Hersha Hospitality Trust (NYSE: HT) (“Hersha,” “Company,” “we” or
“our”), owner of high-quality hotels in urban gateway markets and
regional resort destinations, today announced results for the
second quarter ended June 30, 2022.
Second Quarter 2022 Financial
Results
(Unaudited in thousands, except per share amounts) |
|
Three Months Ended June 30, 2022 |
|
|
|
2022 |
|
|
2021 |
|
Net income (loss) |
$ |
9,212 |
|
$ |
(23,523 |
) |
Net income (loss) per common
share |
$ |
0.05 |
|
$ |
(0.73 |
) |
|
|
|
|
Adjusted FFO1 |
$ |
25,745 |
|
$ |
(1,666 |
) |
Adjusted FFO per common share and
OP Unit |
$ |
0.56 |
|
$ |
(0.04 |
) |
Mr. Jay H. Shah, Hersha’s Chief Executive
Officer, stated, “The resurgence of our gateway urban markets
coupled with continued out-performance in our resort markets
allowed us to generate quarterly comparable portfolio EBITDA of
$47.4M, ahead of our results in the second quarter of 2019. With
the acceleration through the quarter of the demand recovery in the
midweek business transient and group segments, we drove ADR growth
in every one of our markets. While our marquee South Florida
properties, the Cadillac Hotel and Beach Club in Miami and the
Parrot Key Resort and Villas in Key West, were once again among our
top cash flow drivers, the other three of our top five EBITDA
producers hailed from our core Northeast markets of New York,
Boston, and Washington D.C. The Envoy Hotel was our highest EBITDA
generating hotel during the second quarter while the Hyatt Union
Square and The Westin Philadelphia rounded out the group.”
Mr. Shah continued, “Based on the trends we saw in July, the
ongoing momentum from our corporate customers, and strong forward
bookings for the second half of the year, we remain very encouraged
with the sustainability of the recovery in our markets. Our
differentiated and experiential luxury and lifestyle portfolio
along with our unique New York City cluster is very well positioned
to continue outperforming our peers. We expect to benefit from long
runways in the business travel, convention, group, and
international channels as their recoveries continue to take hold in
our markets."
Second Quarter 2022 Operating
Results
The Company’s 32 comparable hotel portfolio
generated 72.6% occupancy, an Average Daily Rate (“ADR”) of
$286.78, and Revenue per Available Room (“RevPAR”) of $208.26
during the second quarter 2022.
Strong ADR growth coupled with ongoing cost
controls and aggressive asset management strategies helped drive
very strong operating margins during the quarter. Comparable GOP
margin was 49.1%, which exceeded the second quarter 2019 by 282
basis points. Comparable hotel EBITDA margin of 38.7% was 236 basis
points higher than the second quarter 2019. EBITDA margins at our
resort properties increased 1,080 basis points as compared to
second quarter 2019.
Our resort portfolio generated RevPAR growth of 36.5% driven by
37.9% ADR growth compared to second quarter 2019. On Miami Beach,
occupancy and ADR growth led to 66.2% RevPAR growth at the Cadillac
Hotel & Beach Club, the highest quarterly growth in the
portfolio. In Coconut Grove, the Ritz-Carlton drove 49.7% ADR
growth resulting in 44.2% RevPAR growth. The Parrot Key Hotel &
Resort ended the period with 79.1% ADR growth leading to a RevPAR
growth of 59.4% to $368.30.
On the West Coast, The Sanctuary Beach Resort continued to
outperform, ending the period with a RevPAR of $440.48, the highest
in our resort portfolio and an improvement of 28.7% driven by 49.4%
ADR growth to $572.48. The Hotel Milo in Santa Barbara ended the
second quarter with an ADR of $424.26, a 67.6% increase resulting
in 40.4% RevPAR growth.
