HT Hersha Hospitality Trust

Hersha Hospitality Trust (NYSE: HT), owner of select service and upscale hotels in major metropolitan markets, today announced results for the first quarter ended March 31, 2010.

Financial Results

For the first quarter ended March 31, 2010, net loss applicable to common shareholders was $(15.8) million, or $(0.16) per diluted common share for the first quarter of 2010, compared to a net loss of $(9.8) million, or $(0.21) per common share for the comparable quarter of 2009.

Adjusted Funds from Operation (“AFFO”) in the first quarter was a loss of $(1.2) million, compared to $1.2 million in the first quarter of 2009. AFFO per diluted common share and limited partnership unit was a loss of $(0.01) compared to $0.02 for the same quarter of 2009. AFFO per share was impacted by an increase in the Company’s weighted average fully diluted share count to approximately 108.8 million in the first quarter of 2010 from approximately 56.5 million in the comparable quarter of 2009.

An explanation of FFO, AFFO, EBITDA, Adjusted EBITDA and Hotel EBITDA, as well as reconciliations to the most directly applicable U.S. GAAP measures, is included at the end of this release.

Mr. Jay H. Shah, Hersha Hospitality’s Chief Executive Officer, stated, “In the first quarter, our consolidated portfolio delivered positive RevPAR growth for the first time in 5 quarters. This growth was primarily attributable to our high quality, well-located portfolio of assets combined with increasing demand from the corporate and leisure traveler. In addition, our revenue management strategies have allowed us to maintain high levels of occupancy throughout this downturn and to increase Hotel EBITDA margins in the latest quarter. As demand returns to our markets, we expect to begin to recapture rate. This rate growth, combined with increasing market share of our newer assets and the benefits of our cost containment initiatives will lead to RevPAR improvements and industry-leading EBITDA margins.”

“During the recent economic cycle, we have taken advantage of the dislocation in the capital and real estate markets to better position our portfolio,” Mr. Shah continued. “We have made a number of accretive acquisitions, increasing our New York City portfolio by two-thirds over the past two years and have simultaneously reduced the average age of our New York City portfolio to two years. These transactions position us to capitalize on the broader economic recovery. We are pleased with our primarily urban portfolio and we will be selective in our acquisitions going forward, seeking assets with growth prospects at or above the Company’s existing growth rate.”

Operating Results

For the quarter ended March 31, 2010, revenue per available room (“RevPAR”) for the Company's consolidated hotels was up 4.0% to $73.01 compared to $70.20 in the prior year period. Our occupancy increased to 61.34% from 57.13% and was slightly offset by a decrease of 3.1% in average daily rate (“ADR”) to $119.02.

Hotel earnings before interest, taxes, depreciation, and amortization (“Hotel EBITDA”) for Hersha's consolidated hotels was $13.1 million for the quarter ended March 31, 2010 compared to $11.0 million for the same period in 2009. Hotel EBITDA margins improved 78 basis points year over year during the first quarter of 2010 from approximately 25.8% to 26.6%, due primarily to the Company’s effective ongoing cost-cutting initiatives and the stabilization of the Company’s newest acquisitions. The Company is significantly impacted by the seasonality of corporate and leisure travel in the northeast United States. The first quarter historically accounts for less than 15% of the Company’s annual consolidated EBITDA and the Company experiences the lowest margins of the year during this time period.

On a same-store basis for Hersha's consolidated hotels (57 hotels), RevPAR for the quarter ended March 31, 2010 was effectively unchanged at $70.00, a decrease of 0.2%, from the comparable quarter in 2009. The decline was a result of an ADR decrease of 5.6% to $116.06 and an increase in occupancy to 60.31% from 57.08%.

Same-store consolidated Hotel EBITDA for the quarter ended March 31, 2010 was $11.1 million compared to $11.2 million for the quarter ended March 31, 2009. The Company's same-store Hotel EBITDA margin was 25.5% in the first quarter of 2010 compared to 25.8% in the first quarter of 2009. Although the same store portfolio recognized an increase in occupancy and a decline in ADR, the pace of margin decline was limited due to recent cost containment initiatives.

