What changed in this filing

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Item 1A. Risk Factors

2020-08-10 compared with 2020-05-11 · 33 added, 32 removed, 76 unchanged (46% of the section changed)

8 unchanged sentences

The COVID-19 pandemic has had a devastating impact on the global economy, including the U.S.

economy, and has resulted, or is expected to result, in a global economic recession.

economy, and has resulted in a global economic recession.

These conditions have materially and adversely impacted our business, operations, financial results and liquidity.

1 unchanged sentence

The reduced economic activity resulting from these factors has severely and negatively impacted our hotel operations and our hotels have experienced a large decline in occupancy and revenues.

In addition, some of our tenants at our net lease retail properties have had to close their businesses, and have experienced substantial declines in their businesses.Some of these tenants have sought rent relief from us and we expect these closures, declines and requests to continue or increase in the future.

In addition, some of our tenants at our net lease retail properties have had to close their businesses, and have experienced substantial declines in their businesses.

Some of these tenants have sought rent relief from us and we expect these closures, declines and requests to continue or increase in the future.

The travel centers operated by TA primarily provide goods and services to the trucking industry, and demand for trucking services in the United States generally reflects the amount of commercial activity in the U.S.

2 unchanged sentences

Although TA’s services have been designated “essential services” by many public authorities, there can be no assurance that such a designation will continue and that, if it does, it will enable TA to avoid adverse effects to its operations and business.

TA’s business was not initially as negatively impacted by the COVID-19 pandemic as the U.S.

economy generally due to an initial spike in demand as businesses and households stocked up on certain goods and supplies that were transported by trucks.

However, if current economic conditions continue for a prolonged period or worsen, TA’s business may be materially and adversely affected by such continued and increasing decline in economic activities and movement of goods across the United States.

TA has experienced declines in its business activity.

If current economic conditions continue for a prolonged period or worsen, TA’s business may be materially and adversely affected by such continued and increasing decline in economic activities and movement of goods across the United States.

In addition, quarantines, temporary closures of businesses, states of emergencies and other measures taken to curb the spread of COVID-19 may negatively impact the ability of our managers and tenants to continue to obtain necessary goods and services or provide adequate staffing, which may also adversely affect our operating results.

15 unchanged sentences

reduced economic demand resulting from mass employee layoffs or furloughs in response to governmental action taken to slow the spread of COVID-19, which could impact the continued viability of our managers and tenants and the demand for our hotels, travel centers and retail space.

Further, the extent and strength of any economic recovery after the COVID-19 pandemic abates are uncertain and subject to various factors and conditions.

Further, the extent and strength of any economic recovery after the COVID-19 pandemic abates, including following any “second wave” or other intensifying of the pandemic, are uncertain and subject to various factors and conditions.

Our and our hotel managers’ and retail-based tenants’ businesses, operations and financial positions may continue to be negatively impacted after the COVID-19 pandemic abates and may remain at depressed levels as compared to prior to the outbreak of the COVID-19 pandemic and those conditions may continue for an extended period.

1 unchanged sentence

We have taken several actions in an attempt to address the operating and financial impact from the COVID-19 pandemic, including:

we reduced our quarterly distribution rate to $0.01 per share payable to our shareholders;

capital expenditures will primarily be limited to maintenance capital, contractual obligations and projects in process;

we obtained a limited waiver from our lenders under our credit facility from compliance with certain financial covenants;

we have been in regular, frequent contact with our hotel managers to implement cost savings measures to minimize losses and preserve liquidity, including agreeing to the closures of certain hotels, the reduction of hotel operating staff and certain other measures;

we have communicated with many of our net lease retail tenants regarding their operation of our properties in the current challenging economic conditions, and we have provided deferrals of approximately $8,584 of rent owed to us that are now required to be payable in installments beginning later this year.

we have received a limited waiver of compliance with certain financial covenants under our credit agreement to ensure we have access to undrawn amounts under such credit facility,

we reduced our quarterly cash distributions on our common shares to $0.01 per share, a savings of $87.2 million per quarter compared to prior distribution levels,

we raised $788.0 million of proceeds from the issuance of 7.5% unsecured senior notes due 2025,

we repurchased $350.0 million principal amount of our $400.0 million of 4.25% senior notes due 2021,

we raised $62.9 million in net proceeds from asset sales and have entered agreements to sell additional properties for a sales price of $55.6 million ,

we have prioritized our projected capital improvement spending to projects in progress, maintenance capital and contractual obligations,

we have communicated with many of our net lease retail tenants regarding their operation of our properties in the current challenging economic conditions, and we have provided deferrals of approximately $11.3 million of rent owed to us that are now required to be payable in installments beginning later this year.