New York
In the second quarter, New York was the largest
EBITDA contributing market in our portfolio generating $9.4M. Our
Manhattan hotels ran 76% occupancy at an ADR of $297.82. Pricing
power remained robust in New York as ADR was 10.3% above 2019
levels in the quarter. Performance built throughout the quarter as
RevPAR and EBITDA improved 26% and 43%, respectively, from April to
June. The Hyatt Union Square, Hilton Garden Inn Tribeca, and Nu
Hotel exceeded Q2 2019 EBITDA levels and helped drive our New York
City portfolio EBITDA to reach 90% of our second quarter 2019
EBITDA.
Hotel Dispositions
On April 27, 2022 we entered into a definitive agreement to sell
seven of our non-core Urban Select Service properties outside of
New York (the “USS Portfolio”) for gross proceeds of $505 million,
or approximately $360,000 per key. The closing of this transaction
is anticipated to be completed in two tranches with the sale of six
assets to be completed in early August while one asset is expected
to close later in the year due to the timing of the CMBS loan
assumption process for this asset.
Presented below are some summary statistics for our comparable
portfolio excluding the USS Portfolio for the three months ending
June 30, 2022.
Comparable Portfolio excl USS Portfolio |
Metric |
Q2 2022 |
Q2 2019 |
Growth |
ADR |
$312 |
$267 |
17.2% |
RevPAR |
$226 |
$224 |
1.0% |
EBITDA |
$37,064 |
$33,195 |
11.7% |
GOP |
47.6% |
43.1% |
448 bps |
EBITDA |
37.0% |
32.8% |
414 bps |
Financing
The Company exited the covenant waiver period as
of June 30, 2022 and has entered into a new $500M revolving credit
agreement that will be effective concurrently with the closing of
the first tranche of the USS Portfolio sale. The Company completed
the second quarter 2022 with approximately $101 million of cash
& cash equivalents and deposits. As of June 30, 2022, the
Company’s consolidated debt had a weighted average interest rate of
4.68% and a weighted average life-to-maturity of 2.2 years.
Preferred Dividend
Distribution
Hersha’s Board of Trustees declared a cash dividend of $0.4297
per Series C Preferred Share and a cash dividend of $0.40625 per
Series D Preferred Share and Series E Preferred Share for the
second quarter ending June 30, 2022. The preferred share dividends
were paid on July 15, 2022, to holders of record as of July 1,
2022. We remain current on all dividends for each of our series of
Preferred Shares.
2022 Outlook
Due to the uncertainty surrounding the lodging industry stemming
from macro-economic conditions, and the effects of the Covid-19
Pandemic, the Company will forego providing full-year 2022
guidance.
Second Quarter 2022 Conference
Call
The Company will host a conference call to
discuss these results at 9:00 AM Eastern Time on Thursday, August
4, 2022. 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 1-844-200-6205 or
1-929-526-1599 for international participants and entering the
passcode 706439 approximately 10 minutes in advance of the call. A
replay of the call will be available from 11:00 AM Eastern Time on
Thursday, August 4, 2022 through 11:59 PM Eastern Time on Thursday,
September 4, 2022. The replay can be accessed by dialing
1-866-813-9403 or +44-204-525-0658 for international participants.
The passcode for the replay is 431719. 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 hotels in urban gateway markets and
regional resort destinations. As of August 3, 2022, the Company's
36 hotels totaling 5,802 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 and Key
Performance Metrics
Common key performance metrics utilized by the lodging industry
are occupancy, average daily rate ("ADR"), and revenue per
available room ("RevPAR"). Occupancy is calculated as the
percentage total rooms sold compared to rooms available to be sold,
while ADR measures the average rate earned per occupied room,
calculated as total room revenue divided by total rooms sold.
RevPAR is a derivative of these two metrics which shows the total
room revenue earned per room available to be sold. Management uses
these metrics in comparison to other hotels in our self-defined
competitive peer set within proximity to each of our hotel
properties.