New York City

Including the acquisitions completed in the first quarter, the New York City portfolio now consists of 12 consolidated hotels and accounts for 21.7% of the Company’s consolidated hotel rooms. For the first quarter of 2010, the Company’s New York City consolidated portfolio of hotels realized a 4.8% growth in occupancy to 77.33% and a 5.7% increase in RevPAR to $116.38. During the same period, Hotel EBITDA margins for this portfolio improved 670 basis points to 30.3% as a result of accretive acquisitions, aggressive cost containment programs and continued stabilization of newer assets.

Hersha’s New York City portfolio includes a number of relatively new properties that are still ramping up their operations, including three hotels acquired in February 2010, all of which opened in July 2009. With the addition of these three assets, the average age of the Company’s NYC portfolio is approximately two years. The Company anticipates benefiting from its portfolio concentration in key urban gateway markets, which are expected to lead a recovery.

Financing

During the first quarter, the Company sold a total of 79.35 million common shares in two separate public offerings for gross proceeds of approximately $272.6 million. The proceeds were used to acquire three hotels in Times Square, New York (as described below), to repay the Company’s revolving line of credit and for general corporate purposes.

As of March 31, 2010, the Company had no outstanding borrowings on its $135.0 million committed line of credit, $40.1 million in cash and escrows and no debt maturities for the remainder of 2010. Approximately 92 percent of the Company’s debt is fixed or capped with a weighted average interest rate of 6.2% and a weighted average life to maturity of 7.0 years.

Acquisitions

In February 2010, the Company closed on the acquisition of three brand new hotels in Times Square, New York for $165.0 million. The 184-room Hampton Inn, 188-room Candlewood Suites and 210-room Holiday Inn Express were recently opened in July 2009 and were purchased unencumbered of debt. The Company expects to realize operating synergies by owning multiple properties in close proximity in one of the busiest locations in the world. The basis for the three hotels is approximately $284,000 per key, and the acquisitions further the Company’s strategy of expanding its presence in New York City, which has historically been one of the strongest markets in the country.

Subsequent Events

On April 13, 2010, the Company purchased from a third party lender the outstanding mortgage loan to one of its unconsolidated joint ventures that owns a Courtyard by Marriott in Boston, MA, in which the Company owns a 50% interest. The Courtyard South Boston was opened in 2005 and remains a core urban holding for the Company. Based upon the purchase price of the note, the Company’s basis in the 164 room asset is $13.8 million or approximately $84,000 per room. Going forward, this asset will be recorded as a consolidated hotel in the Company’s financial statements.

Financial Outlook for 2010

The Company is maintaining the previously provided projections for full-year 2010. The outlook assumes that operating conditions remain challenging but continue to stabilize as the year progresses.

Based on this outlook, the Company is maintaining the following set of projections for the portfolio for the full 2010 calendar year:

• Same store RevPAR for 2010 in the range of a 2.0% decline to a 1.0% increase versus 2009.
• Same store Hotel EBITDA margin deterioration of 100 basis points to 200 basis points.
• 2010 results will reflect full year operational results for the two assets purchased in 2009, and the majority of the year for the three assets purchased in February 2010.

Dividend

For the first quarter of 2010, Hersha Hospitality Trust paid dividends of $0.05 per common share and limited partnership unit. The Company also paid a first quarter cash dividend of $0.50 per Series A Preferred Share.

First Quarter 2010 Earnings Release and Conference Call

The Company will host a conference call to discuss the results at 9:00 AM Eastern time on Wednesday, May 5, 2010. The live conference call can be accessed by dialing (888) 539-3612 or (719) 325-2198 for international participants. A replay of the call will be available from 12:00 noon Eastern time on May 5, 2010, through midnight Eastern Time on May 19, 2010. 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 6798435.

About Hersha Hospitality

Hersha Hospitality Trust is a self-advised real estate investment trust, which owns interests in 76 hotels, totaling 9,838 rooms, primarily along the Northeast Corridor from Boston to Washington D.C. Hersha also owns hotels in Northern California and Scottsdale, Arizona. Hersha focuses on upscale, mid-scale and extended stay hotels in major metropolitan markets.

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. These forward-looking statements include statements related to the Company’s ability to capitalize on selective opportunities in the future, stabilization in hotel operating metrics (including operating metrics with respect to the Company’s consolidated portfolio of New York City hotels) and the Company’s forecasted estimates related to the financial outlook for the full 2010 calendar year. 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, 2009, as filed with the Securities and Exchange Commission. For more information on the New York hotel acquisitions, please refer to the Current Report on Form 8-K filed in February 11, 2010.

