Hersha Hospitality Trust (NYSE: HT), owner of select service and
upscale hotels in major metropolitan markets, today announced
earnings for the first quarter ended March 31,2009. Summary
financial results for the quarter are as follows:
- Consolidated Hotel RevPAR decreased 19.9% -
- Same Store Consolidated Hotel RevPAR decreased 20.0% -
- Adjusted Funds from Operations (�AFFO�) was $1.2 million -
- Adjusted EBITDA from Operations was $14.7 million -
- Modifies Outlook for 2009 -
Financial Results
For the first quarter ending March 31, 2009, AFFO was $1.2
million, compared to $7.2 million in the first quarter of 2008.
AFFO per diluted common share and unit was $0.02 compared to $0.15
for the same quarter of 2008.
Net loss applicable to common shareholders was ($9.8) million,
or ($0.21) per common share, compared to ($4.1) million, or ($0.10)
per common share for the first quarter of 2008. A reconciliation of
AFFO and Adjusted EBITDA to net income applicable to common shares,
the most directly applicable U.S. GAAP measure, is included at the
end of this release.
�The unprecedented economic turmoil combined with extremely
difficult year over year comparisons resulted in a challenging
quarter for the Company,� stated Mr. Jay H. Shah, Hersha
Hospitality�s Chief Executive Officer. �While our first quarter
results are not reflective of what we expect for the remainder of
the year, this normal seasonality combined with revenue declines
due to economic conditions, eroded operating margins for the
quarter. Due to the normal seasonality of our business, the first
quarter historically accounts for less than 15% of the Company�s
annual revenues. We anticipate improvement in hotel operating
margins as we move into the stronger seasonal quarters for the
northeast and we recognize the benefits of our expense control
measures for the remainder of the year. To that end, we are pleased
that our latest cost containment programs implemented late in the
first quarter, combined with higher revenues as the quarter
progressed due to seasonality, resulted in a meaningful margin
improvement of more than 200 basis points in March as compared to
January and February.�
Jay H. Shah concluded, �In the current market, we are focused on
gaining share, aggressively managing property-level expenses and
driving margins. Although, we anticipate that operating
fundamentals will remain difficult and we continue to operate with
limited visibility, we are pleased that we are starting to see the
demand trends in our markets stabilizing. In April, we achieved
over 90% occupancy in New York and over 80% in Boston and
Washington. Our resilient portfolio and a balance sheet that has
manageable debt maturities through 2012, positions us well to
deliver profitable growth over the long-term.�
Operating Results
Total consolidated hotel operating revenues were $45.1 million
for the quarter ended March 31, 2009, compared to $51.9 million in
2008. This decrease was primarily driven by the impact of the
challenging economic environment, along with difficult comparisons
to the first quarter of 2008. The first quarter of 2008 was one of
the strongest in the Company�s history with total consolidated
hotel operating revenues up 15.9% from the first quarter of
2007.
Revenue per available room (�RevPAR�) for the Company's
consolidated hotels (61 hotels) was $68.47 for the quarter ended
March 31, 2009 compared to $85.46 in the prior year period. The
decline was a result of an average daily rate (�ADR�) decrease of
8.5% to $119.00 and an 8.1% decline in occupancy to 57.54%.
On a regional basis, during the first quarter of 2009, the
Company�s New York properties (which historically have accounted
for approximately 35% of the Company�s EBITDA) underperformed the
rest of the portfolio. The decline was primarily due to the
difficult economic environment in that region and challenging year
over year comparisons which ease as the year progresses. Same-
store RevPAR for the Company's New York City hotels declined 31.4%
from the prior year first quarter, driven by an ADR decrease of
22.6% and a 9.8% decline in occupancy. This decrease compares to a
record first quarter RevPAR growth of 19.4% in 2008.
Hotel earnings before interest, taxes, depreciation, and
amortization (�Hotel EBITDA�) for Hersha's consolidated hotels was
$11.1 million for the quarter ended March 31, 2009 compared to
$16.2 million for the same period in 2008. Hotel EBITDA margin was
24.5% for the quarter ended March 31, 2009 compared to 31.2% for
the quarter ended March 31, 2008. The margin deterioration was
primarily related to the decline in revenues in the quarter and the
resulting loss of operating leverage.