An explanation of Funds from Operations (“FFO”), AFFO, Earnings
Before Interest, Taxes, Depreciation and Amortization (“EBITDA”),
EBITDAre, 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,” including those with regard to the
potential future impact of COVID-19, within the meaning of the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. One
of the most significant factors is the ongoing impact of the
current outbreak of COVID-19 on the United States, regional and
global economies, the broader financial markets, the Company’s
customers and employees, governmental responses thereto and the
operation changes the Company has and may implement in response
thereto. These forward-looking statements may include statements
related to, among other things: assumptions regarding the impact to
international and domestic business and leisure travel pertaining
to any pandemic or outbreak of disease, including COVID-19, the
Company’s access to capital on the terms and timing the Company
expects, the Company’s expectations regarding future interest rates
and the impact of inflation on the Company’s results of operations,
the restoration of public confidence in domestic and international
travel, permanent structural changes in demand for conference
centers by business and leisure clientele, the 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, 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, and the Company’s
ability to increase margins, including hotel EBITDA margins.
Certain statements contained in this press release, including those
that express a belief, expectation or intention, as well as those
that are not statements of historical fact, are forward-looking
statements within the meaning of the federal securities laws and as
such are based upon the Company’s current beliefs as to the outcome
and timing of future events. Forward-looking statements are
generally identifiable by use of forward-looking terminology such
as “believe,” “could,” “outlook,” “consider,” “expect,”
“anticipate,” “forecast,” “project,” “likely,” “estimate,” “plan,”
“continue,” “intend,” “should,” “may” and words of similar import.
Because these forward-looking statements relate to future events,
the Company’s plans, strategies, prospects and future financial
performance, and involve known and unknown risks that are difficult
to predict and may be outside the Company’s control, they are not
guarantees of future results and are subject to risks,
uncertainties and assumptions that could cause actual results to
differ materially from those expressed in any forward-looking
statement. 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 most recent
Annual Report on Form 10-K and subsequent Quarterly Reports on Form
10-Q 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 August 3, 2022, 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 amounts) |
|
|
|
|
|
|
|
|
June 30, 2022 |
|
December 31, 2021 |
Assets: |
|
|
|
Investment in Hotel Properties, Net of Accumulated
Depreciation |
$ |
1,335,479 |
|
|
$ |
1,665,097 |
|
Investment in Unconsolidated
Joint Ventures |
|
5,486 |
|
|
|
5,580 |
|
