Hersha Hospitality Trust Announces Second Quarter 2013 Results
Hersha Hospitality Trust Announces Second Quarter 2013 Results
- Consolidated Hotel RevPAR Improved 3.6% -
- Same Store Consolidated Portfolio-Wide Occupancy of 82.2% -
- Same Store Consolidated EBITDA Margins Expand to 42.0% -
PHILADELPHIA--(BUSINESS WIRE)-- Hersha Hospitality Trust (NYSE: HT, the "Company"), owner of upscale hotels in urban gateway markets, today announced results for the second quarter ended June 30, 2013.
Second Quarter 2013 Financial Results
Adjusted Funds from Operations ("AFFO") in the second quarter increased by $2.0 million to $28.7 million, compared to $26.7 million for the second quarter of 2012. AFFO per diluted common share and unit of limited partnership interest in Hersha Hospitality Limited Partnership ("OP Unit") was $0.14, in-line with the same quarter in 2012, due to a higher share count in 2013. The Company's weighted average diluted common shares and OP Units outstanding were approximately 208.1 million in the second quarter 2013, up from approximately 196.3 million in the comparable quarter in 2012.
Net income applicable to common shareholders was $14.3 million for the second quarter ended June 30, 2013, compared to net income applicable to common shareholders of $13.1 million for the comparable quarter in 2012.
"Our portfolio continues to post solid results, with strong occupancy, particularly in New York, and high absolute margins. Year-to-date RevPAR growth of 8.0% within our same store consolidated portfolio remains industry leading. Our year-over-year quarterly RevPAR growth was somewhat muted, however, as the Company faced tough comparables for transient travel in April as a result of the Easter holiday shift, a softer convention calendar in Boston and Philadelphia, as well as the impact from a slowdown in government travel due to sequestration in our Washington, D.C. metro market." commented Mr. Jay H. Shah, the Company's Chief Executive Officer.
Mr. Shah continued, "We continue to believe that we are extremely well-positioned to be outsized beneficiaries of the continuing economic recovery currently underway. We believe that Hersha's young, urban focused, and newly refreshed portfolio will benefit from increased transient travel which is forecasted to be the U.S. lodging industry's sustained driver of RevPAR growth in the near-term. The Company will also benefit from its continued expansion in key gateway markets such as Miami and San Diego and the disposition of non-core assets. Moving forward, the Company will continue to focus on disposition opportunities, both to unlock value from capital recycling within our portfolio and to continue to strategically transition Hersha as the leading urban focused hospitality REIT in the sector."
Second Quarter 2013 Operating Results
For the quarter ended June 30, 2013, revenue per available room ("RevPAR") at the Company's consolidated hotels, 57 hotels as of June 30, 2013 compared to 53 hotels as of June 30, 2012, was up 3.6% to $142.13 compared to $137.25 in the prior year period. The Company's average daily rate ("ADR") at its consolidated hotels increased by 3.4% to $174.42, while occupancy at its consolidated hotels increased by 11 basis points to 81.5%. Hotel EBITDA at the Company's consolidated hotels grew approximately 9.9%, or $3.9 million, to $43.3 million for the quarter ended June 30, 2013 compared to the same period in 2012. Hotel EBITDA margins were 40.9% in the second quarter 2013 compared to 41.5% in the same quarter 2012. In addition to a different mix of hotels within the consolidated portfolio, EBITDA margins were impacted by startup and pre-opening expenses associated with the Hyatt Union Square, increased property taxes and insurance costs.
On a same-store basis (51 hotels), RevPAR at the Company's consolidated hotels for the quarter ended June 30, 2013 was up 3.7% to $142.24 compared to $137.19 in the prior year period. ADR at the Company's same-store consolidated hotels increased by 2.4% to $173.02, while occupancy at same-store consolidated hotels increased by 103 basis points to 82.2%.
Hotel EBITDA margins at the Company's same-store consolidated hotels increased by 30 basis points to 42.0% in the second quarter 2013, and were also impacted by increased property taxes and insurance costs, which collectively reduced margins by approximately 55 basis points.
The Company's top performing markets during the quarter based on RevPAR growth were the California-Arizona, the Connecticut-Rhode Island and the NY-NJ Metro markets with RevPAR growth of 11.4%, 9.8% and 8.7%, respectively.
New York City and Manhattan
The New York City hotel portfolio, which includes the five boroughs, consisted of 16 hotels as of June 30, 2013. For the second quarter 2013, the Company's same-store New York City hotel portfolio (14 hotels) recorded a 5.8% increase in RevPAR to $208.40 as ADR increased 4.7% to $224.72, while occupancy increased 91 basis points to 92.7%.
