PHILADELPHIA - Aug. 8, 2005--Hersha Hospitality Trust (AMEX: HT), a
real estate investment trust (REIT) and owner of nationally franchised,
midscale and upscale hotels, today announced results for the second quarter
and six months ended June 30, 2005.
Financial Highlights
-
Net income available to common shareholders rose 159.3% percent to $3.76
million, compared to $1.45 million for the 2004 second quarter
-
Net income available to common shareholders on a per share basis increased
100.0% percent to $0.18, compared to $0.09 for the quarter on a 23.6% increase
in diluted weighted average shares outstanding
-
Adjusted Funds from Operations (Adjusted FFO) increased 51.0 percent to
$5.83 million from $3.86 million for the quarter
-
Adjusted FFO per fully diluted weighted average share and unit outstanding
increased 25.0 percent to $0.25, compared to $0.20 for the quarter on a
20.4% increase in diluted weighted average shares outstanding
-
Declared 26th consecutive $0.18 common dividend per common share since
1999 IPO
�Hersha had a strong quarter, which was a combination of the continuing
hotel industry recovery; recent, accretive acquisitions in a number of
major Northeast and Mid-Atlantic markets; and excellent performance from
our existing portfolio,� said Jay H. Shah, Hersha president and chief operating
officer.
Operating Highlights
-
Revenue per available room (RevPAR) for the quarter ended June 30, 2005
improved 13.3 percent over the same period last year, with a 4.6 percent
increase in average daily rate (ADR) to $105.19, and a 8.3 percent increase
in occupancy to 77.3 percent
-
The Company�s portfolio operating margins for the quarter increased by
approximately 600 basis points over the same period last year, representing
a 62.1% flow through of incremental revenue to the operating profit. The
significant margin gains are primarily attributable to the ramp up of Hersha�s
same store portfolio and the acquisition of several stabilized properties
since the second quarter of 2004.
-
Same-store RevPAR for the quarter increased 10.2 percent to $74.73 over
the same period last year, reflecting a 2.4 percent increase in ADR to
$99.24 and a 7.6 percent rise in occupancy to 75.3 percent. The Company
includes all hotels owned for the entire second quarter of 2004 and 2005
in its same-store comparisons.
�Our same store portfolio continued to produce strong results and our total
portfolio showed dynamic growth reflecting the robustness in the corporate
travel segment, as well as the persisting strength in the leisure segment.
Many of our hotels are relatively new and in the ramp-up phase, which is
driving our overall portfolio�s strong growth in occupancy,� Jay Shah stated.
�While we expect that we will continue to experience occupancy increases
at many of our newer properties, we anticipate that our RevPAR gains for
the remainder of the year will come from our asset management efforts aimed
at capitalizing on ADR growth,� said Shah. �We were particularly pleased
with our portfolio-wide growth in operating margins in light of the number
of properties in our portfolio that have not yet reached stabilized rate
and occupancy levels.�
Acquisition and Financing Highlights
-
Completed the acquisition of seven hotels aggregating 804 rooms for a total
of $134.7 million, including:a five-hotel portfolio in the Philadelphia,
Penn., and Wilmington, Del., metros consisting of the 155-suite Holiday
Inn Express Hotel & Suites King of Prussia; the 88-room Holiday Inn
Express Oxford Valley; the 88-room Holiday Inn Express of Frazer-Malvern;
the 78-room Courtyard by Marriott Wilmington, Del.; and a 71-room independently
branded hotel also in Wilmington, adjacent to the Courtyard; the 136-room
Hampton Inn Manhattan-Herald Square in New York City; and the 188-room
Courtyard by Marriott in Brookline, MA in the Boston metro.