Cash and Cash Equivalents |
|
87,918 |
|
|
|
72,238 |
|
Escrow Deposits |
|
12,764 |
|
|
|
12,707 |
|
Hotel Accounts Receivable |
|
8,242 |
|
|
|
8,491 |
|
Due from Related Parties |
|
534 |
|
|
|
2,495 |
|
Intangible Assets, Net of Accumulated Amortization of $7,075 and
$6,944 |
|
1,204 |
|
|
|
1,335 |
|
Right of Use Assets |
|
30,152 |
|
|
|
43,442 |
|
Other Assets |
|
36,152 |
|
|
|
21,759 |
|
Hotel Assets Held for Sale |
|
318,716 |
|
|
|
— |
|
Total
Assets |
|
1,836,647 |
|
|
|
1,833,144 |
|
|
|
|
|
Liabilities and
Equity: |
|
|
|
Line of Credit |
$ |
118,684 |
|
|
$ |
118,684 |
|
Term Loan, Net of Unamortized
Deferred Financing Costs |
|
496,527 |
|
|
|
496,085 |
|
Unsecured Notes Payable, Net
of Unamortized Discounts and Unamortized Deferred Financing
Costs |
|
201,386 |
|
|
|
198,490 |
|
Mortgages Payable, Net of
Unamortized Premium and Unamortized Deferred Financing Costs |
|
229,605 |
|
|
|
304,614 |
|
Lease Liabilities |
|
47,744 |
|
|
|
53,691 |
|
Accounts Payable, Accrued
Expenses and Other Liabilities |
|
38,990 |
|
|
|
43,207 |
|
Dividends and Distributions
Payable |
|
6,044 |
|
|
|
6,044 |
|
Liabilities Related to Hotel
Assets Held for Sale |
|
79,787 |
|
|
|
— |
|
Due to Related Parties |
|
482 |
|
|
|
1,723 |
|
Total
Liabilities |
$ |
1,219,249 |
|
|
$ |
1,222,538 |
|
|
|
|
|
Redeemable
Noncontrolling Interest - Consolidated Joint Venture |
$ |
5,274 |
|
|
$ |
2,310 |
|
|
|
|
|
Equity: |
|
|
|
Shareholders' Equity: |
|
|
|
Preferred Shares: $0.01 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 andOutstanding at
June 30, 2022 and December 31, 2021, with Liquidation
Preferences of $25 Per Share |
$ |
147 |
|
|
$ |
147 |
|
Common Shares: Class A, $0.01
Par Value, 104,000,000 Shares Authorized at June 30, 2022 and
December 31, 2021; 39,514,661 and 39,325,025 Shares Issued and
Outstanding at June 30, 2022 and December 31, 2021,
respectively |
|
396 |
|
|
|
394 |
|
Common Shares: Class B, $0.01 Par Value, 1,000,000 Shares
Authorized, None Issued and Outstanding at June 30, 2022 and
December 31, 2021 |
|
— |
|
|
|
— |
|
Accumulated Other Comprehensive Income (Loss) |
|
15,629 |
|
|
|
(2,747 |
) |
Additional Paid-in
Capital |
|
1,154,367 |
|
|
|
1,155,034 |
|
Distributions in Excess of Net
Income |
|
(612,951 |
) |
|
|
(595,454 |
) |
Total Shareholders'
Equity |
|
557,588 |
|
|
|
557,374 |
|
|
|
|
|
Noncontrolling Interests -
Common Units and LTIP Units |
|
54,536 |
|
|
|
50,922 |
|
|
|
|
|
Total Equity |
|
612,124 |
|
|
|
608,296 |
|
|
|
|
|
Total Liabilities and
Equity |
$ |
1,836,647 |
|
|
$ |
1,833,144 |
|
|
|
|
|
HERSHA HOSPITALITY
TRUST |
|
|
|
|
|
|
|
Summary Results
(unaudited) |
|
|
|
|
|
|
|
(in thousands, except shares
and per share data) |
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, 2022 |
|
June 30, 2021 |
|
June 30, 2022 |
|
June 30, 2021 |
Revenues: |
|
|
|
|
|
|
|
Hotel Operating Revenues: |
|
|
|
|
|
|
|
Room |
$ |
98,242 |
|
|
$ |
56,539 |
|
|
$ |
163,374 |
|
|
$ |
95,889 |
|
Food & Beverage |
|
15,710 |
|
|
|
7,230 |
|
|
|
24,766 |
|
|
|
10,304 |
|
Other Operating Revenues |
|
9,247 |
|
|
|
6,314 |
|
|
|
16,886 |
|
|
|
11,043 |
|
Total Hotel Operating
