|
1,947
|
|
|
$
|
(165
|
)
|
|
$
|
(107
|
)
|
|
$
|
1,669
|
|
|
$
|
7,111
|
|
|
$
|
8,780
|
|
(1)
|
Represents reclassifications between accumulated depreciation and building & improvements made to record certain properties at fair value in accordance with GAAP.
|
(2)
|
Excludes
$648
of personal property classified in our consolidated balance sheets as furniture, fixtures and equipment.
|
|
Accumulated
Depreciation
(1)
|
|
Date of
Construction
|
|
Date
Acquired
|
|
Life on which
Depreciation in
Latest Income
Statement is
Computed
|
||
149 TravelCenters of America
|
$
|
(640
|
)
|
|
1962 through 2017
|
|
2007 through 2017
|
|
10 - 40 Years
|
71 Courtyards
|
(394
|
)
|
|
1987 through 2000
|
|
1995 through 2003
|
|
10 - 40 Years
|
|
50 Petro Stopping Centers
|
(290
|
)
|
|
1975 through 2017
|
|
2007 through 2017
|
|
10 - 40 Years
|
|
35 Residence Inns
|
(198
|
)
|
|
1989 through 2002
|
|
1996 through 2005
|
|
10 - 40 Years
|
|
61 Candlewood Hotels
|
(179
|
)
|
|
1996 through 2000
|
|
1997 through 2003
|
|
10 - 40 Years
|
|
19 Staybridge Suites
|
(97
|
)
|
|
1989 through 2002
|
|
1996 through 2006
|
|
10 - 40 Years
|
|
22 Hyatt Place
|
(95
|
)
|
|
1992 through 2000
|
|
1997 through 2002
|
|
10 - 40 Years
|
|
10 Crowne Plaza
|
(73
|
)
|
|
1971 through 1988
|
|
2006 and 2017
|
|
10 - 40 Years
|
|
3 InterContinental
|
(65
|
)
|
|
1924 through 1989
|
|
2006
|
|
10 - 40 Years
|
|
5 Royal Sonesta
|
(64
|
)
|
|
1922 through 1987
|
|
2005 through 2017
|
|
10 - 40 Years
|
|
2 Marriott Full Service
|
(58
|
)
|
|
1972 through 1995
|
|
1998 through 2001
|
|
10 - 40 Years
|
|
39 Sonesta ES Suites
|
(57
|
)
|
|
1984 through 2000
|
|
1996 through 2017
|
|
10 - 40 Years
|
|
4 Radisson
|
(43
|
)
|
|
1987 through 1990
|
|
1996 through 1997
|
|
10 - 40 Years
|
|
6 Wyndham Hotels and Resorts and Wyndham Grand
|
(31
|
)
|
|
1960 through 1988
|
|
2006 through 2013
|
|
10 - 40 Years
|
|
5 Sonesta Hotels and Resorts
|
(30
|
)
|
|
1924 through 1989
|
|
2005 through 2016
|
|
10 - 40 Years
|
|
4 Country Inn and Suites
|
(25
|
)
|
|
1987 through 1997
|
|
1996 and 2005
|
|
10 - 40 Years
|
|
12 TownePlace Suites
|
(23
|
)
|
|
1997 through 2000
|
|
1998 through 2001
|
|
10 - 40 Years
|
|
3 Holiday Inn
|
(11
|
)
|
|
1984 through 2001
|
|
2006
|
|
10 - 40 Years
|
|
16 Hawthorn Suites
|
(11
|
)
|
|
1996 through 2000
|
|
1997 through 2006
|
|
10 - 40 Years
|
|
1 Clift Hotel
|
(10
|
)
|
|
1913
|
|
2012
|
|
10 - 40 Years
|
|
2 SpringHill Suites
|
(8
|
)
|
|
1997 through 2000
|
|
2000 through 2001
|
|
10 - 40 Years
|
|
3 Kimpton Hotels
|
(7
|
)
|
|
1901 through 1927
|
|
2016 through 2017
|
|
10 - 40 Years
|
|
|
|
|
|
|
|
|
|
||
Total (522 properties)
|
$
|
(2,409
|
)
|
|
|
|
|
|
|
(1)
|
Excludes accumulated depreciation of
$375
related to personal property classified in our consolidated balance sheets as furniture, fixtures and equipment.
