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HPT Prices Senior Notes

Zacks Equity Research

In order to reduce its existing indebtedness and redeem the outstanding preferred shares Hospitality Properties Trust (HPT), a real estate investment trust (:REIT), recently announced the pricing of an underwritten public offering of unsecured senior notes worth $500 million. The unsecured senior notes, which are scheduled to mature on August 15, 2022, bear an interest rate of 5.00%.

Citigroup Global Markets Inc. of Citigroup Inc. (C), RBC Capital Markets, LLC of Royal Bank of Canada (RY), Merrill Lynch, Pierce, Fenner & Smith Incorporated of Bank of America Corporation (BAC) and Wells Fargo Securities, LLC of Wells Fargo & Company (WFC) acted as joint book-running managers for the offering. On the other hand, Jefferies & Company, Inc. of Jefferies Group, Inc. (JEF), Morgan Stanley & Co. LLC of Morgan Stanley (MS) and UBS Securities LLC of UBS AG (UBS) acted as joint lead managers.

The company expects to use the net proceeds to fully prepay its outstanding senior notes worth $287 million, with 6.75% interest rate and maturity date of February 15, 2013. Hospitality Properties intends to use the remaining amount to buy back some of its outstanding 7% Series C Cumulative Redeemable Preferred Shares and for general corporate purposes. The settlement of the offering is expected to take place on August 16, 2012.

Hospitality Properties recently reported second-quarter 2012 normalized FFO (Funds from Operations) of 75 cents, missing the Zacks Consensus Estimate of 82 cents. As of June 30, 2012, the company had cash and cash equivalents of $24.8 million and total debt of $2.2 million.

Hospitality Properties presently owns 290 hotels and 185 travel centers across the U.S., Ontario, Canada and Puerto Rico. The company does not operate the properties on its own. Instead, it has long-term lease agreements with unaffiliated hospitality management companies which run the properties on its behalf.

We presently have a long-term Neutral recommendation and Zacks #3 Rank (a short-term Hold rating) for Hospitality Properties.

Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.

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