Revenues |
|
123,199 |
|
|
|
70,083 |
|
|
|
205,026 |
|
|
|
117,236 |
|
Other Revenue |
|
91 |
|
|
|
13 |
|
|
|
132 |
|
|
|
25 |
|
Total
Revenues |
|
123,290 |
|
|
|
70,096 |
|
|
|
205,158 |
|
|
|
117,261 |
|
Operating
Expenses: |
|
|
|
|
|
|
|
Hotel Operating Expenses: |
|
|
|
|
|
|
|
Room |
|
19,447 |
|
|
|
12,350 |
|
|
|
34,037 |
|
|
|
21,548 |
|
Food & Beverage |
|
11,607 |
|
|
|
5,409 |
|
|
|
20,011 |
|
|
|
8,282 |
|
Other Operating Expenses |
|
36,039 |
|
|
|
23,551 |
|
|
|
62,395 |
|
|
|
43,660 |
|
Total Hotel Operating
Expenses |
|
67,093 |
|
|
|
41,310 |
|
|
|
116,443 |
|
|
|
73,490 |
|
Gain on Insurance Settlements |
|
(987 |
) |
|
|
(961 |
) |
|
|
(962 |
) |
|
|
(961 |
) |
Property Losses in Excess of Insurance Recoveries |
|
— |
|
|
|
250 |
|
|
|
— |
|
|
|
250 |
|
Hotel Ground Rent |
|
1,531 |
|
|
|
1,064 |
|
|
|
2,621 |
|
|
|
2,164 |
|
Real Estate and Personal Property Taxes and Property Insurance |
|
8,335 |
|
|
|
9,466 |
|
|
|
16,818 |
|
|
|
19,537 |
|
General and Administrative |
|
3,192 |
|
|
|
2,698 |
|
|
|
5,969 |
|
|
|
5,473 |
|
Share Based Compensation |
|
3,299 |
|
|
|
2,589 |
|
|
|
5,840 |
|
|
|
4,758 |
|
Terminated Transaction Costs |
|
— |
|
|
|
36 |
|
|
|
— |
|
|
|
390 |
|
Depreciation and Amortization |
|
17,003 |
|
|
|
21,014 |
|
|
|
36,279 |
|
|
|
42,816 |
|
Loss on Impairment of Assets |
|
— |
|
|
|
222 |
|
|
|
— |
|
|
|
222 |
|
Total Operating
Expenses |
|
99,466 |
|
|
|
77,688 |
|
|
|
183,008 |
|
|
|
148,139 |
|
|
|
|
|
|
|
|
|
Operating Income
(Loss) |
|
23,824 |
|
|
|
(7,592 |
) |
|
|
22,150 |
|
|
|
(30,878 |
) |
Interest Income |
|
1 |
|
|
|
4 |
|
|
|
2 |
|
|
|
5 |
|
Interest Expense |
|
(14,769 |
) |
|
|
(14,982 |
) |
|
|
(29,006 |
) |
|
|
(28,411 |
) |
Other (Expense) Income |
|
(108 |
) |
|
|
(84 |
) |
|
|
(207 |
) |
|
|
377 |
|
Gain on Disposition of Hotel
Properties |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
48,352 |
|
Loss on Debt
Extinguishment |
|
— |
|
|
|
(129 |
) |
|
|
— |
|
|
|
(3,069 |
) |
Income (Loss) before
Results from Unconsolidated Joint Venture Investments and Income
Taxes |
|
8,948 |
|
|
|
(22,783 |
) |
|
|
(7,061 |
) |
|
|
(13,624 |
) |
|
|
|
|
|
|
|
|
Income (Loss) from
Unconsolidated Joint Venture Investments |
|
357 |
|
|
|
(589 |
) |
|
|
(579 |
) |
|
|
(1,247 |
) |
|
|
|
|
|
|
|
|
Income (Loss) before
Income Taxes |
|
9,305 |
|
|
|
(23,372 |
) |
|
|
(7,640 |
) |
|
|
(14,871 |
) |
Income Tax (Expense)
Benefit |
|
(93 |
) |
|
|
(151 |
) |
|
|
(114 |
) |
|
|
438 |
|
Net Income
(Loss) |
|
9,212 |
|
|
|
(23,523 |
) |
|
|
(7,754 |
) |
|
|
(14,433 |
) |
(Income) Loss Allocated to Noncontrolling Interests |
|
|
|
|
|
|
|
Common Units |
|
(379 |
) |
|
|
2,945 |
|
|
|
2,345 |
|
|
|
2,623 |
|
Consolidated Joint Venture |
|
(691 |
) |
|
|
(1,968 |
) |
|
|
(2,964 |
) |
|
|
(1,810 |
) |
Preferred Distributions |
|
(6,043 |
) |
|
|
(6,044 |
) |
|
|
(12,087 |
) |
|
|
(12,087 |
) |
|
|
|
|
|
|
|
|
Net Income(Loss)
Applicable to Common Shareholders |
$ |
2,099 |
|
|
$ |
(28,590 |
) |
|
$ |
(20,460 |
) |
|
$ |
(25,707 |
) |
|
|
|
|
|
|
|
|
Earnings per
Share: |
|
|
|
|
|
|
|
BASIC |
|
|
|
|
|
|
|
Net Income (Loss)
