UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): October 14, 2008
(October 14, 2008)
HERSHA
HOSPITALITY TRUST
(Exact
name of registrant as specified in its charter)
Maryland
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001-14765
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251811499
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification
No.)
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44
Hersha Drive
Harrisburg,
Pennsylvania 17102
(Address
and zip code of
principal
executive offices)
Registrant’s
telephone number, including area code:
(215) 238-1046
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instructions A.2. below):
£
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Written communications pursuant
to Rule 425 under the Securities Act (17 CFR
230.425)
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£
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Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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£
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Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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£
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Pre-commencement communications
pursuant to Rule 13e4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01
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Entry
into a Material Definitive
Agreement.
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On
October 14, 2008, Hersha Hospitality Limited Partnership, a Virginia limited
partnership (“HHLP”), and Hersha Hospitality Trust, a Maryland real estate
investment trust (“Hersha”), entered into a Revolving Credit Loan and Security
Agreement (the “Credit Agreement”) with TD Bank, N.A. (the “Agent”) and various
other lenders. A copy of the Credit Agreement is attached hereto as
Exhibit 10.1
and is incorporated by reference herein. The following summary is
qualified in its entirety by reference to the Credit Agreement.
The
Credit Agreement provides for a revolving line of credit (the “Line of Credit”)
in the principal amount of up to $175 million, including a sub-limit of $25
million for irrevocable stand-by letters of credit. The existing bank
group has committed $135 million, and the Credit Agreement is structured to
allow for an increase of an additional $40 million.
The
proceeds of the Line of Credit must be used for (i) repayment of all amounts
outstanding under the current $100 million Revolving Credit Loan and Security
Agreement, dated January 17, 2006, as amended, by and among HHLP, the Trust and
Commerce Bank, N.A. (the “Existing Credit Agreement”) (ii) working capital and
general corporate purposes, including payment of distributions or dividends and
(iii) the future purchase of additional hotels. The Line of Credit
replaces the Existing Credit Agreement.
The
Credit Agreement provides that (i) up to $87.75 million (increased from $65.0
million in the Existing Credit Agreement) (“Type A Loans”) shall be made
available for a period of not greater than eighteen months, provided that the
aggregate amount of all Type A Loans outstanding shall not exceed at any time
the lesser of (a) 67% of the appraised value of certain hotel properties pledged
to the Bank as collateral or (b) an amount that would cause HHLP to exceed a
minimum debt service coverage ratio of 1.35 to 1.00 as set forth in the Credit
Agreement, and (ii) the lesser of $47.25 million or an amount equal to 50.0% of
the net unencumbered asset value of HHLP’s directly-owned hotel properties
(increased from $35.0 million in the Existing Credit Agreement) (“Type B Loans”)
shall be made available for a period of not greater than ninety
days. If a commitment increase occurs, the HHLP’s capacity to borrow
Type A Loans will increase up to $125 million and HHLP’s capacity to borrow Type
B Loans will increase up to $50 million.
The Line
of Credit expires on December 31, 2011, and, provided no event of default occurs
and remains uncured, HHLP and the Trust may request that the Agent and the
lenders renew the line of credit for an additional period of one
year.
At HHLP’s
option, the interest rate on the line of credit is either (i) the Wall Street
Journal variable prime rate per annum or (ii) LIBOR available for the periods of
1, 2, 3, or 6 months plus two and one half percent (2.5%) per
annum.
HHLP and
Hersha have provided the following collateral for the line of credit: (i) a
perfected first-lien security interest in all existing and future unencumbered
assets of HHLP, whether such assets are real, personal or mixed in nature and
including, but not limited to, all existing and future accounts, inventory,
equipment, instruments, documents chattel paper, investment property, deposit
accounts, letters of credit and letter of credit rights and general intangibles,
and all proceeds and products of the foregoing; (ii) title-insured, first-lien
mortgages on (a) the Holiday Inn Express and Suites, Harrisburg, PA; (b) the
Mainstay Suites and Sleep Inn, King of Prussia, PA; (c) the Fairfield Inn,
Laurel, MD; (d) Hampton Inn, Philadelphia, PA; (e) Residence Inn, Langhorne, PA;
(f) Residence Inn, Norwood, MA; (g) Holiday Inn Norwich, CT; (h) Holiday Inn
Express, Hummelstown, PA; (i) Holiday Inn Express, New Columbia, PA; (j) Hampton
Inn, Danville, PA; (k) Holiday Inn Express, Camp Springs, PA; and (l) Sheraton
JFK Hotel, Jamaica, NY; and (iii) collateral assignment of all hotel management
contracts from which HHLP or its affiliates derive revenues. Hersha
and certain of Hersha’s subsidiaries guarantee HHLP’s obligations under the
Credit Agreement.
The
Credit Agreement includes certain financial covenants and requires that Hersha
maintain (i) a minimum tangible net worth of $300 million; (ii) a maximum of
accounts and other receivables from affiliates of $125 million; and (iii) annual
distributions not to exceed 95% of adjusted funds from operations; (iv) maximum
variable rate indebtedness to total debt of 30%; and (v) certain financial
ratios, including:
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·
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a
debt service coverage ratio of not less than 1.35 to
1.00;
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·
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a
total funded liabilities to gross asset value ratio of not more than 0.67
to 1.00; and
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·
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a
EBITDA to debt service ratio of not less than 1.40 to
1.00;
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Item
9.01
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Financial
Statements and Exhibits.
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Revolving
Credit Loan and Security Agreement, dated October 14, 2008, by and between
Hersha Hospitality Limited Partnership, Hersha Hospitality Trust and TD
Bank, N.A.
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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HERSHA
HOSPITALITY TRUST
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Date: October
14, 2008
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By:
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/s/Ashish R. Parikh
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Ashish
R. Parikh
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Chief
Financial Officer
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