The Manhattan hotel portfolio consisted of 13 hotels as of June 30, 2013. For the second quarter of 2013, the Company's same-store Manhattan hotel portfolio (11 hotels) recorded a 2.9% increase in RevPAR to $219.02, as ADR increased 2.1% to $234.77, and occupancy increased 72 basis points to 93.3%.
As of June 30, 2013, the Company maintained significant financial flexibility with approximately $29.3 million of cash and cash equivalents and $183.8 million available on its $250 million senior unsecured revolving line of credit As of June 30, 2013, 92.8% of the Company's consolidated debt is fixed rate debt or effectively fixed through interest rate swaps and caps. The Company's total consolidated debt has a weighted average interest rate of approximately 4.85% and a weighted average life-to-maturity of approximately 4.0 years.
In April 2013, the Company received the remaining balance of principal and accrued interest on the development loan for the Hyatt 48 Lex in the amount of $2.0 million. With this transaction, the Company no longer possesses any development loan exposure.
In addition, in April 2013, the Company modified its $30 million loan for the Courtyard by Marriott Los Angeles, CA. This modification included the option to advance an additional $5 million in principal, bears interest at a variable rate of one month LIBOR plus 3.00% and now matures in September 2017. Furthermore, during the second quarter, the Company repaid $7.9 million on its outstanding mortgage at the Residence Inn, Tysons Corner, VA.
During the second quarter, the Company completed two acquisitions of high quality hotels attractively located in top gateway markets. In May 2013, the Company closed on the 245-room Courtyard San Diego Downtown for a total purchase price of $71.0 million. The hotel, which recently completed a $6.4 million renovation of all guest rooms, is uniquely situated on the north side of the Gaslamp Quarter within close proximity to the city's Central Business District, which encompasses approximately 11 million square feet of office space. Additionally, the San Diego market is a premier convention location, with the expansion of the San Diego Convention center in 2016 expected to further increase demand.
In June 2013, the Company acquired the 140-room Residence Inn Coconut Grove in Miami for $21.8 million. The Residence Inn Coconut Grove is located in a highly desirable commercial and residential neighborhood in Miami in close proximity to the Downtown Brickell office market and the University of Miami in Coral Cables.
The Company continued its efforts to recycle capital from its non-core portfolio into core, urban transient markets. The Company sold the Comfort Inn in Harrisburg, PA for $3.7 million in June 2013 and recognized a gain of $1 million from this transaction. Additionally, the Company entered into a purchase and sale agreement to sell the Holiday Inn Express in Camp Springs, PA in May 2013 for an aggregate sale price of $8.5 million. A non-cash impairment charge of $3.7 million was recorded as a result of entering into the purchase and sale agreement. Results of operations for the Comfort Inn in Harrisburg, PA and the Holiday Inn Express in Camp Springs, MD have been reclassified to discontinued operations for the three-month and the six-month periods ended June 30, 2013 and 2012. The sale of this hotel is subject to customary closing conditions, including the completion of the buyer's due diligence. Accordingly, no assurance can be given that this sale will close on the terms summarized above or at all.
Outlook for 2013
The Company is maintaining its range of operating expectations for 2013. Based on management's current outlook, the Company is re-issuing the following previously announced operating expectations for 2013:
|Total consolidated RevPAR growth:||6.0% to 7.5%|
|Total consolidated Hotel EBITDA margins:||Improvement of 25 basis points to 50 basis points|
|Same-store consolidated RevPAR growth:||5.5% to 7.0%|
|Same-store consolidated Hotel EBITDA margin improvement:||Improvement of 25 basis points to 75 basis points|
For the second quarter 2013, the Company paid a dividend of $0.50 per Series B Preferred Share and $0.4297 per Series C Preferred Share.
The Company also paid a dividend of $0.06 per Common Share and per OP unit for the second quarter ended June 30, 2013.
Second Quarter 2013 Conference Call
Hersha will host a conference call to discuss the Company's financial results at 9:00 AM Eastern time on Wednesday July 31, 2013. A live webcast of the conference call will be available online on the Company's website at www.hersha.com. The conference call can be accessed by dialing (888) 510-1786 or (719) 457-2627 for international participants. A replay of the call will be available from 12:00 p.m. Eastern Time on Wednesday, July 31, 2013, through midnight Eastern Time on August 14, 2013. The replay can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international participants. The passcode for the call and the replay is 2575296. A replay of the webcast will be available on the Company's website for a limited time.
About Hersha Hospitality
Hersha Hospitality Trust (HT) is a self-advised real estate investment trust, which owns interests in 65 hotels totaling 9,616 rooms, primarily along the Northeast Corridor from Boston to Washington DC. The Company also owns hotels in Southern California, Northern California, Arizona and Miami, Florida. 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 www.hersha.com.