The seasonal nature of the Company�s revenues limited its
ability to control operating margins in the first quarter. During
the first quarter, the Company implemented staffing, sales and
marketing, and purchasing changes to achieve a higher level of
operating efficiencies from its hotel operations. The Company
anticipates these changes will start to contribute to operating
margin improvement starting in the second quarter of 2009. The
Company�s operating margins are forecasted to improve as the year
progresses from the benefit from these cost savings, along with
anticipated stronger revenues in the second through fourth quarters
due to the seasonality of revenues in the Company�s core Northeast
markets.
On a same-store basis for Hersha's consolidated hotels (55
hotels), RevPAR was $68.02 for the quarter ended March 31, 2009
compared to $85.01 in the prior year period. The decline was a
result of an ADR decrease of 8.9% to $117.76 and an 8.0% decline in
occupancy.
Same-store consolidated Hotel EBITDA for the quarter ended March
31, 2009 was $10.2 million compared to $16.2 million for the
quarter ended March 31, 2008. The Company's same-store Hotel EBITDA
margin was 25.0% in the first quarter of 2009 compared to 31.5% in
the first quarter of 2008.
Balance Sheet
At March 31, 2009, Hersha Hospitality Trust had approximately
$759.5 million of total consolidated debt outstanding, which
included approximately $51.5 million of trust preferred securities
and $105.3 million outstanding on the Company's line of credit.
Fixed rate debt, including variable rate debt fixed by an interest
rate swap, amounted to approximately 79.1% of total consolidated
debt. For the first quarter of 2009, the weighted average interest
rate on all of the Company's fixed and floating rate debt was
approximately 6.1% and 3.45%, respectively. The weighted average
life to maturity of the Company's debt, excluding the line of
credit, was approximately 7.7 years. Total common shares and units
of limited partnership interest of Hersha Hospitality Limited
Partnership outstanding at March 31, 2009 were approximately 48.3
million and 8.8 million, respectively.
Financial Outlook for 2009
The Company is adjusting its financial guidance for full-year
2009. The outlook assumes that operating conditions remain
challenging for the remainder of the year but also assumes that the
overall economy performs better in the second half of the year.
Based on those expectations, the Company is providing the
following set of assumptions for the portfolio in 2009:
- RevPAR is forecasted to decline
by 14.0% to 20.0%, compared to the prior expected decline of 12.0%
to 15.0%. In terms of quarterly progression, the Company expects
that the first half of 2009 will experience RevPAR declines in the
mid to high teen range, and moderate in the third and fourth
quarters.
- Operating margin deterioration
of 200 basis points to 400 basis points.
- 2009 results will reflect full
year operational results for the six assets purchased in 2008 and
the stabilization of assets opened and purchased in 2007.
Dividend
For the second quarter of 2009, Hersha Hospitality Trust
declared dividends of $0.05 per common share and limited
partnership unit. The Board of Trustees also declared a second
quarter cash dividend of $0.50 per Series A Preferred Share.
First Quarter 2009 Earnings Conference Call
The Company will host a conference call to discuss its financial
results at 9:00 AM Eastern time on Thursday, May 7, 2009.
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.
The live conference call can be accessed by dialing (877)
857-6163 or (719) 325-4819 for international participants. A replay
of the call will be available from 12:00 Noon Eastern time on May
7, 2009, through midnight Eastern Time on May 21, 2009. The replay
can be accessed by dialing (888) 203-1112 or (719) 457-0820 for
international participants. The passcode for the call and the
replay is 6761645.
About Hersha Hospitality
Hersha Hospitality Trust is a self-advised real estate
investment trust, which owns interests in 77 hotels, totaling 9,707
rooms, primarily along the Northeast Corridor from Boston to
Washington D.C. The Company also owns hotels in Northern California
and Scottsdale, Arizona. Hersha focuses on high quality upscale
hotels in high barrier to entry markets. More information on the
Company and its portfolio of hotels is available on Hersha's Web
site at http://www.hersha.com.