HERSHA HOSPITALITY TRUST     Balance Sheet (in thousands, except shares and per share data) March 31, 2010 December 31, 2009 Assets: Investment in Hotel Properties, net of Accumulated Depreciation $ 1,111,255 $ 938,954 Investment in Unconsolidated Joint Ventures 35,831 39,182 Development Loans Receivable 46,700 46,094 Cash and Cash Equivalents 22,004 11,404 Escrow Deposits 18,112 16,174 Hotel Accounts Receivable, net of allowance for doubtful accounts of $109 and $34 8,865 7,103 Deferred Financing Costs, net of Accumulated Amortization of $4,690 and $4,262 8,074 8,696 Due from Related Parties 4,614 2,394 Intangible Assets, net of Accumulated Amortization of $864 and $803 7,771 7,542 Other Assets 12,663 12,428 Assets Held for Sale 21,073 21,073     Total Assets $ 1,296,962   $ 1,111,044     Liabilities and Equity: Line of Credit $ - $ 79,200 Mortgages and Notes Payable, net of unamortized discount of $1,200 and $49 657,998 645,351 Accounts Payable, Accrued Expenses and Other Liabilities 23,067 16,216 Dividends and Distributions Payable 8,337 4,293 Due to Related Parties 282 769 Liabilities Related to Assets Held for Sale 20,876 20,892     Total Liabilities   710,560     766,721     Redeemable Noncontrolling Interests - Common Units $ 15,874 $ 14,733   Equity: Shareholders' Equity: Preferred Shares - 8% Series A, $.01 Par Value, 29,000,000 shares authorized, 2,400,000 Shares Issued and Outstanding (Aggregate Liquidation Preference $60,000) at March 31, 2010 and December 31, 2009 24 24 Common Shares - Class A, $.01 Par Value, 300,000,000 and 150,000,000 Shares Authorized at March 31, 2010 and December 31, 2009, 137,246,278 and 57,682,917 Shares Issued and Outstanding at March 31, 2010 and December 31, 2009, respectively 1,372 577 Common Shares - Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding - - Accumulated Other Comprehensive Loss (165 ) (160 ) Additional Paid-in Capital 747,229 487,481 Distributions in Excess of Net Income   (208,409 )   (185,725 ) Total Shareholders' Equity 540,051 302,197   Noncontrolling Interests: Noncontrolling Interests - Common Units 30,524 27,126 Noncontrolling Interests - Consolidated Joint Ventures   (47 )   267   Total Noncontrolling Interests 30,477 27,393     Total Equity 570,528 329,590     Total Liabilities and Equity $ 1,296,962   $ 1,111,044       HERSHA HOSPITALITY TRUST Summary Results (in thousands, except shares and per share data) Three Months Ended March 31, 2010 March 31, 2009 Revenues: Hotel Operating Revenues $ 49,388 $ 42,397 Interest Income from Development Loans 1,374 2,397 Other Revenue   165     229   Total Revenues   50,927     45,023     Operating Expenses: Hotel Operating Expenses 32,163 28,144 Hotel Ground Rent 292 292 Real Estate and Personal Property Taxes and Property Insurance 4,045 3,198 General and Administrative 2,834 1,480 Stock Based Compensation 656 421 Acquisition and Terminated Transaction Costs 3,336 7 Depreciation and Amortization   12,056     10,439   Total Operating Expenses   55,382     43,981     Operating (Loss) Income (4,455 ) 1,042   Interest Income 41 60 Interest Expense 11,357 10,230 Other Expense 92 50 Loss on Debt Extinguishment   731     -   Loss before Income (Loss) from Unconsolidated Joint Venture Investments and Discontinued Operations (16,594 ) (9,178 )   Unconsolidated Joint Ventures Loss from Unconsolidated Joint Venture Investments (1,040 ) (1,329 ) Gain from Remeasurement of Investment in Unconsolidated Joint Ventures   1,818     -   Income (Loss) from Unconsolidated Joint Venture Investments   778     (1,329 )   Loss from Continuing Operations (15,816 ) (10,507 )   Discontinued Operations Loss from Discontinued Operations   (521 )   (176 )   Net Loss (16,337 ) (10,683 )   Loss Allocated to Noncontrolling Interests 1,715 2,053 Preferred Distributions   (1,200 )   (1,200 )   Net Loss Applicable to Common Shareholders $ (15,822 ) $ (9,830 )  

