- Full-Year 2016 Net Income of $95.6 Million,
or $2.18 per Share -
- Full-Year 2016 Comparable Portfolio RevPAR
Growth of 2.1% -
- FY 2016 Adjusted EBITDA of $171.6 Million
-
Hersha Hospitality Trust (NYSE: HT) (“Hersha” or the “Company”),
owner of upscale hotels in urban gateway markets, today announced
results for the full-year and the fourth quarter ended December 31,
2016.
Full-Year and Fourth Quarter 2016 Financial Results
Net income applicable to common shareholders was $95.6 million,
or $2.18 per diluted common share, in 2016, compared to net income
applicable to common shareholders of $27.4 million, or $0.56 per
diluted common share, in 2015. The increase in 2016 net income was
primarily the result of gains recognized from the Company’s $640.3
million of hotel sales undertaken throughout the year.
Net income applicable to common shareholders was $1.1 million,
or $0.03 per diluted common share, in fourth quarter 2016, compared
to net income applicable to common shareholders of $8.8 million, or
$0.19 per diluted common share, in fourth quarter 2015. The
decrease in fourth quarter 2016 net income and net income per
diluted common share were primarily due to the timing and volume of
the Company’s 2016 asset sales, increased preferred distributions
related to the Company’s 6.5% Series D and Series E Preferred Share
issuances, weakness in the Company’s South Florida portfolio, as
well as expenses related to the lease buyout at The Cadillac
Courtyard Miami Beach.
Adjusted Funds from Operations (“AFFO”) in 2016 decreased by
$8.3 million, or 7.0%, to $109.8 million, compared to $118.1
million in 2015 due to the factors previously mentioned. The
Company’s weighted average diluted common shares and units of
limited partnership interest in Hersha Hospitality Limited
Partnership (“OP Unit”) outstanding declined to approximately 45.7
million as of December 31, 2016, compared to approximately 50.3
million as of December 31, 2015. AFFO per diluted common share and
OP Unit in 2016 was $2.40, a 2.1% increase from AFFO of $2.35 per
diluted common share and OP Unit reported in 2015.
AFFO in the fourth quarter 2016 decreased by $9.4 million, or
28.8%, to $23.0 million, compared to $32.4 million in the fourth
quarter 2015. AFFO per diluted common share and OP Unit in the
fourth quarter 2016 was $0.52, a 22.4% decrease from AFFO per
diluted common share and OP Unit of $0.67 in the same quarter in
2015 as a result of the previously mentioned factors. An
explanation of certain non-GAAP financial measures used in this
press release, including, among others, AFFO, as well as
reconciliations of those non-GAAP financial measures, to GAAP net
income, is included at the end of this press release.
Mr. Jay H. Shah, Hersha’s Chief Executive Officer, stated, “2016
was a transformational year for Hersha as we executed several
creative and unique entrepreneurial initiatives to unlock value,
drive results, and continue our growth trajectory in our core
markets, while further diversifying our income stream. During 2016,
we entered into agreements to sell 16 hotels for $832.8 million and
closed on 11 of these hotels for $640.3 million, highlighted by our
7-hotel, $571.4 million joint-venture transaction with Cindat,
which materially reduced our exposure to the challenged Manhattan
market. We utilized proceeds from our joint-venture sale and other
suburban dispositions, while deferring over $186.0 million of tax
gains, to acquire 5 high-quality, well-located hotels for $380.9
million, meaningfully increasing our exposure to the higher growth
Washington, DC, Boston and California markets. The net result of
our capital recycling activities is a young, differentiated,
geographically focused, transient hotel portfolio in-tune with
travelers’ tastes and preferences. We also executed several large
capital raising transactions to optimize our balance sheet in 2016,
expanding the Company’s unsecured borrowing capacity to $1.0
billion. In addition, we successfully accessed the best preferred
market in years to raise $292.5 million of 6.5% Preferred Equity,
which provided additional financial flexibility to execute our
business plan. Finally, and in-line with the Company’s value
creation philosophy and commitment to total shareholder returns, we
repurchased $52.0 million of our common shares in 2016,
representing approximately 6.2% of the float.”
Mr. Shah continued, “For the full-year period, our comparable
portfolio reported 2.1% RevPAR growth to $171.27 driven by our
Philadelphia, Washington, DC and West Coast hotel clusters.
