Hersha Hospitality Announces Fourth Quarter Results
Hersha Hospitality Announces Fourth Quarter Results
- Consolidated Hotel RevPAR Improved 12.8% -
- Consolidated Average Daily Rate Increased 7.8% -
- Same Store EBITDA Margins of 43.6% -
- Same Store EBITDA Margin growth of 360 Basis Points -
Fourth Quarter 2012 Financial Results
Net income applicable to common shareholders improved by $6.1 million to $3.3 million for the fourth quarter ended December 31, 2012, compared to a net loss of ($2.8) million for the comparable quarter of 2011.
Adjusted Funds from Operations ("AFFO") in the fourth quarter increased by $6.9 million to $23.4 million, compared to $16.5 million for the fourth quarter of 2011. AFFO per diluted common share and unit of limited partnership interest in Hersha Hospitality Limited Partnership ("OP Unit") increased 22.2% to $0.11 compared to $0.09 in same quarter in 2011. The Company's weighted average diluted common shares and OP Units outstanding were approximately 206.7 million in the fourth quarter of 2012, up from approximately 180.3 million in the comparable quarter of 2011.
"Based upon our forward booking pace we anticipated a strong fourth quarter and were pleased that our results exceeded even our internal expectations, despite the initial disruption related to the impact of Hurricane Sandy in the Northeast," commented Mr. Jay H. Shah, the Company's Chief Executive Officer. "After a difficult third quarter, we posted strong results in our NYC Urban and Manhattan portfolio during the fourth quarter. Our NYC Urban and Manhattan portfolio outperformed the market's RevPAR growth by approximately 620 and 520 basis points, respectively. Our performance clearly demonstrates the benefits of our young business transient focused portfolio that continues to capture a disproportionate share of corporate and leisure demand. Furthermore, with market-leading EBITDA margins of 41% across our entire portfolio, and 53% in Manhattan, we believe that our portfolio has an unparalleled ability to convert this strong market share and revenue growth into cash flow."
Mr. Shah continued, "Over the past few years we have made significant investments to enhance our portfolio, in terms of acquisitions, renovations and developments. We also recycled capital through the divestiture of a portfolio that did not have the same growth profile as our urban gateway focused portfolio. We invested in the early stages of the cycle, and are now realizing the benefits as the cycle is progressing. Our performance in the fourth quarter and year to date in 2013 from a margin perspective suggests that there is still more growth to realize. With most of our significant renovation activity completed and new assets scheduled to be delivered in 2013, we have a significant amount of embedded internal growth that should continue to yield meaningful EBITDA and cash flow in the coming years."
Fourth Quarter 2012 Operating Results
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.
For the quarter ended December 31, 2012, revenue per available room ("RevPAR") for the Company's consolidated hotels, 56 hotels at December 31, 2012 compared to 52 hotels as of December 31, 2011, was up 12.8% to $131.72 compared to $116.79 in the prior year period. The Company's average daily rate (ADR) for its consolidated hotels increased by 7.8% to $175.17, and occupancy for its consolidated hotels increased by 331 basis points to 75.2%.
Hotel EBITDA for the Company's consolidated hotels grew approximately 34.9%, or $10.4 million, to $40.2 million for the quarter ended December 31, 2012 compared to the same period in 2011. Hotel EBITDA margins increased 150 basis points to 40.9% in the fourth quarter of 2012 compared to 39.4% in the same quarter of 2011.
On a same-store basis (51 hotels), RevPAR for the Company's consolidated hotels for the quarter ended December 31, 2012 was up 10.9% to $131.35 compared to $118.42 in the prior year period. ADR for the Company's same-store consolidated hotels increased by 6.4% to $173.66, while occupancy for its same-store consolidated hotels increased by 310 basis points to 75.6%.
Hotel EBITDA for the Company's same-store consolidated hotels for the quarter ended December 31, 2012 increased approximately 21.4% or $6.6 million, to $37.5 million compared to the quarter ended December 31, 2011. Hotel EBITDA margins for the Company's same-store consolidated hotels increased by 360 basis points to 43.6% in the fourth quarter of 2012 compared to 40.0% in the fourth quarter of 2011.