|
(A)
|
The change in total cost of properties for the period from January 1,
2015
to
December 31, 2017
is as follows:
|
|
2017
|
|
2016
|
|
2015
|
||||||
Balance at beginning of year
|
$
|
8,108,171
|
|
|
$
|
7,684,059
|
|
|
$
|
7,090,078
|
|
Additions: acquisitions and capital expenditures
|
741,790
|
|
|
455,373
|
|
|
665,300
|
|
|||
Dispositions
|
(71,054
|
)
|
|
(31,261
|
)
|
|
(71,319
|
)
|
|||
Balance at close of year
|
$
|
8,778,907
|
|
|
$
|
8,108,171
|
|
|
$
|
7,684,059
|
|
(B)
|
The change in accumulated depreciation for the period from January 1,
2015
to
December 31, 2017
is as follows:
|
|
2017
|
|
2016
|
|
2015
|
||||||
Balance at beginning of year
|
$
|
2,177,847
|
|
|
$
|
1,938,823
|
|
|
$
|
1,727,032
|
|
Additions: depreciation expense
|
277,043
|
|
|
270,285
|
|
|
238,941
|
|
|||
Dispositions
|
(45,474
|
)
|
|
(31,261
|
)
|
|
(27,150
|
)
|
|||
Balance at close of year
|
$
|
2,409,416
|
|
|
$
|
2,177,847
|
|
|
$
|
1,938,823
|
|
(C)
|
The aggregate cost tax basis for federal income tax purposes of our real estate properties was
$6,384,965
on
December 31, 2017
.
|
|
Hospitality Properties Trust
|
|
|
By:
|
/s/ John G. Murray
|
|
John G. Murray
President and Chief Operating Officer
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ John G. Murray
|
|
President and
Chief Operating Officer
(Principal Executive Officer)
|
|
March 1, 2018
|
|
John G. Murray
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Mark L. Kleifges
|
|
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
|
|
March 1, 2018
|
|
Mark L. Kleifges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Donna D. Fraiche
|
|
Independent Trustee
|
|
March 1, 2018
|
|
Donna D. Fraiche
|
|
|
|
|
|
|
|
|
|
|
|
/s/ John L. Harrington
|
|
Independent Trustee
|
|
March 1, 2018
|
|
John L. Harrington
|
|
|
|
|
|
|
|
|
|
|
|
/s/ William A. Lamkin
|
|
Independent Trustee
|
|
March 1, 2018
|
|
William A. Lamkin
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Adam D. Portnoy
|
|
Managing Trustee
|
|
March 1, 2018
|
|
Adam D. Portnoy
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Mark L. Kleifges
Name: Mark L. Kleifges Title: Chief Financial Officer and Treasurer |
By:
|
/s/ John Correia
Name: John Correia Title: Vice President |
|
Owner
|
|
Hotel
|
|
Landlord
|
|
Date of
Agreement |
|
Effective Date
|
|
Invested
Capital Amount |
|
Section 2.02
(1)
Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambridge TRS, Inc.
|
|
Royal Sonesta Cambridge
40 Edwin H. Land Boulevard Cambridge, MA 02142 |
|
HPT Cambridge LLC
|
|
January 31, 2012
|
|
January 31, 2012
|
|
$
|
120,000,000
|
|
January 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambridge TRS, Inc.
|
|
Royal Sonesta Harbor Court Baltimore
550 Light Street
Baltimore, MD
|
|
Harbor Court Associates, LLC
|
|
May 31, 2012
|
|
May 31, 2012
|
|
$
|
47,296,000
|
|
January 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambridge TRS, Inc.