Earnings per Share:

BASIC Loss from Continuing Operations Applicable to Common Shareholders $ (0.16 ) $ (0.21

)

Loss from Discontinued Operations   0.00     0.00     Net Loss Applicable to Common Shareholders $ (0.16 ) $ (0.21 )   DILUTED Loss from Continuing Operations Applicable to Common Shareholders $ (0.16 ) $ (0.21 ) Loss from Discontinued Operations   0.00     0.00     Net Loss Applicable to Common Shareholders $ (0.16 ) $ (0.21 )  

Weighted Average Common Shares Outstanding:

Basic 99,311,523 47,786,503 Diluted 99,311,523 47,786,503

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 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 noncontrolling 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 noncontrolling 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 non-cash impairment expenses;
• adding back acquisition and terminated transaction expenses;
• 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, 2010 March 31, 2009   Net loss applicable to common shares $ (15,822 ) $ (9,830 ) Loss allocated to noncontrolling interest (1,715 ) (2,053 ) (Income) loss from unconsolidated joint ventures (778 ) 1,329 Depreciation and amortization 12,056 10,439 Depreciation and amortization from discontinued operations - 499 FFO allocated to noncontrolling interests in consolidated joint ventures   124     212   Funds from consolidated hotel operations applicable to common shares and Partnership units (6,135 ) 596   Income (loss) from unconsolidated joint venture investments 778 (1,329 ) Add: Depreciation and amortization of purchase price in excess of historical cost 508 521 Interest in depreciation and amortization of unconsolidated joint ventures   229     541   Funds from unconsolidated joint venture operations applicable to common shares and Partnership units 1,515 (267 )     Funds from Operations applicable to common shares and Partnership units (4,620 ) 329   Add: FFO allocated to noncontrolling interests in consolidated joint ventures (124 ) (212 ) Gain from remeasurement of investment in unconsolidated joint ventures (1,818 ) - Acquisition and terminated transaction costs 3,336 7 Amortization of deferred financing costs 533 537 Deferred financing costs written off in debt extinguishment 731 - Amortization of discounts and premiums 53 3 Non cash stock compensation expense 656 421 Straight-line amortization of ground lease expense   66     69     Adjusted Funds from Operations $ (1,187 ) $ 1,154     AFFO per Diluted Weighted Average Common Shares and Units Outstanding $ (0.01 ) $ 0.02     Diluted Weighted Average Common Shares and Units Outstanding 108,826,751 56,532,803

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 March 31, 2010 March 31, 2009   Net loss applicable to common shares $ (15,822 ) $ (9,830 ) Less: (Income) Loss from unconsolidated joint ventures (778 ) 1,329 Interest income (41 ) (60 ) Add: Loss allocated to noncontrolling interest (1,715 ) (2,053 ) Distributions to Series A Preferred Shareholders 1,200 1,200 Interest expense from continuing operations 11,357 10,230 Interest expense from discontinued operations 384 389 Deferred financing costs

written off in debt extinguishment

731 - Depreciation and amortization from continuing operations 12,056 10,439 Depreciation and amortization from discontinued operations - 499 Acquisition and terminated transaction costs 3,336 7 Non-cash stock compensation expense 656 421 Straight-line amortization of ground lease expense   66     69     Adjusted EBITDA from consolidated hotel operations   11,430     12,640       Income (Loss) from unconsolidated joint venture investments 778 (1,329 ) Add: Gain on remeasurement of investment in unconsolidated joint ventures (1,818 ) - Depreciation and amortization of purchase price in excess of historical cost 508 521 Adjustment for interest in interest expense, depreciation and amortization of unconsolidated joint ventures   2,635     2,915     Adjusted EBITDA from unconsolidated joint venture operations   2,103     2,107     Adjusted EBITDA $ 13,533   $ 14,747  

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 found in the Investor Relations section and the “SEC Filings and Presentations” page of the Company’s Web site, www.hersha.com.