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 FFO, AFFO, EBITDA and Adjusted EBITDA to net income or loss, the most directly comparable U.S. GAAP measures, is included at the end of this release.
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 may include statements related to the Company's ability to outperform, the ongoing recovery 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 completion of acquisitions under contract, the Company's ability to identify and complete the acquisition of hotel properties in new markets, the Company's ability to enter into contracts for and complete the disposition of non-core assets, the Company's ability to complete the hotel redevelopment projects, the Company's ability to increase margins, including Hotel EBITDA margins, and the Company's operating expectations for the full 2013 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, 2012 filed by the Company with the Securities and Exchange Commission and other documents filed by the Company with the Securities and Exchange Commission.
|HERSHA HOSPITALITY TRUST|
|Balance Sheet (unaudited)|
|(in thousands, except shares and per share data)|
Investment in Hotel Properties, net of Accumulated Depreciation, (including consolidation of variable interest entity assets of $86,515 and $86,657)
|Investment in Unconsolidated Joint Ventures||14,365||16,007|
|Development Loans Receivable||-||28,425|
|Cash and Cash Equivalents||29,294||69,059|
|Hotel Accounts Receivable, net of allowance for doubtful accounts of $19 and $365||13,974||11,538|
|Deferred Financing Costs, net of Accumulated Amortization of $5,945 and $4,841||9,098||8,695|
|Due from Related Parties||5,776||8,488|
|Intangible Assets, net of Accumulated Amortization of $3,119 and $2,413||8,251||8,698|
|Deposits on Hotel Acquisitions||16,486||37,750|
|Hotel Assets Held for Sale||8,193||-|
|Liabilities and Equity:|
|Line of Credit||$||66,200||$||-|
|Unsecured Term Loan||150,000||100,000|
|Unsecured Notes Payable||51,548||51,548|
Mortgages Payable, including net Unamortized Premium (including consolidation of variable interest entity debt of $56,488 and $57,256)
|Accounts Payable, Accrued Expenses and Other Liabilities||34,641||33,838|
|Dividends and Distributions Payable||15,949||15,621|
|Due to Related Parties||6,139||4,403|
|Redeemable Noncontrolling Interests - Common Units||$||-||$||15,321|
Preferred Shares: $.01 Par Value, 29,000,000 shares Authorized, 7,600,000 Series B and C Shares Issued and Outstanding at June 30, 2013 and 7,000,000 Series A and B Shares Issued and Outstanding at December 31, 2012, with Liquidation Preferences of $25 per Share
Common Shares: Class A, $.01 Par Value, 300,000,000 Shares Authorized, 202,667,646 and 198,672,356 Shares Issued and Outstanding at June 30, 2013 and December 31, 2012, respectively
Common Shares: Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding
|Accumulated Other Comprehensive Income (Loss)||577||(1,786||)|
|Additional Paid-in Capital||1,196,914||1,178,292|
|Distributions in Excess of Net Income||(370,709||)||(348,734||)|
|Total Shareholders' Equity||828,885||829,828|
|Noncontrolling Interests - Common Units||29,167||15,484|
Noncontrolling Interests - Consolidated Variable Interest Entity
|Total Noncontrolling Interests||29,213||15,960|
|Total Liabilities and Equity||$||1,832,255||$||1,707,679|
|HERSHA HOSPITALITY TRUST|
|Summary Results (unaudited)|
|(in thousands, except shares and per share data)|
|Three Months Ended||Six Months Ended|
|June 30, 2013||June 30, 2012||June 30, 2013||June 30, 2012|
|Hotel Operating Revenues||$||106,092||$||94,785||$||182,095||$||158,855|
|Interest Income from Development Loans||12||518||158||1,139|
|Hotel Operating Expenses||55,765||50,130||103,442||89,849|
|Gain on Insurance Settlements||-||-||(403||)||-|
|Hotel Ground Rent||266||214||494||408|
|Real Estate and Personal Property Taxes and Property Insurance||6,425||5,090||13,023||10,122|
|General and Administrative||3,260||3,074||5,868||6,109|
|Stock Based Compensation||2,439||2,266||4,827||4,399|
|Acquisition and Terminated Transaction Costs||773||124||776||1,082|
|Depreciation and Amortization||16,083||13,924||30,957||27,155|
|Gain on Hotel Acquisitions||(12,107||)||-||(12,107||)||-|
|Total Operating Expenses||72,904||74,822||146,877||139,124|
|Loss on Debt Extinguishment||284||240||545||246|
Income (Loss) before Income (Loss) from Unconsolidated Joint Ventures Investments, Income Taxes and Discontinued Operations
|Unconsolidated Joint Ventures|
|Income (Loss) from Unconsolidated Joint Ventures||148||414||(248||
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