|
|
Sonesta Hotel Philadelphia
1800 Market Street
Philadelphia, PA
|
|
HPT IHG-2 Properties Trust
|
|
June 18, 2012
|
|
June 18, 2012
|
|
$
|
32,500,000
|
|
January 1, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambridge TRS, Inc.
|
|
Royal Sonesta Houston Hotel
2222 West Loop South
Houston, TX
|
|
HPT IHG-2 Properties Trust
|
|
July 16, 2012
|
|
July 16, 2012
|
|
$
|
70,671,350
|
|
January 1, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambridge TRS, Inc.
|
|
Sonesta Gwinnett Place
1775 Pleasant Hill Road Duluth, GA |
|
HPT Cambridge LLC
|
|
February 26, 2013
|
|
May 17, 2013
|
|
$
|
31,000,000
|
|
January 1, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambridge TRS, Inc.
|
|
Royal Sonesta New Orleans
300 Bourbon Street New Orleans, LA |
|
Royal Sonesta, Inc.
|
|
June 28, 2013
|
|
June 28, 2013
|
|
$
|
151,000,000
|
|
January 1, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambridge TRS, Inc.
|
|
Sonesta Fort Lauderdale
999 North Fort Lauderdale Beach Boulevard Fort Lauderdale, FL |
|
HPT IHG-2 Properties Trust
|
|
May 30, 2014
|
|
May 30, 2014
|
|
$
|
65,000,000
|
|
January 1, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambridge TRS, Inc.
|
|
Sonesta Silicon Valley
1820 Barber Lane
Milpitas, CA
|
|
HPT IHG-2 Properties Trust
|
|
December 5, 2016
|
|
December 5, 2016
|
|
$
|
46,000,000
|
|
January 1, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambridge TRS, Inc.
|
|
Royal Sonesta Chase Park Plaza
212-232 Kingshighway
Boulevard
St. Louis, MO
|
|
HPT IHG-2 Properties Trust
|
|
June 2, 2017
|
|
June 2, 2017
|
|
$
|
87,750,000
|
|
January 1, 2021
|
|
|
Year Ended December 31,
|
||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||||
Income from continuing operations (including gains on sales of properties, if any) before income tax benefit (expense) and equity in earnings (losses) of an investee
|
|
$
|
201,904
|
|
|
$
|
226,993
|
|
|
$
|
167,963
|
|
|
$
|
199,036
|
|
|
$
|
127,750
|
|
|
$
|
153,219
|
|
Fixed Charges
|
|
181,579
|
|
|
161,913
|
|
|
144,898
|
|
|
139,486
|
|
|
145,954
|
|
|
136,111
|
|
||||||
Adjusted Earnings
|
|
$
|
383,483
|
|
|
$
|
388,906
|
|
|
$
|
312,861
|
|
|
$
|
338,522
|
|
|
$
|
273,704
|
|
|
$
|
289,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Interest on indebtedness and amortization of debt issuance costs and debt discounts and premiums
|
|
$
|
181,579
|
|
|
$
|
161,913
|
|
|
$
|
144,898
|
|
|
$
|
139,486
|
|
|
$
|
145,954
|
|
|
$
|
136,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Ratio of Earnings to Fixed Charges
|
|
2.11
|
x
|
|
2.40x
|
|
|
2.16x
|
|
|
2.43x
|
|
|
1.88x
|
|
|
2.13x
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||||
Income from continuing operations (including gains on sales of properties, if any) before income tax benefit (expense) and equity in earnings (losses) of an investee
|
|
$
|
201,904
|
|
|
$
|
226,993
|
|
|
$
|
167,963
|
|
|
$
|
199,036
|
|
|
$
|
127,750
|
|
|
$
|
153,219
|
|
Fixed Charges
|
|
181,579
|
|
|
161,913
|
|
|
144,898
|
|
|
139,486
|
|
|
145,954
|
|
|
136,111
|
|
||||||
Adjusted Earnings
|
|
$
|
383,483
|
|
|
$
|
388,906
|
|
|
$
|
312,861
|
|
|
$
|
338,522
|
|
|
$
|
273,704
|
|
|
$
|
289,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Interest on indebtedness and amortization of debt issuance costs and debt discounts and premiums
|
|
$
|
181,579
|
|
|
$
|
161,913
|
|
|
$
|
144,898
|
|
|
$
|
139,486
|
|
|
$
|
145,954
|
|
|
$
|
136,111
|
|
Preferred distributions
|
|
1,435
|
|
|
20,664
|
|
|
20,664
|
|
|
20,664
|
|
|
26,559
|
|
|
40,145
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Combined Fixed Charges and Preferred distributions
|
|
$
|
183,014
|
|
|
$
|
182,577
|
|
|
$
|
165,562
|
|
|
$
|
160,150
|
|
|
$
|
172,513
|
|
|
$
|
176,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Ratio of Earnings to Fixed Charges and Preferred distributions
|
|
2.10
|
x
|
|
2.13x
|
|
|
1.89x
|
|
|
2.11x
|
|
|
1.59x
|
|
|
1.64x
|
|
Name
|
|
State of Formation,
Organization or Incorporation |
Cambridge TRS, Inc.