Forward Looking Statement
Certain matters within this press release are discussed using
forward-looking language as specified in 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 statement. For a description of these factors,
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, 2008, filed with the Securities Exchange
Commission.
HERSHA HOSPITALITY TRUST � �
Balance Sheet (in
thousands, except shares and per share data)
March 31, 2009
December 31, 2008 Assets: Investment in Hotel
Properties, net of Accumulated Depreciation $ 973,208 $ 982,082
Investment in Joint Ventures 45,307 46,283 Development Loans
Receivable 83,500 81,500 Cash and Cash Equivalents 14,770 15,697
Escrow Deposits 13,278 12,404 Hotel Accounts Receivable, net of
allowance for doubtful accounts of $66 and $120 6,963 6,870
Deferred Costs, net of Accumulated Amortization of $4,143 and
$3,606 8,629 9,157 Due from Related Parties 4,262 3,595 Intangible
Assets, net of Accumulated Amortization of $656 and $595 7,251
7,300 Other Assets 14,468 13,517 � �
Total Assets $
1,171,636 � $ 1,178,405 � �
Liabilities and Equity: Line of
Credit $ 105,321 $ 88,421 Mortgages and Notes Payable, net of
unamortized discount of $59 and $61 654,151 655,360 Accounts
Payable, Accrued Expenses and Other Liabilities 16,525 17,745
Dividends and Distributions Payable 11,240 11,240 Due to Related
Parties 694 302 � �
Total Liabilities � 787,931 � � 773,068
� �
Redeemable Noncontrolling Interests - Common Units $
17,592 $ 18,739 �
Equity: Shareholder's Equity:
Preferred Shares - 8% Series A,
$.01 Par Value, 2,400,000 Shares Issued andOutstanding at March 31,
2009 and December 31, 2008 (Aggregate LiquidationPreference
$60,000)
24 24
Common Shares - Class A, $.01 Par
Value, 80,000,000 Shares Authorized, 48,292,360and 48,276,222
Shares Issued and Outstanding at March 31, 2009 and December
31,2008, respectively
483 483
Common Shares - Class B, $.01 Par
Value, 1,000,000 Shares Authorized, None Issuedand Outstanding
- - Accumulated Other Comprehensive Loss (58 ) (109 ) Additional
Paid-in Capital 464,394 463,772 Distributions in Excess of Net
Income � (132,729 ) � (114,207 ) Total Shareholders' Equity 332,114
349,963 � Noncontrolling Interests: Noncontrolling Interests -
Common Units 32,620 34,781 Noncontrolling Interests - Consolidated
Joint Ventures � 1,379 � � 1,854 �
Total Noncontrolling Interests
33,999 36,635 � � Total Equity 366,113 386,598 � �
Total
Liabilities and Equity $ 1,171,636 � $ 1,178,405 �
HERSHA
HOSPITALITY TRUST � �
Summary Results (in thousands,
except shares and per share data)
Three Months Ended
March 31, 2009 March 31, 2008 Revenues: Hotel
Operating Revenues $ 45,069 $ 51,919 Interest Income from
Development Loans 2,397 2,020 Land Lease Revenue 1,321 1,334 Other
Revenue � 216 � � 252 �
Total Revenues � 49,003 � � 55,525 �
�
Operating Expenses: Hotel Operating Expenses 30,538 32,432
Hotel Ground Rent 292 226 Land Lease Expense 724 749 Real Estate
and Personal Property Taxes and Property Insurance 3,348 3,162
General and Administrative 1,901 1,875 Acquisition and Terminated
Transaction Costs 7 - Depreciation and Amortization � 10,938 � �
9,466 �
Total Operating Expenses � 47,748 � � 47,910 � �
Operating Income 1,255 7,615 � Interest Income 60 82
Interest Expense 10,619 10,707 Other Expense � 50 � � 28 �
Loss
before loss from Unconsolidated Joint Venture
Investments and Discontinued Operations (9,354 ) (3,038
) �
Loss from Unconsolidated Joint Venture
Investments � (1,329 ) � (738 ) �
Loss from Continuing
Operations (10,683 ) (3,776 ) �
Discontinued Operations
Loss from Discontinued Operations � - � � (109 ) �
Net Loss
(10,683 ) (3,885 ) Loss Allocated to Noncontrolling Interests 2,053
1,006 Preferred Distributions � (1,200 ) � (1,200 ) �
Net Loss
applicable to Common Shareholders $ (9,830 ) $ (4,079 )
�
Basic earnings per share
Loss from continuing operations applicable to common shareholders $
(0.21 ) $ (0.10 ) Loss from Discontinued Operations � 0.00 � � 0.00
