Hersha Hospitality Trust Announces Full-Year and Fourth Quarter 2013 Results
February 26, 2014 9:54am
- Full-Year 2013 Hotel EBITDA Growth of 6.7% -
- Full-Year 2013 Average Daily Rate of $179.70 -
- Full-Year 2013 Occupancy of 79.7% -
- Completes the Sale of 16 Properties within Non-Core Portfolio -
- Increases Presence on West Coast and Miami Beach -
Full-Year and Fourth Quarter 2013 Financial Results
Net income applicable to common shareholders was $32.8 million, or $0.16 per diluted common share, for the full-year ended December 31, 2013 compared to net income applicable to common shareholders of $8.4 million, or $0.04 per diluted common share, in 2012. The increase in net income reported for the full-year and fourth quarter 2013 periods was primarily related to a gain on the disposition of 12 non-core hotel properties that closed during the fourth quarter.
Adjusted Funds from Operations (“AFFO”) in 2013 increased by $7.2 million to $86.5 million, compared to $79.3 in 2012. AFFO per diluted common share and unit of limited partnership interest in Hersha Hospitality Limited Partnership (“OP Unit”) was $0.41, an increase from AFFO of $0.40 per diluted common share and OP Unit reported in 2012. The Company’s weighted average diluted common shares and OP Units outstanding were approximately 208.9 million as of December 31, 2013, compared to approximately 198.1 million as of December 31, 2012.
AFFO in the fourth quarter declined by $2.0 million to $24.6 million, compared to $26.6 million in the fourth quarter 2012. AFFO per diluted common share and OP Unit was $0.12, a decrease from AFFO of $0.13 per diluted common share and OP Unit reported in the same quarter in 2012. An explanation of certain non-GAAP financial measures used in this press release, including, among others, AFFO, as well as reconciliations of those non-GAAP financial measures, is included at the end of this press release.
Mr. Jay H. Shah, Hersha’s Chief Executive Officer stated, “Our RevPAR quality improved materially in 2013 given the combination of capital recycling initiatives highlighted by our non-core portfolio sale, in addition to acquisitions undertaken in strong RevPAR markets such as Miami Beach and San Diego, and the opening of our Hyatt Union Square property. For the full-year 2013 period, the Company delivered Consolidated RevPAR of $143.30, which represented record full-year RevPAR for the Company, driven by growing corporate and leisure transient demand trends in U.S. gateway markets. As anticipated, the fourth quarter of 2013 was challenging on a year-over-year basis due to difficult comparable performance numbers from a year ago related to the significant demand surge from Hurricane Sandy relief efforts that significantly bolstered the portfolio results in New York and the surrounding markets during the fourth quarter 2012 and one-time events such as the government shutdown in October of 2013. Nevertheless, we continued to execute our business plan on a variety of strategic initiatives that favorably position the Company to deliver strong operating results and cash flow in the periods ahead.”
Mr. Shah continued, “2013 was an active year from a strategic perspective as the Company’s non-core portfolio sale, expansion on the West Coast and in Miami, and delivery of the new tower at the Cadillac Courtyard Miami Beach Oceanfront furthered our commitment to recycle capital and concentrate on high RevPAR quality assets in high demand gateway markets. We are confident that our transformative work undertaken throughout 2013 will better reflect our inherent hotel portfolio value.”
Full Year and Fourth Quarter 2013 Operating Results
For full-year 2013, revenue per available room (“RevPAR”) at the Company's 43 consolidated hotels as of December 31, 2013 compared to 38 hotels as of December 31, 2012, increased 4.0% to $143.30 compared to $137.78 in 2012. The Company’s average daily rate (“ADR”) for the hotel portfolio increased by 2.6% to $179.70, while occupancy increased 112 basis points to 79.7%. Hotel EBITDA for the hotel portfolio increased approximately 6.7%, or $7.8 million, to $124.5 million in 2013 compared to 2012.
