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TravelCenters of America will buy 20 properties from its main landlord

January 17, 2019 GMT

TravelCenters of America will buy 20 properties from its main landlord

WESTLAKE, Ohio -- Truck-stop operator TravelCenters of America, LLC plans to buy 20 travel centers from its main landlord, in a $308.2 million deal meant to burnish the company’s financial standing.

TravelCenters expects the purchases, across 15 states, to occur in three batches this month. Only one of the properties is located in Ohio, in the village of North Baltimore south of Toledo, a regulatory filing shows.

The Westlake-based company already operates the facilities, which it leases from Hospitality Properties Trust, a publicly traded real estate investor based in Massachusetts. TravelCenters will continue leasing 179 additional travel centers from Hospitality Properties Trust but is amending the underlying lease agreements, the companies announced late Wednesday.

Andrew Rebholz, chief executive officer at TravelCenters, said the real estate purchases and adjustments to leases will reduce the company’s spending on rent, free up cash and provide heightened financial flexibility.

“Today’s news is a positive step forward for the company, and we believe this should translate to increased value for shareholders, now and in the future,” Rebholz said during a Thursday morning conference call with analysts and investors.

The company had cash available for the purchases after selling its 225 freestanding convenience stores in December for $330.8 million.

Rebholz didn’t rule out making similar deals in the future, but he said TravelCenters and Hospitality Properties Trust haven’t discussed additional sales. He predicted that most of the growth in TravelCenters’ footprint this year will come through franchising opportunities, not real estate acquisitions or development.

During the conference call, he acknowledged that the 20 properties slated to change hands are smaller or less bustling travel centers, where the ratio of income to rental payments was relatively slim when Hospitality Properties Trust and TravelCenters were discussing potential transactions. But in many cases, Rebholz said, TravelCenters believes it can improve the properties’ performance.

Once the deals are done, TravelCenters’ minimum yearly rent obligation will fall by $43.1 million. Each of its leases will Hospitality Properties Trust will be extended by three years.

Starting in April, TravelCenters also will begin paying off backlogged rent to Hospitality Properties Trust, at a discount. In exchange for making payments starting this year, rather than in 2024, TravelCenters reduced the deferred rental amount to $70.5 million instead of $150 million.

The company’s share price perked up Thursday morning, in the wake of the announcement. TravelCenters’ shares are listed on the Nasdaq.