There can be no assurance that these actions or others that we may take will be successful or that they will enable us to maintain sufficient liquidity and withstand the current economic challenges.

We recently reduced our quarterly rate of distribution on our common shares to $0.01 per share for the quarter ended March 31, 2020 and future distributions may remain at this level for an indefinite period or be eliminated and the form of payment could change.

We announced on March 30, 2020 that we had reduced our regular quarterly cash distributions rate on our common shares to $0.01 per share for the quarter ended March 31, 2020 .

We intend to continue to make regular quarterly distributions to our shareholders at this reduced rate.

We recently reduced our quarterly rate of distribution on our common shares to $0.01 per share and future distributions may remain at this level for an indefinite period or be eliminated and the form of payment could change.

Beginning in the second quarter of 2020, we reduced our regular quarterly cash distributions rate on our common shares to $0.01 per share and we expect our quarterly distribution to continue at that rate during the Waiver Period and possibly thereafter subject to REIT tax requirements.

our ability to make or sustain the rate of distributions may continue to be adversely affected by the negative impact of the COVID-19 pandemic and its aftermath on our business, results of operations and liquidity;

and during the continuance of any event of default under our credit agreement, we may be limited or in some cases prohibited from making distributions to our shareholders;

any future debt obligations we may incur may impose similar or other restrictions on our ability to pay distributions to our shareholders;

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, but not limited to our FFO and Normalized FFO, requirements to maintain our qualification for taxation as a REIT, limitations in our credit agreement and public debt covenants, the availability to us of debt and equity capital, our distribution rate as a percentage of the trading price of our common shares, or dividend yield, and to the dividend yield of other REITs, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations.

our making of distributions is subject to compliance with restrictions contained in our credit agreement, including being limited to amounts required to maintain our qualification for taxation as a REIT and $.01 per common share per quarter, and during the continuance of any event of default under our credit agreement, we may be limited or in some cases prohibited from making distributions to our shareholders;

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, but not limited to our FFO and Normalized FFO, requirements to maintain our qualification for taxation as a REIT, limitations in our credit agreement and public debt covenants, the availability to us of debt and equity capital, our dividend yield, and to the dividend yield of other REITs, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations.

For these reasons, among others, our distribution rate may not increase for an indefinite period and could be eliminated.

In order to preserve liquidity, we may elect to pay distributions to our shareholders in part in a form other than cash, such as issuing additional common shares of ours to our shareholders, as permitted by the applicable tax rules.

We may exhaust the security deposits and guarantees our hotel operators have provided to us, which would significantly reduce the security of our minimum returns and rents from our hotels, subject our operating results to potentially significantly increased variability and potentially fundamentally alter our business arrangements with our hotel operators .

Based on our current estimates, we project that we will exhaust all of the security deposits and most of the guarantees our hotel operators have provided to us by as early as the end of the second quarter 2020.

This change will significantly reduce the security of our minimum returns from our hotels and potentially significantly increase the variability of our operating results.

We have exhausted the security deposits and guarantees that our two largest hotel operators have provided to us, which significantly reduces the security of our minimum returns and rents from our hotels, subjects our operating results to potentially significantly increased variability and potentially fundamentally alters our business arrangements with our hotel operators .

We fully utilized the security deposits and exhausted the guarantees provided by IHG and Marriott, which represent 42.6% of our annual minimum returns and rents as of June 30, 2020.

As a result the security of our minimum returns from our hotels has been significantly reduced and the variability of our operating results has been significantly increased.

If our hotel operators are unwilling or unable to fund our minimum returns and rents, we may have the right to terminate our operating agreements with that operator and change the operator of the hotel.

2 unchanged sentences

As a result, our business arrangements with our hotel operators could fundamentally change and those changes may harm us, our business, our results of operations and financial condition.

We do not know how our hotel operators may address any shortfalls in our minimum returns or rents, particularly under the current economic conditions.

IHG has defaulted on its payment obligations and we provided IHG with a notice to terminate our agreements with IHG.

In addition, we do not know how our other hotel operators may address any shortfalls in our minimum returns or rents, particularly under the current economic conditions.

Our investment activities, other than maintenance and any urgent capital expenditures at our existing properties, have been significantly curtailed and we expect that to continue for an indefinite period.

1 unchanged sentence

We are prioritizing capital spending to conserve cash and liquidity.

In addition, the waiver we obtained from our lenders for relief from compliance with certain financial covenants under our credit facility limits our ability to make acquisitions through the Waiver Period.

As a result, we will be limited in pursuing investments, which may limit our ability to grow and to act upon opportunities we believe would benefit us.