The Company's top performing markets during the quarter, excluding New York City and Manhattan, were the NY-NJ Metro, the California-Arizona and the Boston markets with RevPAR growth of 28.1%, 21.6% and 7.7%, respectively.
New York City and Manhattan
The New York City hotel portfolio, which includes the five boroughs, consisted of 15 hotels as of December 31, 2012. For the fourth quarter of 2012, the Company's same-store New York City hotel portfolio (14 hotels) recorded a 14.6% increase in RevPAR to $230.85, as ADR increased 11.3% to $248.54 and occupancy increased 262 basis points to 92.9%. Hotel EBITDA margins increased 370 basis points to 51.5%.
The Manhattan hotel portfolio consisted of 12 hotels as of December 31, 2012. For the fourth quarter of 2012, the Company's same-store Manhattan hotel portfolio (11 hotels) recorded an 11.5% increase in RevPAR to $242.38 as occupancy increased 155 basis points to 93.0% and ADR increased 9.7% to $260.51. Hotel EBITDA margins increased 250 basis points to 53.0%, the highest Manhattan portfolio EBITDA margins in the Company's history.
In addition to strong business transient demand, the Company's New York City hotel performance, primarily the Company's JFK Airport hotels, benefited from the displacement caused by Hurricane Sandy in November and December. This displacement offset some of the disruption caused by the storm in late October as well as the approximately $0.7 million of lost business caused by the hurricane-related closure of the Holiday Inn Express - Water Street, located in Lower Manhattan. This asset is currently under renovation and is expected to reopen late in the second quarter of 2013.
As of December 31, 2012, the Company maintained significant financial flexibility with approximately $69.1 million of cash and cash equivalents and no borrowings on its $250.0 million senior unsecured revolving line of credit. The Company had $100 million drawn on its unsecured term loan facility as of December 31, 2012. In January 2013, the Company drew an additional $50 million on its unsecured term loan facility to refinance an existing mortgage on one of its assets. As of December 31, 2012, 100% of the Company's consolidated debt is fixed rate debt or effectively fixed through interest rate swaps and caps and has a weighted average interest rate of approximately 5.26%. The weighted average life to maturity of total consolidated debt is approximately 4.6 years.
In October 2012, the Company entered into a purchase and sale agreement to acquire the 205 room Hilton Garden Inn on 52nd Street in Midtown East, Manhattan for total consideration of $74.0 million, or approximately $361,000 per key. The transaction is expected to close shortly after the developer completes construction, anticipated in the fourth quarter of 2013.
In February 2013, the Company sold its 66.7% interest in a 92-room Courtyard by Marriott located in Warwick, Rhode Island to its joint venture partner in a transaction valuing the property at $7.15 million. The sale of the Company's interest in this property enhances the quality of the portfolio and helps further simplify the Company's capital structure while reducing outstanding debt.
Outlook for 2013
The Company is introducing its operating expectations for 2013 for its portfolio as the Company continues to experience strong year over year trends. Based on management's current outlook, the Company is issuing the following operating expectations for 2013 as follows:
|Total consolidated RevPAR growth:||5.5% to 7.5%|
|Total consolidated portfolio Hotel EBITDA margins:||Improvement of 25 basis points to 50 basis points|
|Same-store consolidated RevPAR growth:||5.0% to 7.0%|
|Same-store consolidated Hotel EBITDA margin improvement:||Improvement of 25 basis points to 75 basis points|
For the fourth quarter of 2012, the Company paid dividends of $0.06 per common share and OP Unit and $0.50 per Series A and Series B preferred share.
Fourth Quarter 2012 Conference Call
The Company will host a conference call to discuss its financial results at 11:00 AM Eastern time on Thursday, February 21, 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) 359-3624 or (719) 325-2144 for international participants. A replay of the call will be available from 2:00 p.m. Eastern Time on Thursday February 21, 2013, through midnight Eastern Time on March 7, 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 9461416. A replay of the webcast will be available on the Company's website for a limited time.