Applicable to Common Shareholders |
$ |
0.05 |
|
|
$ |
(0.73 |
) |
|
$ |
(0.52 |
) |
|
$ |
(0.66 |
) |
DILUTED |
|
|
|
|
|
|
|
Net Income (Loss)
Applicable to Common Shareholders |
$ |
0.05 |
|
|
$ |
(0.73 |
) |
|
$ |
(0.52 |
) |
|
$ |
(0.66 |
) |
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding: |
|
|
|
|
|
|
|
Basic |
|
39,277,269 |
|
|
|
39,097,820 |
|
|
|
39,254,536 |
|
|
|
39,034,707 |
|
Diluted |
|
40,453,785 |
|
|
|
39,097,820 |
|
|
|
39,254,536 |
|
|
|
39,034,707 |
|
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 December 2018 Financial Standards White
Paper 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 depreciation and amortization related to real
estate, gains and losses from the sale of certain real estate
assets, gains and losses from change in control, and impairment
write-downs of certain real estate assets and investments in
entities when the impairment is directly attributable to decreases
in the value of depreciable real estate held by an entity. 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:
- deducting or adding back income tax
benefit or expense;
- adding back non-cash share-based
compensation expense;
- adding back acquisition and
terminated transaction expenses;
- adding back amortization of
discounts, premiums, and deferred financing costs;
- adding back write-offs of deferred
financing costs on debt extinguishment;
- adding back straight-line
amortization of ground lease expense; and
- adding back interest expense that has been paid-in-kind.
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. 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 |
|
Six Months Ended |
|
|
June 30, 2022 |
|
June 30, 2021 |
|
June 30, 2022 |
|
June 30, 2021 |
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shares |
|
$ |
2,099 |
|
|
$ |
(28,590 |
) |
|
$ |
(20,460 |
) |
|
$ |
(25,707 |
) |
Income (loss) allocated to noncontrolling interest |
|
|
1,070 |
|
|
|
(977 |
) |
|
|
619 |
|
|
|
(813 |
) |
(Income) loss from unconsolidated joint ventures |
|
|
(357 |
) |
|
|
589 |
|
|
|
579 |
|
|
|
1,247 |
|
Gain on disposition of hotel properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(48,352 |
) |
Loss from impairment of depreciable assets |
|
|
— |
|
|
|
222 |
|
|
|
— |
|
|
|
222 |
|
Depreciation and
amortization |
|
|
17,003 |
|
|
|
21,014 |
|
|
|
36,279 |
|
|
|
42,816 |
|
Funds from
consolidated hotel operations applicable to common shares and
Partnership units |
|
|
19,815 |
|
|
|
(7,742 |
) |
|
|
17,017 |
|
|
|
(30,587 |
) |
|
|
|
|
|
|
|
|
|
Income (loss) from
unconsolidated joint venture investments |
|
|
357 |
|
|
|
(589 |
) |
|
|
(579 |
) |
|
|
(1,247 |
) |
Unrecognized pro rata interest in loss of unconsolidated joint
venture |
|
|
(79 |
) |
|
|
(318 |
) |
|
|
(298 |
) |
|
|
(814 |
) |
Depreciation and amortization of difference between purchase price
and historical cost |
|
|
21 |
|
|
|
21 |
|
|
|
42 |
|
|
|
42 |
|
Interest in depreciation and amortization of unconsolidated joint
ventures |
|
|
625 |
|
|
|
651 |
|
|
|
1,252 |
|
|
|
1,282 |
|
Funds from
unconsolidated joint venture operations applicable to common shares