Excluding New York City, which continued to be negatively impacted
by the delivery of new supply, we reported 3.5% RevPAR growth.
Adjusted EBITDA totaled $171.6 million, while Adjusted FFO per
share increased 2.1% to $2.40 for the full-year period. During
fourth quarter 2016, we reported a 30 basis point RevPAR increase
as continued strength in Washington, DC and on the West Coast
offset weakness in South Florida, our most challenged market during
the period. Excluding our South Florida portfolio, comparable
portfolio RevPAR increased 1.8%. As we look forward, we are
encouraged by improved sentiment post-election, and are hopeful
lodging will benefit from an expected acceleration of GDP and
increased business spending.”
Fourth Quarter 2016 Operating Results
The best performing market during the fourth quarter was the
Company’s Washington, DC Metro portfolio, which reported 9.7%
revenue per available room (“RevPAR”) growth. The Company’s
Washington, DC Urban and West Coast portfolios reported 5.4% and
4.8% RevPAR growth, respectively, in fourth quarter 2016.
RevPAR at the Company's 43 comparable hotels increased 0.3% to
$165.73 in fourth quarter 2016. The Company’s average daily rate
(“ADR”) for the comparable hotel portfolio increased 2.1% to
$211.95, while occupancy decreased 136 basis points to 78.2%. Hotel
EBITDA margins for the comparable hotel portfolio decreased 70 bps
to 34.9%. Excluding Hyatt Union Square and The Sanctuary Beach
Resort, which reported disproportionate margin deterioration due to
renovations in connection with the re-concepting of the
restaurants’ food and beverage outlets, the Company’s comparable
EBITDA margins decreased 30 basis points.
New York City and Manhattan
The New York City hotel portfolio, which includes the five
boroughs, consisted of 10 hotels as of December 31, 2016. In the
fourth quarter the Company’s comparable New York City hotel
portfolio reported very strong occupancy of 92.1%. RevPAR increased
1.1% to $229.14, driven by a 1.3% ADR increase to $248.69.
The Manhattan hotel portfolio consisted of 7 hotels as of
December 31, 2016. The Company’s comparable Manhattan hotel
portfolio reported robust 94.0% occupancy, reflecting the inherent
demand characteristic of the Manhattan market. RevPAR rose 1.2% to
$261.96 as a result of 1.7% ADR growth to $278.82. The Company’s
Manhattan portfolio reported Gross Operating Profitability (“GOP”)
and EBITDA margins of 55.6% and 43.0%, respectively, in the fourth
quarter 2016. In the fourth quarter, the Company outperformed
greater Manhattan RevPAR by 70 basis points, and has outperformed
the Manhattan market in 10 of the previous 12 quarters as a result
of a young, well-located, and purpose-built hotel cluster in-tune
with travelers’ tastes and preferences.
Financing
As of December 31, 2016, the Company maintained significant
financial flexibility with approximately $185.6 million of cash and
cash equivalents and full capacity on the Company’s senior
unsecured credit facility. As of December 31, 2016, 42.0% of the
Company’s consolidated debt was fixed rate debt or hedged through
interest rate swaps and caps. The Company’s total consolidated debt
had a weighted average interest rate of approximately 3.43% and a
weighted average life-to-maturity of approximately 3.9 years.
Preferred Shares
On November 1, 2016, the Company priced a public offering of
6.5% Series E Cumulative Redeemable Preferred Shares of Beneficial
Interest, par value $.01 per share, for gross proceeds of $100.0
million.
Acquisitions
On October 20, 2016, the Company closed on the fee simple
145-room Courtyard by Marriott in Sunnyvale, CA for $75.0 million,
or $517,200 per key. The acquisition included the assumption of
$40.6 million in CMBS debt that matures in 2025. The debt is
interest only until August 2020, incurring interest at a fixed rate
of 4.72%.
On December 1, 2016, the Company closed on the purchase of the
77-room Ambrose Hotel in Santa Monica, CA for $47.5 million, or
$617,000 per key. The Ambrose Hotel is located within Santa
Monica’s 7.9 million square-foot Class A office market and is
proximate to Silicon Beach, which includes high profile employers
such as Google, Facebook, Apple, IMAX, Hulu and Riot Games. The
Ambrose is one block from St. John’s Heath Center, a private,
234-room hospital renown for clinical excellence and award-winning
care. The hotel includes a two-level, 82 space parking garage, in
addition to an executive meeting room and a fitness center.