|
|
Maryland
|
Candlewood Jersey City-Urban Renewal, L.L.C.
|
|
New Jersey
|
Harbor Court Associates, LLC
|
|
Maryland
|
HPT Cambridge LLC
|
|
Massachusetts
|
HPT Clift TRS LLC
|
|
Maryland
|
HPT CW MA Realty Trust (Nominee Trust)
|
|
Massachusetts
|
HPT CY TRS, Inc.
|
|
Maryland
|
HPT Geary ABC Holdings LLC
|
|
Maryland
|
HPT Geary Properties Trust
|
|
Maryland
|
HPT IHG Canada Corporation
|
|
New Brunswick
|
HPT IHG Canada Properties Trust
|
|
Delaware
|
HPT IHG GA Properties LLC
|
|
Maryland
|
HPT IHG PR, Inc.
|
|
Puerto Rico
|
HPT IHG-2 Properties Trust
|
|
Maryland
|
HPT IHG-3 Properties LLC
|
|
Maryland
|
HPT PSC Properties LLC
|
|
Maryland
|
HPT PSC Properties Trust
|
|
Maryland
|
HPT SN Holding, Inc.
|
|
New York
|
HPT Suite Properties Trust
|
|
Maryland
|
HPT TA Properties LLC
|
|
Maryland
|
HPT TA Properties Trust
|
|
Maryland
|
HPT TRS IHG-2, Inc.
|
|
Maryland
|
HPT TRS Inc.
|
|
Maryland
|
HPT TRS MRP, Inc.
|
|
Maryland
|
HPT TRS SPES II, Inc.
|
|
Maryland
|
HPT TRS WYN, Inc.
|
|
Maryland
|
HPTCY Properties Trust
|
|
Maryland
|
HPTMI Hawaii, Inc.
|
|
Delaware
|
HPTMI Properties Trust
|
|
Maryland
|
HPTWN Properties Trust
|
|
Maryland
|
Royal Sonesta, Inc.
|
|
Louisiana
|
|
|
|
/s/ Ernst & Young LLP
|
1.
|
I have reviewed this Annual Report on Form 10-K 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: March 1, 2018
|
/s/ Adam D. Portnoy
|
|
Adam D. Portnoy
|
|
Managing Trustee
|
1.
|
I have reviewed this Annual Report on Form 10-K 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: March 1, 2018
|
/s/ John G. Murray
|
|
John G. Murray
|
|
President and Chief Operating Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K 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: March 1, 2018
|
/s/ Mark L. Kleifges
|
|
Mark L. Kleifges
|
|
Chief Financial Officer and Treasurer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
/s/ Adam D. Portnoy
|
|
/s/ John G. Murray
|
Adam D. Portnoy
|
|
John G. Murray
|
Managing Trustee
|
|
President and Chief Operating Officer
|
|
|
|
|
|
|
/s/ Mark L. Kleifges
|
|
|
Mark L. Kleifges
|
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
|
Date: March 1, 2018
|
|
|