and Partnership units |
|
|
924 |
|
|
|
(235 |
) |
|
|
417 |
|
|
|
(737 |
) |
|
|
|
|
|
|
|
|
|
Funds from Operations
applicable to common shares and Partnership units |
|
|
20,739 |
|
|
|
(7,977 |
) |
|
|
17,434 |
|
|
|
(31,324 |
) |
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
|
93 |
|
|
|
151 |
|
|
|
114 |
|
|
|
(438 |
) |
Non-cash share based compensation expense |
|
|
3,299 |
|
|
|
2,589 |
|
|
|
5,840 |
|
|
|
4,758 |
|
Straight-line amortization of
lease expense |
|
|
118 |
|
|
|
128 |
|
|
|
298 |
|
|
|
257 |
|
Terminated transaction
costs |
|
|
— |
|
|
|
36 |
|
|
|
— |
|
|
|
390 |
|
Amortization of discounts,
premiums, and deferred financing costs |
|
|
1,496 |
|
|
|
1,227 |
|
|
|
2,944 |
|
|
|
2,504 |
|
Amortization of liability and
reclassification of other comprehensive income for amended interest
rate swaps |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
424 |
|
Interest expense
paid-in-kind |
|
|
— |
|
|
|
1,801 |
|
|
|
1,855 |
|
|
|
2,534 |
|
Deferred financing costs and
debt premium written off in debt extinguishment |
|
|
— |
|
|
|
129 |
|
|
|
— |
|
|
|
3,069 |
|
Loss on remediation of damage,
excluding impairment of depreciable assets |
|
|
— |
|
|
|
250 |
|
|
|
— |
|
|
|
250 |
|
|
|
|
|
|
|
|
|
|
Adjusted Funds from
Operations |
|
$ |
25,745 |
|
|
$ |
(1,666 |
) |
|
$ |
28,485 |
|
|
$ |
(17,576 |
) |
|
|
|
|
|
|
|
|
|
AFFO per Diluted Weighted
Average Common Shares and Partnership Units Outstanding |
|
$ |
0.56 |
|
|
$ |
(0.04 |
) |
|
$ |
0.62 |
|
|
$ |
(0.39 |
) |
|
|
|
|
|
|
|
|
|
Diluted Weighted Average
Common Shares and Partnership Units Outstanding |
|
|
45,716,098 |
|
|
|
44,724,968 |
|
|
|
45,629,745 |
|
|
|
44,525,168 |
|
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”) a measure calculated by adding gains from the
disposition of hotel operations, 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 to calculate Adjusted EBITDA.
HERSHA HOSPITALITY
TRUST |
|
|
|
|
|
|
|
|
EBITDAre and Adjusted
EBITDA |
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, 2022 |
|
June 30, 2021 |
|
June 30, 2022 |
|
June 30, 2021 |
Net income (loss) |
|
$ |
9,212 |
|
|
$ |
(23,523 |
) |
|
$ |
(7,754 |
) |
|
$ |
(14,433 |
) |
(Income) loss from unconsolidated joint ventures |
|
|
(357 |
) |
|
|
589 |
|
|
|
579 |
|
|
|
1,247 |
|
Interest expense |
|
|
14,769 |
|
|
|
14,982 |
|
|
|
29,006 |
|
|
|
28,411 |
|
Non-operating interest
income |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
Income tax expense (benefit) |
|
|
93 |
|
|
|
151 |
|
|
|
114 |
|
|
|
(438 |
) |
Depreciation and
amortization |
|
|
17,003 |
|
|
|
21,014 |
|
|
|
36,279 |
|
|
|
42,816 |
|
EBITDA from
consolidated hotel operations |
|
|
40,719 |
|
|
|
13,209 |
|
|
|
58,222 |
|
|
|
57,598 |
|
Gain on disposition of hotel
properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(48,352 |
) |
Loss from impairment of
depreciable assets |
|
|
— |
|
|
|
222 |
|
|
|
— |
|
|
|
222 |
|
EBITDAre from
consolidated hotel operations |
|
|
40,719 |
|
|
|
13,431 |
|
|
|
58,222 |
|
|
|
9,468 |
|
Income (loss) from
unconsolidated joint venture investments |
|
|
357 |
|
|
|
(589 |
) |
|
|
(579 |
) |