Dispositions
On November 4, 2016, the Company closed on the sale of the
125-room Residence Inn in Framingham, MA and the 96-room Residence
Inn in Norwood, MA for a combined $47.0 million, or approximately
$213,000 per key.
Subsequent Events
In January 2017, Hersha redeemed its interest in its Mystic
Partners joint-venture. The Company transferred to its former
joint-venture partner all of its partnership interests in the
Hartford Marriott and the Hartford Hilton for $8.5 million, which
represented a 100% recovery of the Company’s equity investment in
these assets. The Company simultaneously assumed full ownership of
the Mystic Marriott Hotel & Spa without any additional cash
payment to the joint-venture partner.
In January 2017, Hersha closed on the sale of the 203-room
Courtyard by Marriott in Alexandria, VA, and the 120-room Residence
Inn in Greenbelt, MD for $62.0 million. In addition, the Company
agreed to a 6-month extension to close on the sale of three
suburban West Coast hotels for $130.5 million, a $7.5 million
increase from the original purchase price, valuing the entire
757-room, 5-hotel suburban portfolio at $192.5 million, or $254,000
per key. In addition to the price increase, the Company has secured
a $10.0 million non-refundable deposit from the purchaser. The
suburban West Coast portfolio sale is anticipated to close in July
2017.
On February 1, 2017, the Company acquired the 115-room
Ritz-Carlton in Coconut Grove, FL for $36.0 million, or $313,000
per key. The Company funded The Ritz-Carlton, Coconut Grove
acquisition in part with proceeds from the recent sale of the
Residence Inn Greenbelt as part of a tax-deferred like-kind
exchange.
On February 21, 2017, Hersha acquired the 153-room Pan Pacific
Hotel in Seattle, WA. The Company intends to engage in a
tax-deferred reverse like-kind exchange with respect to its
acquisition of The Pan Pacific and the expected disposition of the
suburban West Coast portfolio that is anticipated to close in July
2017, which would allow deferral of the gain from the suburban West
Coast portfolio sale.
Share Repurchase Activity
In the fourth quarter, the Company repurchased approximately
167,000 common shares for an aggregate repurchase price of $3.0
million. During 2016, the Company repurchased approximately 2.8
million common shares for an aggregate repurchase price of $52.0
million, which represented approximately 6.2% of the Company common
shares outstanding as of December 31, 2015.
On October 3, 2016, the Company announced a new share repurchase
program of up to $100 million of the Company’s outstanding common
shares. The new repurchase program expires on December 31, 2017,
unless extended by the Board of Trustees.
Dividends
Hersha paid a cash dividend of $0.4297 per Series C Preferred
Share, and $0.40625 per Series D Preferred Share for the fourth
quarter ending December 31, 2016, and a prorated initial dividend
of $0.30694 per Series E Preferred Share. The preferred share
dividends were paid January 17, 2017 to holders of record as of
January 1, 2017.
The Company also paid cash dividends totaling $0.48 per common
share and per limited partnership unit, consisting of a quarterly
dividend of $0.28 per common share and limited partnership unit for
the fourth quarter ending December 31, 2016, and an additional
special dividend of $0.20 per common share and limited partnership
unit. These common share dividends and limited partnership unit
distributions were paid January 17, 2017 to holders of record as of
January 5, 2017.
2017 Outlook
The Company is introducing its operating and financial
expectations for 2017. The Company’s expectations, which are based
on the Company’s current view of operating and economic
fundamentals, include the Company’s liquidation of The Mystic JV,
the suburban Washington, DC hotel dispositions, the acquisition of
The Ritz-Carlton, Coconut Grove, and the Company’s acquisition of
The Pan Pacific Hotel in Seattle, WA, and does not build in any
additional acquisitions, dispositions or capital market activities
for 2017. Based on management’s current outlook and assumptions,
the Company’s 2017 operating expectations are as follows:
2017 Outlook ($’s in millions except per share
amounts) Low High Net income $67.0 $77.0
Net income per share $1.59 $1.82 Comparable Property RevPAR
Growth 0.0% 2.0% Comparable Property EBITDA Margins -1.0% 0.0%
Adjusted EBITDA $162.0 $172.0 Adjusted FFO $94.0
$104.0 Adjusted FFO per share $2.08 $2.31
Fourth Quarter 2016 Conference Call
The Company will host a conference call to discuss these results
at 9:00 a.m. Eastern Time on February 23, 2017. Hosting the call
will be Mr. Jay H. Shah, Chief Executive Officer, Mr. Neil H. Shah,
President and Chief Operating Officer, and Mr. Ashish Parikh, Chief
Financial Officer.
A live audio webcast of the conference call will be available on
the Company’s website at www.hersha.com. The conference call can be
accessed by dialing 1-888-500-6974 or 1-719-457-2734 for
international participants. A replay of the call will be available
from 12:00 p.m. Eastern Time on Thursday, February 23, 2017,
through 11:59 pm Eastern Time on Thursday, March 9, 2017. The
replay can be accessed by dialing 1-844-512-2921 or 1-412-317-6671
for international participants. The passcode for the call and the
replay is 4643214. A replay of the webcast will be available on the
Company’s website for a limited time.
About Hersha Hospitality Trust
Hersha Hospitality Trust (HT) is a self-advised real estate
investment trust in the hospitality sector, which owns and operates
high quality upscale hotels in urban gateway markets. The Company's
53 hotels totaling 7,943 rooms are located in New York, Washington,
DC, Boston, Philadelphia, Miami and select markets on the West
Coast. The Company's common shares are traded on The New York Stock
Exchange under the ticker “HT”.
Non-GAAP Financial Measures
An explanation of Funds from Operations (“FFO”), AFFO, Earnings
Before Interest, Taxes, Depreciation and Amortization (“EBITDA”),
Adjusted EBITDA and Hotel EBITDA, as well as reconciliations of
FFO, AFFO, EBITDA and Adjusted EBITDA to net income or loss, the
most directly comparable U.S. GAAP measures, is included at the end
of this release.
Cautionary Statements Regarding Forward Looking
Statements
Certain matters within this press release are discussed using
“forward-looking statements” within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995,
and, as such, may involve known and unknown risks, uncertainties
and other factors that may cause the actual results or performance
to differ from those projected in the forward-looking statements.
These forward-looking statements may include statements related to,
among other things: the Company’s 2017 outlook for net income
attributable to common shareholders, net income per weighted
average common share and OP Units outstanding, Adjusted EBITDA,
AFFO, AFFO per weighted average common share and OP Unit
outstanding, consolidated and comparable RevPAR growth and
consolidated and comparable EBITDA margin growth, economic and
other assumptions underlying the Company’s 2017 outlook and
assumptions regarding economic growth, labor markets, real estate
values and the economic vibrancy of our target markets, the
Company’s ability to grow operating cash flow, leverage rate-driven
revenue growth, return capital to its shareholders, whether in the
form of increased dividends or otherwise, the Company’s ability to
match or outperform its competitors’ performance, the ability of
the Company’s hotels to achieve stabilized or projected revenue,
the stability of the lodging industry and the markets in which the
Company’s hotel properties are located, the Company’s ability to
generate internal and external growth, the Company’s ability to
increase margins, including hotel EBITDA margins, the Company’s
ability to close on pending transactions on the terms it expects,
if at all, and the Company’s ability to achieve its forecasted
stabilization rates. Forward-looking statements are neither
historical facts nor assurances of future performance. Instead,
they are based only on the Company’s current beliefs, expectations
and assumptions regarding the future of its business, future plans
and strategies, projections, anticipated events and trends, the
economy and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent
uncertainties, risks and changes in circumstances that are
difficult to predict and many of which are outside of the Company’s
control. The Company’s actual results and financial condition may
differ materially from those indicated in the forward-looking
statements contained in this press release. Therefore, you should
not rely on any of these forward-looking statements. For a
description of factors that may cause the Company’s actual results
or performance to differ from its forward-looking statements,
please review the information under the heading “Risk Factors”
included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2016 filed by the Company with the Securities
and Exchange Commission (“SEC”) and other documents filed by the
Company with the SEC from time to time. All information provided in
this press release, unless otherwise stated, is as of February 22,
2017, and the Company undertakes no duty to update this information
unless required by law.
HERSHA HOSPITALITY TRUST Balance Sheet
(unaudited) (in thousands, except shares and per share data)
December 31, 2016 December 31,
2015 Assets:
Investment in Hotel Properties, Net of
Accumulated Depreciation, Including Consolidation of Variable
Interest Entity Assets of $0 and $82,787
$ 1,767,570 $ 1,831,119 Investment in Unconsolidated Joint Ventures
11,441 10,316 Cash and Cash Equivalents 185,644 27,955 Escrow
Deposits 8,993 19,204
Hotel Accounts Receivable, Net of
Allowance for Doubtful Accounts of $91 and $12
8,769 9,465 Due from Related Parties 18,332 6,243
Intangible Assets, Net of Accumulated
Amortization of $4,532 and $3,951
16,944 13,389 Deposits on Hotel Acquisitions - 5,000 Other Assets
39,370 39,958 Hotel Assets Held for Sale 98,473
-
Total Assets $ 2,155,536 $ 1,962,649
Liabilities and Equity: Line of Credit $ - $
27,000
Unsecured Term Loan, Net of Unamortized
Deferred Financing Costs
663,500 547,780
Unsecured Notes Payable, Net of
Unamortized Deferred Financing Costs
50,578 50,525
Mortgages Payable, including Net
Unamortized Premium and Unamortized Deferred Financing Costs, and
Consolidation of Variable Interest Entity Debt of $0 and
$52,509
337,821 544,659 Accounts Payable, Accrued Expenses and Other
Liabilities 65,106 59,226 Dividends and Distributions Payable
26,050 16,515 Due to Related Parties - 8,789 Liabilities Related to
Hotel Assets Held for Sale 51,428 - Deferred Gain on Disposition of
Hotel Assets 81,314 -
Total
Liabilities $ 1,275,797 $ 1,254,494
Equity: Shareholders' Equity:
Preferred Shares: $.01 Par Value,
29,000,000 Shares Authorized, 3,000,000 Series C, 7,700,000 Series
D and 4,000,000 Series E Shares Issued and Outstanding at December
31, 2016 and 4,600,000 Series B and 3,000,000 Series C Shares
Issued and Outstanding at December 31, 2015, with Liquidation
Preferences of $25 Per Share
$ 147 $ 76
Common Shares: Class A, $0.01 Par Value,
75,000,000 and 300,000,000 Shares Authorized at December 31, 2016
and December 31, 2015 respectively, 41,770,514 and 44,457,368
Shares Issued and Outstanding at December 31, 2016 and December 31,
2015, respectively
418 444
Common Shares: Class B, $0.01 Par Value,
1,000,000 Shares Authorized, None Issued and Outstanding at
December 31, 2016 and December 31, 2015
- - Accumulated Other Comprehensive Loss 1,373 (466 ) Additional
Paid-in Capital 1,198,311 1,086,259 Distributions in Excess of Net
Income (364,831 ) (408,274 ) Total Shareholders'
Equity 835,418 678,039 Noncontrolling Interests:
Noncontrolling Interests - Common Units and LTIP Units 44,321
31,876 Noncontrolling Interests - Consolidated Variable Interest
Entity - (1,760 ) Total Noncontrolling
Interests 44,321 30,116 Total Equity 879,739 708,155
Total Liabilities and Equity $ 2,155,536
$ 1,962,649
HERSHA HOSPITALITY
TRUST Summary Results (unaudited) (in thousands, except
shares and per share data)
Three Months Ended
Year Ended December 31, 2016
December 31, 2015 December 31, 2016
December 31, 2015 Revenues: Hotel Operating Revenues:
Room $ 96,113 $ 110,053 $ 408,844 $ 424,477 Food & Beverage
9,795 8,064 35,366 26,405 Other Operating Revenues 5,470
4,979 22,160 19,390
Total Hotel Operating Revenues 111,378 123,096 466,370
470,272 Other Revenue 67 32 259
113
Total Revenues 111,445
123,128 466,629 470,385
Operating Expenses: Hotel Operating Expenses:
Room 21,234 23,912 89,055 90,681 Food & Beverage 8,327 5,902
29,566 21,040
Other Operating Expenses
34,998 36,637 144,335
142,592 Total Hotel Operating Expenses 64,559 66,451
262,956 254,313 Hotel Ground Rent 924 914 3,600 3,137 Real Estate
and Personal Property Taxes and Property Insurance 7,745 8,927
32,157 34,518 General and Administrative 4,934 4,031 16,396 13,992
Share Based Compensation 2,255 1,918 8,048 6,523 Acquisition and
Terminated Transaction Costs 827 665 2,560 1,119 Depreciation and
Amortization 18,131 18,995
75,390 74,390
Total Operating Expenses
99,375 101,901 401,107
387,992
Operating Income 12,070 21,227
65,522 82,393 Interest Income 143 49 362 193 Interest
Expense (10,425 ) (11,167 ) (44,352 ) (43,557 ) Other Expense (97 )
(33 ) (961 ) (367 ) Gain on Disposition of Hotel Properties 21,000
- 115,839 - Lease Buyout (16,831 ) - (16,831 ) - Loss on Debt
Extinguishment (111 ) (15 ) (1,187 )
(561 )
Income before Income (Loss) from
Unconsolidated Joint Venture Investments and Income Taxes
5,749 10,061 118,392 38,101
Income (Loss) from
Unconsolidated Joint Venture Investments 587
105 (1,823 ) 965
Income before Income Taxes 6,336 10,166 116,569 39,066
Income Tax Benefit 375 2,401 4,888 3,141
Net Income 6,711 12,567 121,457 42,207
Income Allocated to Noncontrolling Interests (204 ) (210 )
(4,477 ) (411 ) Preferred Distributions (5,374 ) (3,589 ) (17,380 )
(14,356 )
Extinguishment of Issuance Costs Upon
Redemption of Series B Preferred Shares
- - (4,021 ) -
Net Income Applicable to Common Shareholders $ 1,133
$ 8,768 $ 95,579 $ 27,440
Earnings per
Share:
BASIC Net Income Applicable to Common Shareholders $
0.03 $ 0.19 $ 2.21 $ 0.56
DILUTED Net Income Applicable to Common Shareholders
$ 0.03 $ 0.19 $ 2.18 $ 0.56
Weighted Average
Common Shares Outstanding:
Basic 41,733,272 45,663,416 42,957,199 47,786,811 Diluted
42,307,583 46,211,104 43,530,731 48,369,658
Non-GAAP Measures
FFO and AFFO
The National Association of Real Estate Investment Trusts
(“NAREIT”) developed Funds from Operations (“FFO”) as a non-GAAP
financial measure of performance of an equity REIT in order to
recognize that income-producing real estate historically has not
depreciated on the basis determined under GAAP. We calculate FFO
applicable to common shares and Common Units in accordance with the
April 2002 National Policy Bulletin of NAREIT, which we refer to as
the White Paper. The White Paper defines FFO as net income (loss)
(computed in accordance with GAAP) excluding extraordinary items as
defined under GAAP and gains or losses from sales of previously
depreciated assets, plus certain non-cash items, such as loss from
impairment of assets and depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. Our
interpretation of the NAREIT definition is that non-controlling
interest in net income (loss) should be added back to (deducted
from) net income (loss) as part of reconciling net income (loss) to
FFO. Our FFO computation may not be comparable to FFO reported by
other REITs that do not compute FFO in accordance with the NAREIT
definition, or that interpret the NAREIT definition differently
than we do.
The GAAP measure that we believe to be most directly comparable
to FFO, net income (loss) applicable to common shareholders,
includes loss from the impairment of certain depreciable assets,
our investment in unconsolidated joint ventures and land,
depreciation and amortization expenses, gains or losses on property
sales, non-controlling interest and preferred dividends. In
computing FFO, we eliminate these items because, in our view, they
are not indicative of the results from our property operations. We
determined that the loss from the impairment of certain depreciable
assets, including investments in unconsolidated joint ventures and
land, was driven by a measurable decrease in the fair value of
certain hotel properties and other assets as determined by our
analysis of those assets in accordance with applicable GAAP. As
such, these impairments have been eliminated from net income (loss)
to determine FFO.
Hersha also presents Adjusted Funds from Operations (AFFO),
which reflects FFO in accordance with the NAREIT definition further
adjusted by:
- adding back non-cash share based
compensation expense;
- adding back acquisition and terminated
transaction expenses;
- adding back contingent
considerations;
- adding back amortization of deferred
financing costs;
- adding back adjustments for the
amortization of discounts and premiums;
- adding back write-offs of deferred
financing costs on debt extinguishment, both for consolidated and
unconsolidated properties;
- adding back straight-line amortization
of ground lease expense and prior period tax assessment expenses;
and
- adding back unconsolidated joint
venture management company transaction costs and state and local
tax expense related to prior period assessment.
FFO and AFFO do not represent cash flows from operating
activities in accordance with GAAP and should not be considered an
alternative to net income as an indication of the Company’s
performance or to cash flow as a measure of liquidity or ability to
make distributions. We consider FFO and AFFO to be meaningful,
additional measures of our operating performance because they
exclude the effects of the assumption that the value of real estate
assets diminishes predictably over time, and because they are
widely used by industry analysts as performance measures. We show
both FFO from consolidated hotel operations and FFO from
unconsolidated joint ventures because we believe it is meaningful
for the investor to understand the relative contributions from our
consolidated and unconsolidated hotels. The display of both FFO
from consolidated hotels and FFO from unconsolidated joint ventures
allows for a detailed analysis of the operating performance of our
hotel portfolio by management and investors. We present FFO and
AFFO applicable to common shares and OP Units because our OP Units
are redeemable for common shares. We believe it is meaningful for
the investor to understand FFO and AFFO applicable to all common
shares and OP Units.
Certain amounts related to depreciation and amortization and
depreciation and amortization from discontinued operations in the
prior year FFO reconciliation have been recast to conform to the
current year presentation. In addition, based on guidance provided
by NAREIT, we have eliminated loss from the impairment of certain
depreciable assets, including investments in unconsolidated joint
ventures and land, from net (income) loss to arrive at FFO in each
year presented. The following table reconciles FFO and AFFO for the
periods presented to the most directly comparable GAAP measure, net
income (loss) applicable to common shares, for the same
periods:
HERSHA HOSPITALITY TRUST Funds from Operations
(FFO) and Adjusted Funds from Operations (AFFO) (in thousands,
except shares and per share data)
Three Months
Ended Year Ended December 31, 2016
December 31, 2015 December 31, 2016
December 31, 2015 Net income applicable to common
shares $ 1,133 $ 8,768 $ 95,579 $ 27,440 Income allocated to
noncontrolling interest 204 210 4,477 411 (Income) loss from
unconsolidated joint ventures (587 ) (105 ) 1,823 (965 ) Gain on
disposition of hotel properties (21,000 ) - (115,839 ) -
Depreciation and amortization 18,131 18,995
75,390 74,390
Funds from consolidated hotel
operations applicable to common shares and Partnership
units
(2,119 ) 27,868 61,430
101,276 Income (loss) from unconsolidated joint
venture investments 587 105 (1,823 ) 965
Depreciation and amortization of
difference between purchase price and historical cost
(225 ) 121 (418 ) 481
Interest in depreciation and amortization
of unconsolidated joint ventures
3,421 1,232 14,820
5,027
Funds from unconsolidated joint venture
operations applicable to common shares and Partnership
units
3,783 1,458 12,579 6,473
Funds from
Operations applicable to common shares and Partnership units
1,664 29,326 74,009 107,749 Add: Lease Buyout 16,831 -
16,831 - Non-cash extinguishment of issuance costs upon redemption
of Series B Preferred Shares - - 4,021 - Non-cash share based
compensation expense 2,255 1,918 8,048 6,523 Acquisition and
terminated transaction costs 827 665 2,560 1,119 Amortization of
deferred financing costs 679 654 2,624 2,650 Interest in
amortization of deferred financing costs of unconsolidated joint
venture 389 - 987 - Amortization of discounts and premiums (174 )
(389 ) (1,265 ) (1,289 ) Deferred financing costs and debt premium
written off in debt extinguishment 111 15 1,187 561 Straight-line
amortization of ground lease expense 159 162 640 542 State and
local tax expense related to reassessment of prior period
assessment 292 - 162
238
Adjusted Funds from Operations $
23,033 $ 32,351 $ 109,804 $ 118,093
AFFO per Diluted Weighted Average Common
Shares and Partnership Units Outstanding
$ 0.52 $ 0.67 $ 2.40 $ 2.35
Diluted Weighted Average Common Shares and Partnership Units
Outstanding 44,661,249 48,157,678 45,740,227 50,276,867
Adjusted EBITDA
Adjusted Earnings Before Interest, Taxes, and Depreciation and
Amortization (EBITDA) is a non-GAAP financial measure within the
meaning of the Securities and Exchange Commission rules. Our
interpretation of Adjusted EBITDA is that EBITDA derived from our
investment in unconsolidated joint ventures should be added back to
net income (loss) as part of reconciling net income (loss) to
Adjusted EBITDA. Our Adjusted EBITDA computation may not be
comparable to EBITDA or Adjusted EBITDA reported by other companies
that interpret the definition of EBITDA differently than we do.