-
Completed the sale of two hotels�the 110-room Doubletree Club at JFK Airport
and the 79-room Holiday Inn Express in Long Island City, which has been
reported as discontinued operations
�We are excited about our new acquisitions considering the current competition
in the marketplace. Our Manhattan-Herald Square asset is additional exposure
to the already robust Manhattan market, while our Boston and Philadelphia
acquisitions are timely considering that both markets historically lag
New York and Washington in recovery,� Shah explained. �Additionally, as
we add to our portfolio, we will selectively prune assets that our asset
management program identifies as having less long-term growth potential.�
Mystic Partners, LLC Joint Venture
In June, the Company entered into an agreement to form a joint venture
with Waterford Hospitality Group, LLC, named Mystic Partners, LLC, which
will own a portfolio consisting of nine Marriott and Hilton-branded hotels
with 1,707 rooms in Connecticut and Rhode Island and an aggregate value
of approximately $250 million. Under the terms of the transaction:
-
HT is acquiring a 66.7 percent preferred equity interest in the seven stabilized
properties in the portfolio and a 50 percent preferred equity interest
in the two newly developed properties in the portfolio, subject to certain
minority participations
-
The joint venture intends to place approximately $160 million of debt at
the hotel level
The portfolio consists of the 285-room Mystic Marriott Hotel & Spa
in Groton, Conn.; the 133-room Mystic Residence Inn in Mystic, Conn.; the
78-suite Danbury Residence Inn in Danbury, Conn.; the 94-suite Southington
Residence Inn in Southington, Conn.; the newly built 409-room Marriott
Hartford Downtown in downtown Hartford; the 92-room Warwick Courtyard by
Marriott in Warwick, Rhode Island; the 120-room Norwich Courtyard by Marriott
and 24-unit Rosemont Suites in Norwich, Conn.; the 392-room Hilton Hartford
in downtown Hartford, Conn.; and the 80-room Waterford Springhill Suites
in Waterford, Conn.
All nine hotels were developed by Waterford or its affiliates and are,
on average, four years old. The six select-service hotels (three Residence
Inns, two Courtyards, and one SpringHill Suites) are being purchased for
approximately $115,000 per room. The two newly developed full-service hotels,
the Marriott Convention Center Hotel Hartford and the Hilton Hartford,
and the four-year old Marriott Hotel & Spa in Mystic, Conn., are being
acquired for approximately $165,000 per room.
�We expect Mystic Partners, LLC to close on most of the portfolio this
week and to complete the remainder of the acquisitions by the end of the
third quarter or early part of the fourth quarter,� Shah said. �The closing
is subject to customary conditions of closing, which the parties are diligently
working towards satisfying.�
Follow-On Offering
On August 5, 2005, Hersha completed a $60 million offering of Series
A Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation
preference $25.00 per share. Wachovia Capital Markets, LLC and UBS Securities
LLC acted as joint managers for the offering with Raymond James & Associates,
Inc., Robert W. Baird & Co. Incorporated, and Stifel Nicolaus &
Company, Incorporated participating as co-managers.
The Company will use the net proceeds to fund the purchase price for
its pending investment in the Mystic Partners joint venture with Waterford
Hospitality Group, LLC, and for general corporate purposes, including future
acquisitions.
2005 Outlook
HT reaffirmed its previous Adjusted FFO outlook for the full year 2005.
Hersha expects net income to be in a range of $7.4 million to $7.8 million,
or $0.36 to $0.38 per weighted average basic shares outstanding, and Adjusted
FFO to be between $17.7 million and $18.1 million, or $0.76 to $0.78 per
fully diluted weighted average shares and units outstanding.