1 unchanged sentence

We expect that the sale of hotels that we previously announced an intention to sell will be delayed and could be changed or abandoned, and if we do not sell certain of those hotels by a certain agreed upon date, the manager of those hotels, or our management agreements with them, may change.

We expect that the sales of our hotels that we had previously identified for sale will be delayed until later in 2020 or until 2021 as a result of current market conditions.

We expect that the sales of substantially all of our hotels that we had previously identified for sale will be delayed until later in 2020 or until 2021 as a result of current market conditions.

However, any sales of these hotels may be delayed beyond 2021, they may not occur or, if they do occur, they may be sold at prices less than previously expected and we may realize losses from those hotels.

5 unchanged sentences

If we do not resell or rebrand these hotels currently managed by Wyndham, Marriott and Sonesta we do not know whether these managers will continue to manage these hotels and, if so, on what terms.

Many of our tenants and certain of our hotel managers have requested relief from their obligations to pay us rent and returns in response to the current economic conditions resulting from the COVID-19 pandemic and we expect to receive additional similar requests in the future;

Many of our tenants and certain of our hotel managers have requested relief from their obligations to pay us rent and returns in response to the current economic conditions resulting from the COVID-19 pandemic and we may receive additional similar requests in the future;

we have provided certain limited relief in response to these requests and may determine to grant additional relief in the future if we determine it prudent or appropriate to do so.

1 unchanged sentence

Many of our tenants and certain of our hotel managers have requested relief from their obligations to pay rent and returns due to us.

We have entered into rent deferral agreements with 84 net lease retail tenants with leases requiring an aggregate of $61,963 of annual minimum rents.

Generally these rent deferrals are for one to three months of rent and will be repayable by the tenants over a 12 month period beginning in September 2020.

As of May 7, 2020 , we have deferred an aggregate of $8,584 of rent.

We expect to receive additional similar requests in the future, and we may determine to grant additional relief in the future, which may vary from the type of relief we have granted to date, and could include more substantial relief, if we determine it prudent or appropriate to do so.

We have entered into rent deferral agreements with 80 net lease retail tenants with leases requiring an aggregate of $59.3 million of annual minimum rents.

Generally these rent deferrals are for one to four months of rent and will be repayable by the tenants over a 12 to 24 month period beginning in September 2020.

As of August 6, 2020 , we have deferred an aggregate of $11.3 million of rent.

We may receive additional similar requests in the future, and we may determine to grant additional relief in the future, which may vary from the type of relief we have granted to date, and could include more substantial relief, if we determine it prudent or appropriate to do so.

In addition, if our tenants and hotel managers are unable to continue as going concerns as a result of the current economic conditions or otherwise, we will experience a reduction in rents and returns received and we may be unable to find suitable replacement tenants and hotel managers for an extended period or at all and the terms of our agreements with those replacement tenants and hotel managers may not be as favorable to us as the terms of our agreements with our existing tenants and hotel managers.

We may need additional waivers from our lenders in order to avoid defaulting under our revolving credit facility and the terms of our current waiver impose restrictions on our ability to pay distributions, make investments and certain capital improvements and any future waiver may impose similar or additional restrictions.

We may need additional waivers from our lenders in order to avoid defaulting under our credit agreement or public debt agreements and the terms of our current waiver under our credit agreement impose restrictions on our ability to pay distributions, make investments and certain capital improvements and any future waiver may impose similar or additional restrictions.

We obtained a waiver in May 2020 from the lenders under our revolving credit facility for certain financial covenant relief for the four quarterly periods ending March 31, 2021.

In addition, we may need to obtain an extension or additional waivers from the lenders under our revolving credit facility in the future in order to avoid failing to satisfy certain financial covenants under our credit agreement, but our lenders are not required to grant any such waiver and may determine not to do so.

If we fail to receive any required waiver, we may be in default under our credit agreement and the lenders could terminate the credit facility and require us to pay our then outstanding borrowings under our credit facility.

Our current waiver imposes restrictions on our ability to pay distributions, other than as currently contemplated or to maintain our qualification for taxation as a REIT , make investments and certain capital improvements.

We may need to obtain an extension or additional waivers from our lenders or noteholders in the future in order to avoid failing to satisfy certain financial covenants under our debt agreements, but our lenders or noteholders are not required to grant any such waiver and may determine not to do so.

Any future waiver we may obtain may impose similar or additional restrictions, which may limit our ability to pay or increase distributions to our shareholders, make investments that we believe we should make and could reduce our ability to pursue business opportunities, grow our business and improve our operating results.

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors