- Comparable Portfolio RevPAR Growth of 4.6%
Ex-Properties under Renovation - - South Florida and New York City
Portfolio RevPAR Growth of 20.3% and 10.3% -- Exceeds Internal
Forecasts & Raises Full-Year 2018 Guidance -
Hersha Hospitality Trust (NYSE:HT) (“Hersha,” “Company,” “we” or
“our”), owner of high quality hotels in urban gateway markets and
coastal destinations, today announced results for the first quarter
ended March 31, 2018.
First Quarter 2018 Financial
Results
Net loss applicable to common shareholders was
($14.1 million), or ($0.36) per diluted common share, in first
quarter 2018, compared to net income applicable to common
shareholders of $18.7 million, or $0.44 per diluted common share,
in first quarter 2017. The decrease in first quarter 2018 net
income and net income per diluted common share was primarily due to
the gain on disposition of hotel properties and investment in
unconsolidated joint ventures in the first quarter of
2017.
Mr. Jay H. Shah, Hersha’s Chief Executive
Officer, stated, “After a very strong fourth quarter in 2017, we
are pleased to see continued robust operating results and asset
level outperformance in several of our core markets. Our
South Florida portfolio benefitted from a resurgence in leisure
travel that led to RevPAR growth of over 20% for the
second-consecutive quarter. In New York City, comparable
portfolio RevPAR grew 10.3%, driven by strong business transient
demand resulting in occupancy of 91.6%, the highest first quarter
occupancy for our NYC portfolio in our history. We have begun
to see indications of stronger corporate travel pace in NYC, which
combined with our asset management and cost containment strategies,
led to earnings growth for our portfolio in the first
quarter. Market tailwinds and revenue management strategies
yielded strong results during the quarter and excluding assets
under renovation and our Washington, DC cluster, our comparable
portfolio generated 11.5% RevPAR growth.”
Mr. Shah continued, “Our capital recycling
campaign positions us with a high quality, refreshed, and
competitive portfolio with younger, higher growth assets. Our
six most recently acquired assets yielded weighted average RevPAR
growth of 13.0% in the first quarter, which follows 13.9% growth
for these properties in the fourth quarter 2017. We have many
properties in the final stages of significant renovations and
repositioning. As these projects come to an end we look
forward to shifting our focus to driving outperformance from these
hotels.”
Adjusted Funds from Operations (“AFFO”) in the
first quarter 2018 decreased to $2.7 million as a result of the
continued closure of our two South Florida assets and renovation
disruption. AFFO per diluted common share and OP Unit in the
first quarter 2018 was $0.06. 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.
First Quarter 2018 Operating
Results
Revenue per available room (“RevPAR”) at the
Company's 37 comparable hotels increased 0.2% to $154.94 in the
first quarter 2018. The Company’s average daily rate (“ADR”)
for the comparable hotel portfolio increased 1.9% to $201.41, while
occupancy declined 127 basis points to 76.9%. Hotel EBITDA
margins for the comparable hotel portfolio declined 140 basis
points to 24.8%. Excluding our properties under renovation and our
Washington, DC portfolio, which was hindered by difficult
year-over-year comps due to the Presidential Inauguration and the
government shutdown, our comparable RevPAR grew 11.5% to $173.82
during the first quarter. This growth was aided by a 5.3% ADR
increase to $203.99 while occupancy rose 471 basis points to
85.2%. Hotel EBITDA margins for this comparable hotel
portfolio grew 250 basis points to 29.4%.
South Florida
The best performing assets during the first
quarter were in the Company’s South Florida portfolio, which
reported 20.3% RevPAR growth to $229.80. Performance was
driven by a resurgence in leisure travel to Miami as waning Zika
fears, stronger economic growth and an increase in international
inbound tourism continued to drive strong demand. We are
eager for our two largest assets in the region, the Cadillac Hotel
& Beach Club and Parrot Key Hotel & Resort, to reopen and
welcome guests.
New York City and Manhattan
The New York City portfolio, which includes the
five boroughs, consisted of nine hotels as of March 31, 2018.
In the first quarter 2018, the Company’s comparable New York City
hotel portfolio reported RevPAR growth of 10.3% to $169.20, driven
by ADR growth of 3.3% and an occupancy increase of 577 basis points
to 91.6%, the highest first quarter occupancy for our New York City
portfolio in our history. Hotel EBITDA margins for the
Company’s comparable New York City portfolio increased 120 basis
points during the quarter.
The Company’s comparable Manhattan portfolio,
which consisted of six hotels as of March 31, 2018, reported RevPAR
growth of 7.1% to $180.77 driven by ADR growth of 3.1% and an
occupancy increase of 343 basis points to 91.8%. Hersha’s Manhattan
portfolio reported Hotel EBITDA margin growth of 120 basis points
in the first quarter 2018. The Company’s comparable Manhattan
portfolio has outperformed the Manhattan market in 14 of the
previous 17 quarters as a result of a young, well-located and
purpose built hotel cluster that appeals to the tastes and
preferences of today’s traveler.
Acquisitions &
Dispositions
During the first quarter, the Company purchased
the 150-room Annapolis Waterfront Hotel, an Autograph Collection
Hotel, for $41.5 million. The acquisition price represented
an economic capitalization rate of 8.7% and 10.4x EBITDA multiple,
based on trailing twelve-month results. Its unique location,
on the waterfront and at the base of the city’s primary demand
generators, provides a competitive advantage that enables the hotel
to achieve strong occupancies and premium rates in a high
barrier-to-entry marketplace. In addition to synergies from
our Washington DC hotels, we expect to leverage the capabilities
acquired at our 14 other independent and soft branded hotels to
drive performance and profitability and enhance the value of the
asset.
On the disposition front, we closed on the sale
of the 81-room Hampton Inn Financial District, Manhattan for $32.4
million and the Hyatt House in Gaithersburg, MD for $19.0
million. We sold both hotels for a blended economic
capitalization rate of 4.3% and 19.9x EBITDA multiple. We
have been active on the disposition front over the past two years,
selling 19 mature, stabilized hotels at an average economic
capitalization rate of 5.9% and 15.1x EBITDA multiple.
Share Repurchase Activity
In the first quarter 2018, the Company
repurchased 635,590 common shares for an aggregate repurchase price
of $10.8 million at a weighted average price of $17.03. Since
January 1, 2014, the Company has repurchased $241.1 million in
common shares, representing 22.8% of the January 1, 2014
float. For the three months ended March 31, 2018, our diluted
weighted average common shares and partnership units outstanding
was 43,462,075.
Financing
As of March 31, 2018, the Company maintained
sufficient financial flexibility with $31.6 million of cash and
cash equivalents and significant capacity on the Company’s $250
million senior unsecured revolving line of credit. As of
March 31, 2018, 67.0% 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 3.93% and a weighted average life-to-maturity
of approximately 4.0 years.
On February 6, 2018, the Cindat joint venture
successfully refinanced the existing debt on seven assets in
Manhattan in the joint venture owned by the Company and Cindat
Capital Management Limited. The joint venture entered into a
new $300 million senior mortgage loan and $85 million of mezzanine
financing and refinanced the existing $285 million senior loan, the
$50 million mezzanine loan and redeemed $43.2 million of Hersha’s
9% cumulative redeemable preferred interest in the joint
venture.
Dividends
Hersha paid a cash dividend of $0.4297 per
Series C Preferred Share, $0.40625 per Series D Preferred Share,
and $0.40625 per Series E Preferred Share for the first quarter
ending March 31, 2018. The preferred share dividends were
paid April 16, 2018 to holders of record as of April 1, 2018.
The Company also declared cash dividends
totaling $0.28 per common share and per limited partnership unit
for the first quarter ending March 31, 2018. These common
share dividends and limited partnership unit distributions were
paid April 13, 2018 to holders of record as of March 29, 2018.
Full-Year 2018 Outlook
The Company is updating its operating and
financial expectations for the full-year 2018. The Company’s
expectations do not build in any additional acquisitions,
dispositions or capital market activities for 2018. Based on
management’s current outlook and assumptions regarding the timing
of the reopening of our two South Florida assets, the Company’s
2018 operating expectations are as follows:
|
|
|
|
|
Q2'18 Outlook |
2018 CurrentOutlook |
2018 PriorOutlook |
($’s in millions except per share amounts) |
Low |
High |
Low |
High |
Low |
High |
Net income |
($1.0) |
$1.0 |
($22.0) |
($14.0) |
$21.0 |
$29.0 |
Net income per share |
($0.02) |
$0.02 |
($0.56) |
($0.36) |
$0.51 |
$0.71 |
|
|
|
|
|
|
|
Comparable Property RevPAR Growth |
2.5% |
3.5% |
1.5% |
3.0% |
1.0% |
3.0% |
Comparable Property EBITDA Margins |
-0.75% |
0.00% |
-0.50% |
0.50% |
-0.50% |
0.50% |
|
|
|
|
|
|
|
Adjusted EBITDA |
$49.5 |
$51.5 |
$162.0 |
$170.0 |
$159.0 |
$167.0 |
|
|
|
|
|
|
|
Adjusted FFO |
$30.0 |
$32.0 |
$85.0 |
$93.0 |
$82.0 |
$90.0 |
Adjusted FFO per share |
$0.70 |
$0.74 |
$1.96 |
$2.14 |
$1.89 |
$2.07 |
*For detailed reconciliations of the Company’s 2018 operating
expectations, please see “Reconciliation of Non-GAAP Financial
Measures Included in 2018 Outlook” |
|
First Quarter 2018 Conference Call
The Company will host a conference call to
discuss these results at 9:00 a.m. Eastern Time on Wednesday, April
25, 2018. 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 1-888-317-6003 or
1-412-317-6061 for international participants and entering the
passcode 2739473 approximately 10 minutes in advance of the
call. A replay of the call will be available from 11:00 a.m.
Eastern Time on Wednesday, April 25, 2018, through 11:59 pm Eastern
Time on Thursday, May 24, 2018. The replay can be accessed by
dialing 1-877-344-7529 or 1-412-317-0088 for international
participants. The passcode for the replay is 10117602. 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
and coastal destinations. The Company's 49 hotels totaling 7,653
rooms are located in New York, Washington, DC, Boston,
Philadelphia, South Florida 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 such non-GAAP financial measures to 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
2018 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 Units outstanding, consolidated and comparable
RevPAR growth and consolidated and comparable Hotel EBITDA margin
growth, economic and other assumptions underlying the Company’s
2018 outlook and assumptions regarding economic growth, labor
markets, real estate values, lodging fundamentals, corporate
travel, and the economic vibrancy of our target markets, the
Company’s ability to grow operating cash flow, 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, cap rates or EBITDA
multiples consistent with our expectations, 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 reopen hotels damaged
by Hurricane Irma on the terms and timing it expects, the recovery
of the South Florida leisure market and the timing of the reopening
of the Miami Beach Convention Center, the Company’s ability to
implement its business strategies for The Annapolis Waterfront
Hotel on the terms and timing it expects, the Company’s forecasts
of performance and future yields for The Annapolis Waterfront
Hotel, the Company’s expectations for the long-term performance of
the Annapolis market and the risks associated with a lack of market
knowledge or understanding of the local economy, ability to forge
new business relationships and lack of experience with local
government and permitting procedures when entering a new market,
the Company’s expectations regarding foreign exchange rates and the
Company’s ability to increase margins, including hotel EBITDA
margins. 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, 2017 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 April 24, 2018, 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) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018 |
|
December 31, 2017 |
Assets: |
|
|
|
|
|
|
Investment in Hotel Properties, Net of Accumulated
Depreciation |
|
$ |
2,033,555 |
|
|
$ |
2,009,572 |
|
Investment in Unconsolidated Joint Ventures |
|
|
3,368 |
|
|
|
3,569 |
|
Cash and
Cash Equivalents |
|
|
31,620 |
|
|
|
17,945 |
|
Escrow
Deposits |
|
|
7,974 |
|
|
|
7,641 |
|
Hotel
Accounts Receivable, Net of Allowance for Doubtful Accounts of $68
and $49 |
|
|
11,774 |
|
|
|
11,999 |
|
Due from
Related Parties |
|
|
5,385 |
|
|
|
5,322 |
|
Intangible Assets, Net of Accumulated Amortization of $6,940 and
$6,598 |
|
|
16,184 |
|
|
|
16,388 |
|
Other
Assets |
|
|
49,078 |
|
|
|
49,913 |
|
Hotel
Assets Held for Sale |
|
|
- |
|
|
|
15,987 |
|
Total
Assets |
|
$ |
2,158,938 |
|
|
$ |
2,138,336 |
|
|
|
|
|
|
|
|
Liabilities and Equity: |
|
|
|
|
|
|
Line of
Credit |
|
$ |
36,000 |
|
|
$ |
16,100 |
|
Unsecured
Term Loan, Net of Unamortized Deferred Financing Costs |
|
|
697,638 |
|
|
|
715,449 |
|
Unsecured
Notes Payable, Net of Unamortized Deferred Financing Costs |
|
|
53,794 |
|
|
|
53,781 |
|
Mortgages
Payable, Net of Unamortized Premium and Unamortized Deferred
Financing Costs |
|
|
307,283 |
|
|
|
307,683 |
|
Accounts
Payable, Accrued Expenses and Other Liabilities |
|
|
58,772 |
|
|
|
58,770 |
|
Dividends
and Distributions Payable |
|
|
17,110 |
|
|
|
17,115 |
|
Deferred
Gain on Disposition of Hotel Assets |
|
|
- |
|
|
|
81,284 |
|
Total
Liabilities |
|
$ |
1,170,597 |
|
|
$ |
1,250,182 |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
Shareholders' Equity: |
|
|
|
|
|
|
Preferred
Shares: $.01 Par Value, 29,000,000 Shares Authorized,
3,000,000 Series C, 7,701,700 Series D and 4,001,514 Series
E Shares Issued and Outstanding at March 31, 2018 and
3,000,000 Series C, 7,701,700 Series D and 4,000,000 Series E
Shares Issued and Outstanding at December 31, 2017, with
Liquidation Preferences of $25 Per Share |
|
$ |
147 |
|
|
$ |
147 |
|
Common
Shares: Class A, $0.01 Par Value, 104,000,000 Shares
Authorized at March 31, 2018 and December 31, 2017;
39,329,445 and 39,916,661 Shares Issued and Outstanding at
March 31, 2018 and December 31, 2017, respectively |
|
|
394 |
|
|
|
399 |
|
Common
Shares: Class B, $0.01 Par Value, 1,000,000 Shares
Authorized, None Issued and Outstanding at March 31, 2018
and December 31, 2017 |
|
|
- |
|
|
|
- |
|
Accumulated Other Comprehensive Income |
|
|
7,117 |
|
|
|
3,749 |
|
Additional Paid-in Capital |
|
|
1,154,904 |
|
|
|
1,164,946 |
|
Distributions in Excess of Net Income |
|
|
(237,248 |
) |
|
|
(335,373 |
) |
Total
Shareholders' Equity |
|
|
925,314 |
|
|
|
833,868 |
|
|
|
|
|
|
|
|
Noncontrolling Interests: |
|
|
|
|
|
|
Noncontrolling Interests - Common Units and LTIP Units |
|
|
63,027 |
|
|
|
54,286 |
|
|
|
|
|
|
|
|
Total
Equity |
|
|
988,341 |
|
|
|
888,154 |
|
|
|
|
|
|
|
|
Total
Liabilities and Equity |
|
$ |
2,158,938 |
|
|
$ |
2,138,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HERSHA
HOSPITALITY TRUST |
|
|
|
|
|
Summary Results
(unaudited) |
|
|
|
|
|
(in thousands, except
shares and per share data) |
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, 2018 |
|
March 31,
2017 |
Revenues: |
|
|
|
|
|
Hotel
Operating Revenues: |
|
|
|
|
|
Room |
$ |
79,048 |
|
|
$ |
90,769 |
|
Food
& Beverage |
|
13,538 |
|
|
|
10,736 |
|
Other
Operating Revenues |
|
6,929 |
|
|
|
6,447 |
|
Total
Hotel Operating Revenues |
|
99,515 |
|
|
|
107,952 |
|
Other
Revenue |
|
124 |
|
|
|
46 |
|
Total
Revenues |
|
99,639 |
|
|
|
107,998 |
|
|
|
|
|
|
|
Operating
Expenses: |
|
|
|
|
|
Hotel
Operating Expenses: |
|
|
|
|
|
Room |
|
19,356 |
|
|
|
21,304 |
|
Food
& Beverage |
|
11,851 |
|
|
|
9,557 |
|
Other
Operating Revenues |
|
35,575 |
|
|
|
36,406 |
|
Total
Hotel Operating Expenses |
|
66,782 |
|
|
|
67,267 |
|
Hotel
Ground Rent |
|
928 |
|
|
|
807 |
|
Real Estate and Personal Property Taxes and Property
Insurance |
8,292 |
|
|
|
7,626 |
|
General
and Administrative |
|
3,485 |
|
|
|
3,196 |
|
Share
Based Compensation |
|
1,606 |
|
|
|
1,429 |
|
Acquisition and Terminated Transaction Costs |
|
- |
|
|
|
700 |
|
Depreciation and Amortization |
|
21,539 |
|
|
|
19,462 |
|
Total
Operating Expenses |
|
102,632 |
|
|
|
100,487 |
|
|
|
|
|
|
|
Operating (Loss)
Income |
|
(2,993 |
) |
|
|
7,511 |
|
|
|
|
|
|
|
Interest
Income |
|
25 |
|
|
|
125 |
|
Interest
Expense |
|
(11,372 |
) |
|
|
(9,849 |
) |
Other
Expense |
|
(657 |
) |
|
|
(399 |
) |
Gain on
Disposition of Hotel Properties |
|
3,417 |
|
|
|
18,731 |
|
Loss on
Debt Extinguishment |
|
(22 |
) |
|
|
(274 |
) |
(Loss) Income before
Results from Unconsolidated Joint Venture Investments and
Income Taxes |
|
(11,602 |
) |
|
|
15,845 |
|
|
|
|
|
|
|
Unconsolidated Joint
Ventures |
|
|
|
|
|
Loss from
Unconsolidated Joint Ventures |
|
(201 |
) |
|
|
(3,886 |
) |
Gain from
Remeasurement of Investment in Unconsolidated Joint
Venture |
|
- |
|
|
|
16,239 |
|
(Loss) Income from
Unconsolidated Joint Venture Investments |
|
(201 |
) |
|
|
12,353 |
|
|
|
|
|
|
|
Income before Income
Taxes |
|
(11,803 |
) |
|
|
28,198 |
|
|
|
|
|
|
|
Income
Tax Benefit (Expense) |
|
2,655 |
|
|
|
(2,243 |
) |
|
|
|
|
|
|
Net (Loss) Income |
|
(9,148 |
) |
|
|
25,955 |
|
|
|
|
|
|
|
Loss
(Income) Allocated to Noncontrolling Interests |
|
1,104 |
|
|
|
(1,181 |
) |
Preferred
Distributions |
|
(6,044 |
) |
|
|
(6,042 |
) |
|
|
|
|
|
|
Net (Loss) Income
Applicable to Common Shareholders |
$ |
(14,088 |
) |
|
$ |
18,732 |
|
|
|
|
|
|
|
Earnings per
Share: |
|
|
|
|
|
BASIC |
|
|
|
|
|
Net (Loss) Income
Applicable to Common Shareholders |
$ |
(0.36 |
) |
|
$ |
0.45 |
|
|
|
|
|
|
|
DILUTED |
|
|
|
|
|
Net (Loss) Income
Applicable to Common Shareholders |
$ |
(0.36 |
) |
|
$ |
0.44 |
|
|
|
|
|
|
|
Weighted Average Common
Shares Outstanding: |
|
|
|
|
|
Basic |
|
39,636,166 |
|
|
|
41,716,958 |
|
Diluted |
|
39,636,166 |
|
|
|
42,110,911 |
|
|
|
|
|
|
|
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 evaluate our performance by reviewing AFFO, in addition to
FFO, because we believe that adjusting FFO to exclude certain
recurring and non-recurring items as described above provides
useful supplemental information regarding our ongoing operating
performance and that the presentation of AFFO, when combined with
the primary GAAP presentation of net income (loss), more completely
describes our operating performance. 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 |
|
|
March 31, 2018 |
|
|
March 31, 2017 |
|
|
|
|
|
|
Net
(loss) income applicable to common shares |
$ |
(14,088 |
) |
|
$ |
18,732 |
|
(Loss)
income allocated to noncontrolling interest |
|
(1,104 |
) |
|
|
1,181 |
|
Loss
(income) from unconsolidated joint ventures |
|
201 |
|
|
|
(12,353 |
) |
Gain on
disposition of hotel properties |
|
(3,417 |
) |
|
|
(18,731 |
) |
Depreciation and amortization |
|
21,539 |
|
|
|
19,462 |
|
Funds
from consolidated hotel operations applicable to common
shares and Partnership units |
|
3,131 |
|
|
|
8,291 |
|
|
|
|
|
|
|
(Loss)
income from unconsolidated joint venture investments |
|
(201 |
) |
|
|
12,353 |
|
Income
from remeasurement of investment in unconsolidated joint
ventures |
|
- |
|
|
|
(16,239 |
) |
Unrecognized pro rata interest in (loss) income |
|
(4,060 |
) |
|
|
3,185 |
|
Depreciation and amortization of difference between purchase
price and historical cost |
|
24 |
|
|
|
(302 |
) |
Interest
in depreciation and amortization of unconsolidated joint
ventures |
|
1,052 |
|
|
|
950 |
|
Funds
from unconsolidated joint venture operations applicable to
common shares and Partnership units |
|
(3,185 |
) |
|
|
(54 |
) |
|
|
|
|
|
|
Funds from Operations
applicable to common shares and Partnership units |
|
(54 |
) |
|
|
8,237 |
|
|
|
|
|
|
|
Interest
in amortization and write-off of deferred financing costs of
unconsolidated joint venture |
|
2,504 |
|
|
|
367 |
|
Deferred
financing costs and debt premium written off in debt
extinguishment |
|
22 |
|
|
|
274 |
|
Non-cash
share based compensation expense |
|
1,606 |
|
|
|
1,429 |
|
Straight-line amortization of ground lease expense |
|
230 |
|
|
|
159 |
|
Acquisition and terminated transaction costs |
|
- |
|
|
|
700 |
|
Net
operating loss incurred on non-operating properties |
|
589 |
|
|
|
- |
|
Income
tax (benefit) expense |
|
(2,655 |
) |
|
|
2,243 |
|
Amortization of deferred financing costs |
|
558 |
|
|
|
648 |
|
Amortization of discounts and premiums |
|
(126 |
) |
|
|
(174 |
) |
|
|
|
|
|
|
Adjusted Funds from
Operations |
$ |
2,674 |
|
|
$ |
13,883 |
|
|
|
|
|
|
|
AFFO per Diluted
Weighted Average Common Shares and Partnership Units
Outstanding |
$ |
0.06 |
|
|
$ |
0.31 |
|
|
|
|
|
|
|
Diluted Weighted
Average Common Shares and Partnership Units Outstanding |
|
43,462,075 |
|
|
|
44,741,968 |
|
|
|
|
|
|
|
EBITDAre and Adjusted EBITDA
Earnings before interest expense, income taxes,
depreciation and amortization (“EBITDA”) is a supplemental measure
of our operating performance and facilitates comparisons between us
and other lodging REITs, hotel owners who are not REITs and other
capital-intensive companies. NAREIT adopted EBITDA for real estate
(“EBITDAre”) in order to promote an industry-wide measure of REIT
operating performance. We also adjust EBITDAre for interest in
amortization and write-off of deferred financing costs of our
unconsolidated joint ventures, deferred financing costs write-offs
in debt extinguishment, non-cash share based compensation expense,
acquisition and terminated transaction costs and net operating loss
incurred on non-operation properties. (Adjusted EBITDA).
Our EBITDAre and Adjusted EBITDA computation may
not be comparable to EBITDAre 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, GAAP net
income (loss) as a measure of the Company's operating
performance.
|
|
|
|
|
|
HERSHA
HOSPITALITY TRUST |
|
|
|
|
|
EBITDAre and
Adjusted EBITDA |
|
|
|
|
|
(in thousands) |
|
|
|
|
Three Months Ended |
|
March 31, 2018 |
|
March 31,
2017 |
|
|
|
|
|
|
Net (loss) income |
$ |
(9,148 |
) |
|
$ |
25,955 |
|
Loss
(income) from unconsolidated joint ventures |
|
201 |
|
|
|
(12,353 |
) |
Interest
expense |
|
11,372 |
|
|
|
9,849 |
|
Non-operating interest income |
|
(25 |
) |
|
|
(125 |
) |
Income
tax expense |
|
(2,655 |
) |
|
|
2,243 |
|
Depreciation and amortization |
|
21,539 |
|
|
|
19,462 |
|
Gain on
disposition of hotel properties |
|
(3,417 |
) |
|
|
(18,731 |
) |
|
|
|
|
|
|
EBITDAre
from consolidated hotel operations |
|
17,867 |
|
|
|
26,300 |
|
|
|
|
|
|
|
(Loss)
income from unconsolidated joint venture investments |
|
(201 |
) |
|
|
12,353 |
|
Gain on
remeasurement of investment in unconsolidated joint venture |
|
- |
|
|
|
(16,239 |
) |
Unrecognized pro rata interest in (loss) income |
|
(4,060 |
) |
|
|
3,185 |
|
Depreciation and amortization of difference between purchase price
and historical cost |
|
24 |
|
|
|
(302 |
) |
Adjustment for interest in interest expense, depreciation
and amortization of unconsolidated joint ventures |
|
2,652 |
|
|
|
2,095 |
|
|
|
|
|
|
|
EBITDAre
from unconsolidated joint venture operations |
|
(1,585 |
) |
|
|
1,092 |
|
|
|
|
|
|
|
EBITDAre |
|
16,282 |
|
|
|
27,392 |
|
|
|
|
|
|
|
Interest
in amortization and write-off of deferred financing costs of
unconsolidated joint venture |
|
2,504 |
|
|
|
367 |
|
Deferred
financing costs and debt premium written off in debt
extinguishment |
|
22 |
|
|
|
274 |
|
Non-cash
share based compensation expense |
|
1,606 |
|
|
|
1,429 |
|
Straight-line amortization of ground lease expense |
|
230 |
|
|
|
159 |
|
Acquisition and terminated transaction costs |
|
- |
|
|
|
700 |
|
Net
operating loss incurred on non-operating properties |
|
589 |
|
|
|
- |
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
21,233 |
|
|
$ |
30,321 |
|
|
|
|
|
|
|
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. In
addition, our Hotel EBITDA computation may not be comparable to
Hotel EBITDA or other similar metrics reported by other companies
that interpret the definition of Hotel EBITDA differently than we
do. Management believes Hotel EBITDA to be a meaningful measure of
performance of a portfolio of hotels because it is followed by
industry analysts, lenders and investors and that it should be
considered along with, but not as an alternative to, operating
income (loss) as reported in our unaudited summary results as a
measure of our hotel portfolio’s operating performance.