� �
Net loss applicable to common shareholders $ (0.21 ) $
(0.10 ) �
Diluted earnings per share
Loss from continuing operations applicable to common shareholders $
(0.21 ) $ (0.10 ) Loss from Discontinued Operations � 0.00 � � 0.00
� �
Net loss applicable to common shareholders $ (0.21 ) $
(0.10 ) �
Weighted Average Common Shares Outstanding Basic
47,786,503
40,891,140
Diluted 47,786,503
40,891,140
AFFO and GAAP Reconciliation
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 Partnership 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 depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. Our
interpretation of the NAREIT definition is that minority 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 shares, includes
depreciation and amortization expenses, gains or losses on property
sales and minority interest. In computing FFO, we eliminate these
items because, in our view, they are not indicative of the results
from our property operations.
Hersha also presents Adjusted Funds from Operations (AFFO),
which reflects FFO in accordance with the NAREIT definition further
adjusted by:
- adding back write-offs of
deferred financing costs on debt extinguishment, both for
consolidated and unconsolidated properties;
- adding back amortization of
deferred financing costs;
- making adjustments for the
amortization of original issue discount/premium;
- adding back non-cash stock
expense;
- adding back FFO attributed to
our partners in consolidated joint ventures; and
- making adjustments to ground
lease payments, which are required by GAAP to be amortized on a
straight-line basis over the term of the lease, to reflect the
actual lease payment.
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 Hersha�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 Partnership units because our
Partnership 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 Partnership units.
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 � �
Adjusted Funds from
Operations (AFFO) (in thousands, except shares and per share
data) �
Three Months Ended March 31, 2009 March
31, 2008 � Net loss applicable to common shares $ (9,830 ) $
(4,079 ) Loss allocated to noncontrolling interest (2,053 ) (1,006
) Loss from unconsolidated joint ventures 1,329 738 Depreciation
and amortization 10,938 9,466 Depreciation and amortization from
discontinued operations - 156 FFO allocated to noncontrolling
interests in consolidated joint ventures � 212 � � 240 �
Funds
from consolidated hotel operations applicable to common
shares and Partnership units 596 5,515 � Loss from
unconsolidated joint venture investments (1,329 ) (738 ) Add:
Depreciation and amortization of purchase price in excess of
historical cost 521 523 Interest in depreciation and amortization
of unconsolidated joint ventures � 541 � � 1,452 �
Funds from
unconsolidated joint venture operations applicable to common
shares and Partnership units (267 ) 1,237
�
� �
Funds from Operations applicable to common shares and
Partnership units 329
6,752
� Add: FFO allocated to noncontrolling interests in consolidated
joint ventures (212 ) (240 ) Acquisition and terminated transaction
costs 7 - Amortization of deferred financing costs 537 432
Amortization of discounts and premiums 3 (139 ) Non cash stock
compensation expense 422 314 Straight-line amortization of ground
lease expense � 69 � � 75 � �
Adjusted Funds from Operations
$ 1,155 � $ 7,194 � � AFFO per Diluted Weighted Average Common
Shares and Units Outstanding $ 0.02 � $ 0.15 � � Diluted Weighted
Average Common Shares and Units Outstanding 56,532,803 48,068,939
EBITDA and GAAP Reconciliation
Earnings Before Interest, Taxes, and Depreciation and
Amortization (EBITDA) and Adjusted EBITDA are 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 reported by other
companies that interpret the definition of EBITDA differently than
we do. Management believes 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.