HERSHA HOSPITALITY TRUST
Funds from Operations (FFO)
(in thousands, except shares and per share data)
Full Year 2005
Low
High
------------ ------------
Net income applicable to common shareholders $
7,361 $ 7,781
Less: Gain on sale of assets
(1,161) (1,161)
Add:
Depreciation and amortization
9,500 9,500
Equity in depreciation of Unconsolidated
Joint Ventures
1,112 1,112
------------ ------------
Funds from Operations
16,812 17,232
Add:
Income allocated to minority interest in
common units
600 680
Amortization of ground lease expense
232 232
------------ ------------
Adjusted Funds from Operations
$ 17,644 $ 18,144
============ ============
Fully Diluted Weighted Average Common Shares
and Units Outstanding
23,200,000 23,200,000
AFFO per Fully Diluted Weighted Average
Common Shares and Units Outstanding
$ 0.76 $
0.78
============ ============
HERSHA HOSPITALITY TRUST
Summary Results
(in thousands, except shares and per share data)
Three Months Ended
Six Months Ended
------------------------- -------------------------
June 30, Restated June
30, Restated
2005 June 30,
2005 June 30,
2004
2004
------------ ------------ ------------ ------------
Revenue:
Percentage Lease
Revenues - HHMLP $
- $ - $
- $ 1,192
Hotel Operating
Revenues
21,071 13,593
33,871 19,063
------------ ------------ ------------ ------------
Total Revenue
21,071 13,593
33,871 20,255
------------ ------------ ------------ ------------
Expenses:
Hotel Operating
Expenses
12,011 7,772
21,288 11,981
Land Leases
183 219
367 392
Real Estate and
Personal Property
Taxes and
Property
Insurance
943 1,087
1,827 1,663
General and
Administrative
1,147 680
2,138 1,174
Unrecognized
(Gain) on
Derivatives
(3) -
(7) -
Depreciation and
Amortization
2,410 1,719
4,373 3,149
------------ ------------ ------------ ------------
Total Operating
Expenses
16,691 11,477
29,986 18,359
------------ ------------ ------------ ------------
Operating Income
4,380 2,116
3,885 1,896
Interest Income
64 45
101 119
Interest Income -
Secured Loans
Related Party
743 358
1,743 711
Interest Income -
Secured Loans
168 132
168 171
Other Revenue
130 20
158 139
Interest Expense
2,882 1,377
4,756 2,688
------------ ------------ ------------ ------------
Income before
income from
Unconsolidated
Joint Venture
Investments,
Distributions to
Preferred
Unitholders,
Minority Interests
and Discontinued
Operations
2,603 1,294
1,299 348
Income from
Unconsolidated
Joint Venture
Investments
280 165
328 146
------------ ------------ ------------ ------------
Income before
Distribution to
Preferred
Unitholders,
Minority Interests
and Discontinued
Operations
2,883 1,459
1,627 494
Distributions to
Preferred
Unitholders
- -
- 499
Income (Loss)
Allocated to
Minority Interest
in Continuing
Operations
400 284
140 (33)
------------ ------------ ------------ ------------
Income from
Continuing
Operations
2,483 1,175
1,487 28
------------ ------------ ------------ ------------
Discontinued
Operations
(Note 11):
Gain on
Disposition of
Hotel Properties
1,161
- 1,161
-
Income from
Discontinued
Operations
111 272
131 550
------------ ------------ ------------ ------------
Net Income
$ 3,755 $ 1,447
$ 2,779 $
578
============ ============ ============ ============
Earnings Per Share
from Continuing
Operations
Basic
$ 0.12 $
0.07 $ 0.07 $
-
Diluted
$ 0.12 $
0.07 $ 0.07 $
-
Discontinued
Operations Per
Share
Basic
$ 0.06 $
0.02 $ 0.06 $
0.04
Diluted
$ 0.06 $
0.02 $ 0.06 $
0.04
Earnings Per Share
Basic
$ 0.18 $
0.09 $ 0.13 $
0.04
Diluted
$ 0.18 $
0.09 $ 0.13 $
0.04
Basic
20,293,169 15,893,539 20,292,167 14,304,998
Diluted
23,159,013 18,735,976 23,146,372 17,484,063
FFO and GAAP Reconciliation
The National Association of Real Estate Investment Trusts
(�NAREIT�) developed Funds From Operations (�FFO�) as a relative non-GAAP
financial measure of performance and liquidity of an equity REIT in order
to recognize that income-producing real estate historically has not depreciated
on the basis determined under GAAP. FFO as defined by NAREIT is 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.
Hersha also presents Adjusted Funds from Operations (Adjusted FFO), which
reflects FFO in accordance with the NAREIT definition further adjusted
by:
� adding back income allocated to units of partnership
interest in our operating partnership, because the Company reports Adjusted
FFO to common shareholders on a fully diluted basis assuming conversion
of those units to common shares;
� adding back income allocated to units of partnership
interest in HT�s operating partnership related to discontinued operations;
� adding back depreciation related to discontinued operations;
� adding back distributions to holders of preferred units
of partnership interest in the Company�s operating partnership, which are
expensed on its income statement; 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 or Adjusted FFO 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.