|
|
(1,247 |
) |
Unrecognized pro rata interest
in loss of unconsolidated joint venture |
|
|
(79 |
) |
|
|
(318 |
) |
|
|
(298 |
) |
|
|
(814 |
) |
Depreciation and amortization
of difference between purchase price and historical cost |
|
|
21 |
|
|
|
21 |
|
|
|
42 |
|
|
|
42 |
|
Adjustment for interest in
interest expense, depreciation and amortization of unconsolidated
joint ventures |
|
|
1,011 |
|
|
|
970 |
|
|
|
1,973 |
|
|
|
1,908 |
|
EBITDAre from
unconsolidated joint venture operations |
|
|
1,310 |
|
|
|
84 |
|
|
|
1,138 |
|
|
|
(111 |
) |
EBITDAre |
|
|
42,029 |
|
|
|
13,515 |
|
|
|
59,360 |
|
|
|
9,357 |
|
Non-cash share based
compensation expense |
|
|
3,299 |
|
|
|
2,589 |
|
|
|
5,840 |
|
|
|
4,758 |
|
Straight-line amortization of
lease expense |
|
|
118 |
|
|
|
128 |
|
|
|
298 |
|
|
|
257 |
|
Terminated transaction
costs |
|
|
— |
|
|
|
36 |
|
|
|
— |
|
|
|
390 |
|
Loss on reclassification of other comprehensive income for interest
rate swaps |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
324 |
|
Deferred financing costs and debt premium written off in debt
extinguishment |
|
|
— |
|
|
|
129 |
|
|
|
— |
|
|
|
3,069 |
|
Loss on remediation of damage,
excluding impairment of depreciable assets |
|
|
— |
|
|
|
250 |
|
|
|
— |
|
|
|
250 |
|
Adjusted
EBITDA |
|
$ |
45,446 |
|
|
$ |
16,647 |
|
|
$ |
65,498 |
|
|
$ |
18,405 |
|
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 and EBITDAre to be
meaningful measures of a REIT's performance because they are widely
followed by industry analysts, lenders and investors and that they
should be considered along with, but not as an alternative to, GAAP
net income (loss) as a measure of the Company's operating
performance.
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 the 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 |
|
Six Months Ended |
|
|
June 30, 2022 |
|
June 30, 2021 |
|
June 30, 2022 |
|
June 30, 2021 |
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
23,824 |
|
|
$ |
(7,592 |
) |
|
$ |
22,150 |
|
|
$ |
(30,878 |
) |
Other revenue |
|
|
(91 |
) |
|
|
(13 |
) |
|
|
(132 |
) |
|
|
(25 |
) |
Gain on insurance settlement |
|
|
(987 |
) |
|
|
(961 |
) |
|
|
(962 |
) |
|
|
(961 |
) |
Loss from impairment of depreciable assets and remediation |
|
|
— |
|
|
|
472 |
|
|
|
— |
|
|
|
472 |
|
Depreciation and amortization |
|
|
17,003 |
|
|
|
21,014 |
|
|
|
36,279 |
|
|
|
42,816 |
|
General and administrative |
|
|
3,192 |
|
|
|
2,698 |
|
|
|
5,969 |
|
|
|
5,473 |
|
Share based compensation |
|
|
3,299 |
|
|
|
2,589 |
|
|
|
5,840 |
|
|
|
4,758 |
|
Terminated transaction costs |
|
|
— |
|
|
|
36 |
|
|
|
— |
|
|
|
390 |
|
Straight-line amortization of ground lease expense |
|
|
118 |
|
|
|
128 |
|
|
|
298 |
|
|
|
257 |
|
Other |
|
|
85 |
|
|
|
(91 |
) |
|
|
63 |
|
|
|
(117 |
) |
Hotel
EBITDA |
|
$ |
46,443 |
|
|
$ |
18,280 |
|
|
$ |
69,505 |
|
|
$ |
22,185 |
|
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 “News & Presentations” page of the Company’s
website, www.hersha.com.
Contact: Ashish Parikh, Chief Financial
OfficerPhone: 215-238-1046
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