|
|
|
|
|
|
HERSHA
HOSPITALITY TRUST |
|
|
|
|
|
Hotel
EBITDA |
|
|
|
|
|
(in thousands) |
|
|
|
|
Three Months Ended |
|
March 31, 2018 |
|
March 31,
2017 |
|
|
|
|
|
|
Operating income |
$ |
(2,993 |
) |
|
$ |
7,511 |
|
Other
revenue |
|
(124 |
) |
|
|
(46 |
) |
Depreciation and amortization |
|
21,539 |
|
|
|
19,462 |
|
General
and administrative |
|
3,485 |
|
|
|
3,196 |
|
Share
based compensation |
|
1,606 |
|
|
|
1,429 |
|
Acquisition and terminated transaction costs |
|
- |
|
|
|
700 |
|
Straight-line amortization of ground lease expense |
|
230 |
|
|
|
159 |
|
Other |
|
(75 |
) |
|
|
(164 |
) |
|
|
|
|
|
|
Hotel
EBITDA |
$ |
23,668 |
|
|
$ |
32,247 |
|
|
|
|
|
|
|
Reconciliation of Non-GAAP Financial Measures Included
in 2018 Outlook
Funds from Operations
(FFO) and Adjusted Funds from Operations (AFFO) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Outlook |
(in millions, except
shares and per share data) |
|
Low |
|
|
|
High |
|
Net loss
applicable to common shares |
$ |
(22.0 |
) |
|
$ |
(14.0 |
) |
Loss
allocated to noncontrolling interest |
|
(1.6 |
) |
|
|
(1.0 |
) |
Income
from unconsolidated joint ventures |
|
(1.7 |
) |
|
|
(1.7 |
) |
Gain on
disposition of hotel properties |
|
(3.4 |
) |
|
|
(3.4 |
) |
Depreciation and amortization |
|
89.7 |
|
|
|
89.7 |
|
Funds
from consolidated hotel operations applicable to common shares
and Partnership units |
|
60.9 |
|
|
|
69.5 |
|
|
|
|
|
|
|
|
|
Income
from unconsolidated joint venture investments |
|
1.7 |
|
|
|
1.7 |
|
Unrecognized pro rata interest in loss |
|
(3.4 |
) |
|
|
(3.4 |
) |
Depreciation and amortization of difference between purchase
price and historical cost |
|
0.1 |
|
|
|
0.1 |
|
Interest
in depreciation and amortization |
|
4.2 |
|
|
|
4.2 |
|
Funds
from unconsolidated joint venture operations applicable to
common shares and Partnership units |
|
2.7 |
|
|
|
2.7 |
|
|
|
|
|
|
|
|
|
Funds from Operations
applicable to common shares and Partnership units |
|
63.6 |
|
|
|
72.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
in amortization and write-off of deferred financing costs of
unconsolidated joint venture |
|
2.5 |
|
|
|
2.5 |
|
Non-cash
share based compensation expense |
|
10.9 |
|
|
|
10.9 |
|
Straight-line amortization of ground lease expense |
|
0.9 |
|
|
|
0.9 |
|
Net
operating loss incurred on non-operating properties |
|
2.5 |
|
|
|
2.5 |
|
Income
tax expense |
|
1.8 |
|
|
|
1.8 |
|
Amortization of deferred financing costs |
|
2.2 |
|
|
|
2.2 |
|
Amortization of discounts and premiums |
|
(0.5 |
) |
|
|
(0.5 |
) |
Other |
|
1.0 |
|
|
|
0.4 |
|
Adjusted Funds from
Operations |
$ |
85.0 |
|
|
$ |
93.0 |
|
|
|
|
|
|
|
|
|
AFFO per Diluted
Weighted Average Common Shares and Partnership Units
Outstanding |
$ |
1.96 |
|
|
$ |
2.14 |
|
|
|
|
|
|
|
|
|
Diluted Weighted
Average Common Shares and Partnership Units Outstanding |
|
43.4 |
|
|
|
43.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from
Operations (FFO) and Adjusted Funds from Operations
(AFFO) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2 2018 Outlook |
(in millions, except
shares and per share data) |
|
Low |
|
|
|
High |
|
Net
(loss) income applicable to common shares |
$ |
(1.0 |
) |
|
$ |
1.0 |
|
(Loss)
income allocated to noncontrolling interest |
|
(0.1 |
) |
|
|
0.1 |
|
Income
from unconsolidated joint ventures |
|
(0.7 |
) |
|
|
(0.7 |
) |
Gain on
disposition of hotel properties |
|
- |
|
|
|
- |
|
Depreciation and amortization |
|
22.7 |
|
|
|
22.7 |
|
Funds
from consolidated hotel operations applicable to common shares
and Partnership units |
|
21.0 |
|
|
|
23.1 |
|
|
|
|
|
|
|
|
|
Income from
unconsolidated joint venture investments |
|
0.7 |
|
|
|
0.7 |
|
Unrecognized pro rata interest in income |
|
0.1 |
|
|
|
0.1 |
|
Depreciation and amortization of difference between purchase
price and historical cost |
|
0.02 |
|
|
|
0.02 |
|
Interest
in depreciation and amortization |
|
1.1 |
|
|
|
1.1 |
|
Funds
from unconsolidated joint venture operations applicable to
common shares and Partnership units |