Management believes Adjusted EBITDA to be a meaningful measure of a
REIT's performance because it is widely followed by industry
analysts, lenders and investors and that it should be considered
along with, but not as an alternative to, net income, cash flow,
FFO and AFFO, as a measure of the Company's operating
performance.
HERSHA HOSPITALITY TRUST Adjusted EBITDA (in
thousands)
Three Months Ended Year
Ended December 31, 2016 December 31, 2015
December 31, 2016 December 31, 2015 Net
income applicable to common shareholders $ 1,133 $ 8,768 $ 95,579 $
27,440 Income allocated to noncontrolling interest 204 210 4,477
411 (Income) loss from unconsolidated joint ventures (587 ) (105 )
1,823 (965 ) Gain on disposition of hotel properties (21,000 ) -
(115,839 ) - Non-operating interest income (143 ) (49 ) (362 ) (182
) Distributions to Preferred Shareholders 5,374 3,589 17,380 14,356
Interest expense 10,425 11,167 44,352 43,557 Extinguishment of
issuance costs upon redemption of Series B Preferred Shares - -
4,021 - Income tax benefit (375 ) (2,401 ) (4,888 ) (3,141 )
Deferred financing costs and debt premium written off in debt
extinguishment 111 15 1,187 561 Depreciation and amortization
18,131 18,995 75,390 74,390 Acquisition and terminated transaction
costs 827 665 2,560 1,119 Lease Buyout 16,831 - 16,831 - Non-cash
share based compensation expense 2,255 1,918 8,048 6,523
Straight-line amortization of ground lease expense 159 162 640 542
Unconsolidated joint venture management
company transition costs and state and local tax expense related to
reassessment of prior period assessment
292 - 162 238
Adjusted EBITDA from consolidated hotel
operations 33,637 42,934
151,361 164,849 Income (loss) from
unconsolidated joint venture investments 587 105 (1,823 ) 965
Depreciation and amortization of difference between purchase price
and historical cost (225 ) 121 (418 ) 481
Adjustment for interest in interest
expense, depreciation and amortization of unconsolidated joint
ventures
5,441 2,771 22,444
10,993
Adjusted EBITDA from unconsolidated joint
venture operations 5,803 2,997
20,203 12,439
Adjusted
EBITDA $ 39,440 $ 45,931 $ 171,564 $
177,288
Hotel EBITDA
Hotel EBITDA is a commonly used measure of performance in the
hotel industry for a specific hotel or group of hotels. We believe
Hotel EBITDA provides a more complete understanding of the
operating results of the individual hotel or group of hotels. We
calculate Hotel EBITDA by utilizing the total revenues generated
from hotel operations less all operating expenses, property taxes,
insurance and management fees, which calculation excludes Company
expenses not specific to a hotel, such as corporate overhead.
Because Hotel EBITDA is specific to individual hotels or groups of
hotels and not to the Company as a whole, it is not directly
comparable to any GAAP measure and should not be relied on as a
measure of performance for our portfolio of hotels taken as a
whole.
Supplemental Schedules
The Company has published supplemental earnings schedules in
order to provide additional disclosure and financial information
for the benefit of the Company’s stakeholders. These can be found
in the Investor Relations section and the “SEC Filings and
Presentations” page of the Company’s website, www.hersha.com.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170222006695/en/
Hersha Hospitality TrustAshish Parikh, Chief Financial
OfficerPeter Majeski, Manager of Investor Relations &
Finance215-238-1046
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