About Hersha Hospitality
Hersha Hospitality Trust is a self-advised real estate investment trust, which owns 63 hotels in major urban gateway markets including New York City, Washington DC, Boston, Philadelphia, Los Angeles and Miami totaling 9,129 rooms. HT follows a highly selective investment approach and leverages operational advantage through rigorous and sustainable asset management practices. For further information on the Company visit our website at 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. 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 to be filed by the Company with the Securities and Exchange Commission on or about February 22, 2013 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)|
|December 31, 2012||December 31, 2011|
Investment in Hotel Properties, net of Accumulated Depreciation, (including consolidation of variable interest entity assets of $86,657 and $0)
|Investment in Unconsolidated Joint Ventures||16,007||38,839|
|Development Loans Receivable||28,425||35,747|
|Cash and Cash Equivalents||69,059||24,568|
|Hotel Accounts Receivable, net of allowance for doubtful accounts of $365 and $495||11,538||11,353|
|Deferred Financing Costs, net of Accumulated Amortization of $4,841 and $9,138||8,695||9,023|
|Due from Related Parties||8,488||6,189|
|Intangible Assets, net of Accumulated Amortization of $2,413 and $1,357||8,698||8,013|
|Deposits on Hotel Acquisitions||37,750||19,500|
|Hotel Assets Held for Sale||-||93,829|
|Liabilities and Equity:|
|Line of Credit||$||-||$||51,000|
|Unsecured Term Loan||100,000||-|
Mortgages and Notes Payable, including net Unamortized Premium (including consolidation of variable interest entity debt of $57,256 and $0)
|Accounts Payable, Accrued Expenses and Other Liabilities||33,838||31,140|
|Dividends and Distributions Payable||15,621||13,908|
|Due to Related Parties||4,403||2,932|
|Liabilities Related to Assets Held for Sale||-||61,758|
|Redeemable Noncontrolling Interests - Common Units||$||15,321||$||14,955|
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 December 31, 2012 and December 31, 2011
Preferred Shares: 8% Series B, $.01 Par Value, 4,600,000 shares authorized, 4,600,000 Shares Issued and Outstanding (Aggregate Liquidation Preference $115,000) at December 31, 2012 and none issued and outstanding at December 31, 2011
Common Shares: Class A, $.01 Par Value, 300,000,000 Shares Authorized at December 31, 2012 and December 31, 2011, 198,672,356 and 169,969,973 Shares Issued and Outstanding at December 31, 2012 and December 31, 2011, respectively
Common Shares: Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding
|Accumulated Other Comprehensive Loss||(1,786||)||(1,151||)|
|Additional Paid-in Capital||1,178,292||1,041,027|
|Distributions in Excess of Net Income||(348,734||)||(310,972||)|
|Total Shareholders' Equity||829,828||730,673|
|Noncontrolling Interests - Common Units||15,484||16,862|
|Noncontrolling Interests - Consolidated Joint Ventures||-||307|
|Noncontrolling Interests - Consolidated Variable Interest Entity||476||-|
|Total Noncontrolling Interests||15,960||17,169|
|Total Liabilities and Equity||$||1,707,679||$||1,630,909|
|HERSHA HOSPITALITY TRUST|
|Summary Results (unaudited)|
|(in thousands, except shares and per share data)|
|Three Months Ended||Year Ended|
|December 31, 2012||December 31, 2011||December 31, 2012||December 31, 2011|
|Hotel Operating Revenues||$||98,458||$||75,678||$||356,005||$||282,534|
|Interest Income from Development Loans||396||617||1,998||3,427|
|Hotel Operating Expenses||51,525||40,805||196,119||153,227|
|Hotel Ground Rent||213||184||835||877|
Real Estate and Personal Property Taxes and Property Insurance
|General and Administrative||4,858||4,451||13,749||10,942|
|Stock Based Compensation||3,356||2,825||9,678||7,590|
|Acquisition and Terminated Transaction Costs||20||479||1,187||2,742|
|Depreciation and Amortization||15,060||13,193||57,364||50,780|
|Total Operating Expenses||81,476||66,796||301,459||245,220|
|Loss on Debt Extinguishment||3,075||68||3,324||123|
Income (Loss) before (Loss) Income from Unconsolidated Joint Venture Investments, Income Taxes and Discontinued Operations
|Unconsolidated Joint Ventures|
(Loss) Income from Unconsolidated Joint Ventures
|Impairment of Investment in Unconsolidated Joint Venture||-||-||-||(1,677||)|
(Loss) Gain from Remeasurement of Investment in Unconsolidated Joint Ventures
(Loss) Income from Unconsolidated Joint Venture Investments