|
1.9 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
Funds from Operations
applicable to common shares andPartnership units |
|
22.9 |
|
|
|
25.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
share based compensation expense |
|
3.0 |
|
|
|
3.0 |
|
Straight-line amortization of ground lease expense |
|
0.2 |
|
|
|
0.2 |
|
Net
operating loss incurred on non-operating properties |
|
1.9 |
|
|
|
1.9 |
|
Income
tax expense |
|
1.7 |
|
|
|
1.7 |
|
Amortization of deferred financing costs |
|
0.6 |
|
|
|
0.6 |
|
Other |
|
(0.2 |
) |
|
|
(0.4 |
) |
Adjusted Funds from
Operations |
$ |
30.0 |
|
|
$ |
32.0 |
|
|
|
|
|
|
|
|
|
AFFO per Diluted
Weighted Average Common Shares and Partnership Units
Outstanding |
$ |
0.70 |
|
|
$ |
0.74 |
|
|
|
|
|
|
|
|
|
Diluted Weighted
Average Common Shares and Partnership Units Outstanding |
|
43.4 |
|
|
|
43.4 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
2018 Outlook |
($'s in
millions except per share amounts) |
|
Low |
|
|
High |
|
Net
Loss |
$ |
1.0 |
|
|
9.0 |
|
Income from unconsolidated joint ventures |
|
(1.7 |
) |
|
(1.7 |
) |
Interest expense |
|
47.2 |
|
|
47.2 |
|
Non-operating interest income |
|
(0.1 |
) |
|
(0.1 |
) |
Income tax expense |
|
1.5 |
|
|
1.8 |
|
Depreciation and amortization |
|
89.7 |
|
|
89.7 |
|
Gain on disposition of hotel properties |
|
(3.4 |
) |
|
(3.4 |
) |
EBITDAre
from consolidated hotel operations |
|
134.2 |
|
|
142.5 |
|
|
|
|
|
|
|
|
Income
(loss) from unconsolidated joint venture investments |
|
1.7 |
|
|
1.7 |
|
Add: |
|
|
|
|
|
|
Unrecognized pro rata interest in loss |
|
(3.4 |
) |
|
(3.4 |
) |
Depreciation and amortization of difference between
purchase price and historical cost |
|
0.1 |
|
|
0.1 |
|
Adjustment for interest in interest expense, depreciation
and amortization |
|
11.3 |
|
|
11.3 |
|
EBITDAre
from unconsolidated joint venture hotel operations |
|
9.8 |
|
|
9.8 |
|
|
|
|
|
|
|
|
EBITDAre |
|
143.9 |
|
|
152.3 |
|
|
|
|
|
|
|
|
Interest in amortization and write-off of deferred
financing costs of unconsolidated joint venture |
|
2.5 |
|
|
2.5 |
|
Non-cash share based compensation expense |
|
10.9 |
|
|
10.9 |
|
Straight-line amortization of ground lease expense |
|
0.9 |
|
|
0.9 |
|
Net operating loss incurred on non-operating properties |
|
2.5 |
|
|
2.5 |
|
Other |
|
1.2 |
|
|
0.9 |
|
Adjusted
EBITDA |
$ |
162.0 |
|
$ |
170.0 |
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
|
|
|
|
|
|
|
|
Q2 2018 Outlook |
($'s in millions except
per share amounts) |
|
Low |
|
|
|
High |
|
Net income |
$ |
5.0 |
|
|
$ |
7.0 |
|
Income
from unconsolidated joint ventures |
|
(0.7 |
) |
|
|
(0.7 |
) |
Interest
expense |
|
11.7 |
|
|
|
11.7 |
|
Non-operating interest income |
|
(0.03 |
) |
|
|
(0.03 |
) |
Income
tax expense |
|
1.7 |
|
|
|
1.7 |
|
Depreciation and amortization |
|
22.7 |
|
|
|
22.7 |
|
EBITDAre from
consolidated hotel operations |
|
40.4 |
|
|
|
42.4 |
|
|
|
|
|
|
|
|
|
Income from
unconsolidated joint venture investments |
|
0.7 |
|
|
|
0.7 |
|
Add: |
|
|
|
|
|
|
|
Unrecognized pro rata interest in income |
|
0.1 |
|
|
|
0.1 |
|
Depreciation and amortization of difference between
purchase price and historical cost |
|
0.02 |
|
|
|
0.02 |
|
Adjustment for interest in interest expense, depreciation
and amortization |
|
2.8 |
|
|
|
2.8 |
|
EBITDAre from
unconsolidated joint venture hotel operations |
|
3.7 |
|
|
|
3.7 |
|
|
|
|
|
|
|
|
|
EBITDAre |
|
44.1 |
|
|
|
46.1 |
|
|
|
|
|
|
|
|
|
Non-cash
share based compensation expense |
|
3.0 |
|
|
|
3.0 |
|
Straight-line amortization of ground lease expense |
|
0.2 |
|
|
|
0.2 |
|
Net
operating loss incurred on non-operating properties |
|
1.9 |
|
|
|
1.9 |
|
Other |
|
0.3 |
|
|
|
0.3 |
|
Adjusted EBITDA |
$ |
49.5 |
|
|
$ |
51.5 |
|
|
|
|
|
|
|
|
|
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.
Contact: Ashish Parikh, Chief Financial
OfficerGreg Costa, Manager of Investor Relations &
FinancePhone: 215-238-1046
Hersha Hospitality (NYSE:HT)
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