HT considers FFO and Adjusted FFO to be meaningful, additional measures
of 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 a performance
measure. Hersha also believes that the additional adjustments made to arrive
at Adjusted FFO help to provide a meaningful view of its underlying operations.
Comparison of the Company�s presentation of FFO and Adjusted FFO to similarly
titled measures for other REITs is not necessarily meaningful due to the
differences in the calculations used internally and by other REITs.
The following table reconciles FFO and Adjusted FFO for
the periods presented to the most directly comparable GAAP measure, net
income, for the same periods:
HERSHA HOSPITALITY TRUST
Funds from Operations (FFO)
(in thousands, except shares and per share data)
Three Months Ending Six Months Ending
06/30/05 06/30/04 06/30/05
06/30/04
----------- ----------- ----------- -----------
Net Income applicable
to common shares
$ 3,755 $ 1,447 $
2,779 $ 578
Less: Gain on sale of
assets
(1,161) -
(1,161) -
Add:
Depreciation and
amortization
2,410 1,719
4,373 3,149
Adjustments for
Unconsolidated Joint
Ventures
259 162
516 322
----------- ----------- ----------- -----------
Funds from Operations
5,263 3,328
6,507 4,049
Add:
Income allocated to
minority interest in
common units
400 284
140 (33)
Income allocated to
minority interest
for discontinued
operations
15 49
18 126
Depreciation from
discontinued
operations
- 165
- 330
Distributions to
preferred
unitholders
- -
- 499
Amortization of
deferred financing
costs
92 32
172 65
Amortization of
ground lease expense
58 -
116 -
----------- ----------- ----------- -----------
Adjusted Funds from
Operations
$ 5,828 $ 3,858 $
6,953 $ 5,036
=========== =========== =========== ===========
Fully Diluted Weighted
Average Common Shares
and Units Outstanding 23,159,013 19,231,178
23,146,372 19,139,894
AFFO per Fully Diluted
Weighted Average
Common Shares and
Units Outstanding
$0.25 $0.20
$0.30 $0.26
=========== =========== =========== ===========
EBITDA and GAAP Reconciliation
EBITDA is a non-GAAP financial measure within the meaning
of the Securities and Exchange Commission rules. Management believes EBITDA
to be a meaningful measure of a REIT�s performance and that it should be
considered along with, but not as an alternative to, net income and cash
flow as a measure of our operating performance.
HERSHA HOSPITALITY TRUST
EBITDA
(in thousands, except shares and per share data)
Three Months Ending Six Months Ending
06/30/05 06/30/04 06/30/05 06/30/04
--------- --------- --------- ---------
Net Income applicable to common
shares
$ 3,755 $ 1,447 $ 2,779 $
578
Less: Interest income
(64) (45) (101)
(119)
Add:
Interest expense
2,882 1,377 4,756
2,688
Adjustments for
Unconsolidated Joint
Ventures
259 162
516 322
Income allocated to minority
interest in common units
400 284
140 (33)
Income allocated to minority
interest for discontinued
operations
15 49
18 126
Depreciation and amortization
from continuing operations 2,410
1,719 4,373 3,149
Depreciation from
discontinued operations
- 165
- 330
Distributions to preferred
unitholders
- -
- 499
Amortization of ground lease
expense
58 -
116 -
--------- --------- --------- ---------
EBITDA
$ 9,715 $ 5,158 $12,597 $ 7,540
========= ========= ========= ========= |
Hersha Hospitality Trust is a self-advised real estate investment trust
that owns midscale and upscale hotels in the eastern United States with
strong, national franchise affiliations. The company focuses on acquisition
and joint venture opportunities in primary and secondary markets near major
metropolitan markets. For additional information, please visit the Company�s
website at www.hersha.com.
This press release contains forward-looking statements about Hersha
Hospitality Trust, including those statements regarding future operating
results, the timing and composition of revenues and expected events.
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