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. Because Hotel EBITDA is specific
to individual hotels or groups of hotels and not to the Company as
a whole, it is not reconcilable to any comparable GAAP measure for
the Company.
HERSHA HOSPITALITY TRUST � �
Adjusted EBITDA (in
thousands)
Three Months Ended March 31, 2009 March
31, 2008 � Net loss applicable to common shares $ (9,830 ) $
(4,079 ) Less: Loss from unconsolidated joint ventures 1,329 738
Interest income (60 ) (82 ) Add: Loss allocated to noncontrolling
interest (2,053 ) (1,006 ) Distributions to Series A Preferred
Shareholders 1,200 1,200 Interest expense from continuing
operations 10,619 10,707 Interest expense from discontinued
operations - 70 Depreciation and amortization from continuing
operations 10,938 9,466 Depreciation and amortization from
discontinued operations - 156 Non-cash stock compensation expense
422 314 Straight-line amortization of ground lease expense � 69 � �
75 � �
Adjusted EBITDA from consolidated hotel operations �
12,634 � � 17,559 � � � (Loss) income from unconsolidated joint
venture investments (1,329 ) (738 ) Add: Depreciation and
amortization of purchase price in excess of historical cost 521 523
Adjustment for interest in interest expense, depreciation and
amortization of unconsolidated joint ventures � 2,914 � � 4,775 � �
Adjusted EBITDA from unconsolidated joint venture operations
� 2,106 � � 4,560 � �
Adjusted EBITDA $ 14,740 � $ 22,119 �
HERSHA HOSPITALITY TRUST Unconsolidated Joint Venture
EBITDA � � (in thousands) � � � � � � � � �
Courtyard
Ewing
Hilton Garden
Inn
Glastonbury
Homewood
Suites
Glastonbury
Courtyard
South Boston
Holiday Inn
Express
South Boston
Mystic
Partners
Holiday Inn
Express
Chelsea
TOTAL Hersha Ownership 50.0 % 48.0 % 48.0 % 50.0 % 50.0 %
(66.7%, 15%, 8.8
%)
50.0 % Hersha Participating Preferred % 11.0 % 11.0 % 10.0 % N/A
N/A
8.5
% N/A �
THREE MONTHS ENDED MARCH 31,
2009
Joint Venture Net Income (Loss) $ (148 ) $ (165 ) $ (213 ) $ (432 )
$ (266 ) $ (4,037 ) $ (598 ) $ (5,859 ) �
Hotel Cash Available
for Distribution Hotel EBITDA $ 243 $ 257 $ 212 $ (31 ) $ (93 )
$ 792 $ 680 $ 2,060 Debt Service (210 ) (258 ) (325 ) (273 ) (153 )
(2,661 ) (1,269 ) (5,149 ) CapEx Reserve & Other � (35 ) � (41
) � (28 ) � (19 ) � (20 ) � (579 ) � (84 ) � (806 ) Cash Available
for Distribution $ (2 ) $ (42 ) $ (141 ) $ (323 ) $ (266 ) $ (2,448
) $ (673 ) $ (3,895 ) �
EBITDA Hersha Income (Loss) from
Unconsolidated JV $ (74 ) $ (81 ) $ - $ (232 ) $ (162 ) $ (409 ) $
(371 ) $ (1,329 )
Addback: Step up and Outside Basis
Amortization - 2 - 16 29 402 72 521 Adjustment for interest in
interest expense, depreciation and amortization of unconsolidated
joint venture 196 202 212 200 87 1,378 639 2,914 � � � � � � � �
Hersha EBITDA from Unconsolidated JV $ 122 � $ 123 � $ 212 � $ (16
) $ (46 ) $ 1,371 � $ 340 � $ 2,106 �
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 found in
the Investor Relations section and the �SEC Filings and
Presentations� page of the Company�s Web site, www.hersha.com.
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