For the fourth quarter of 2013, RevPAR at the Company's consolidated hotels as of December 31, 2013 compared to December 31, 2012, was down 1.6% to $148.60 compared to $150.97 for the fourth quarter 2012. The Company’s fourth quarter ADR for the hotel portfolio declined by 2.0% to $189.05, while occupancy increased 31 basis points to 78.6%. Hotel EBITDA for the hotel portfolio declined approximately 2.5% to $34.6 million for the fourth quarter 2013 compared to the same period in 2012. This decline was primarily due to ADR-driven RevPAR loss, compounded by $610,000 in cancellation fees from Hurricane Sandy disaster relief agencies recognized by the hotels in fourth quarter 2012 for rooms that were never utilized, ongoing renovation disruptions at the Cadillac Courtyard Miami Beach Oceanfront and the Rittenhouse Hotel, and increased commissions and contract labor expenses, in addition to higher real estate taxes.
New York City and Manhattan
The New York City hotel portfolio, which includes the five boroughs, consisted of 16 hotels as of December 31, 2013. For the fourth quarter 2013, the Company’s New York City hotel portfolio recorded a 4.4% decrease in RevPAR to $220.87, as ADR decreased 3.5% to $240.19, while occupancy declined 95 basis points to 92.0%.
The Manhattan hotel portfolio consisted of 13 hotels as of December 31, 2013. For the fourth quarter of 2013, the Company’s Manhattan hotel portfolio recorded a 2.3% decrease in RevPAR to $236.80, as ADR declined 1.7% to $256.26, and occupancy declined 65 basis points to 92.4%. Despite challenging comparisons to the prior year, the Manhattan portfolio recorded healthy EBITDA margins of 46.4% during the fourth quarter 2013.
Given the difficult comparisons to fourth quarter 2012 due to positive impacts from Hurricane Sandy relief efforts, the Company believes comparing fourth quarter 2013 operating results to fourth quarter 2011 operating results in New York City provides a more accurate picture of the operating performance. On a two year basis, the Company’s consolidated New York City hotels reported a 10.8% increase in RevPAR, driven by an 8.4% increase in ADR and a 200 basis point increase in occupancy.
As of December 31, 2013, the Company maintained significant financial flexibility with approximately $36.2 million of cash and cash equivalents and a fully undrawn $250 million senior unsecured revolving line of credit. As of December 31, 2013, 100.0% 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 4.91% and a weighted average life-to-maturity of approximately 3.7 years.
On November 6, 2013, Hersha announced a definitive agreement to purchase the 122-room Hotel Oceana in Santa Barbara, California for $42 million. The purchase price reflects an 8.6% economic capitalization rate on trailing-twelve month net operating income as of December 31, 2013.
The Hotel Oceana acquisition will be funded with cash on hand, and includes the assumption of approximately $25.3 million in mortgage debt, incurring interest at a fixed rate of 4.4% per year and maturing in 2023. The acquisition of the Hotel Oceana is expected to close by the end of first quarter of 2014, and is subject to a variety of closing conditions and the receipt of lender consent.
On December 20, 2013, the Company closed on the purchase of two Autograph Collection hotels in Miami’s South Beach (“South Beach Autograph Portfolio”). The purchase price for the recently renovated South Beach Autograph Portfolio was $50.95 million and reflected a full-year 2014 economic capitalization rate of approximately 6.8%, and an 8.5% - 9.0% capitalization rate on stabilized earnings. The 145-room South Beach Autograph Portfolio includes the 75-room Blue Moon Hotel and the 70-room Winter Haven Hotel.
The acquisition of the South Beach Autograph Portfolio was funded with cash on hand, and with a portion of net proceeds generated from the non-core portfolio sale further described below.
The Company made further progress regarding efforts to recycle capital from stabilized, select service assets in suburban markets to higher growth urban gateway assets.
On December 18, 2013, Hersha closed on the sale of 12 of 16 hotels included within the non-core hotel portfolio the Company previously announced in September 2013. The sale of the 12 hotels generated net proceeds of approximately $122.3 million.
During February 2014, the Company closed on the sale of the remaining 4 hotels within this portfolio. The sale of the 4 hotels generated net proceeds of approximately $13.6 million.
This sale completes Hersha’s portfolio transformation into a pure play urban transient-focused collection of hotels with exposure to some of the highest demand gateway markets in the United States.
The Company entered into a definitive agreement to sell the Hotel 373 located in midtown Manhattan. The 70 room hotel is being sold to an offshore investment group for $37.0 million, or approximately $529,000 per key.
The Company values the anticipated sale of Hotel 373 at an economic capitalization rate of 5.2% based on trailing 2013 net operating income and a trailing 2013 hotel EBITDA multiple of 17.3x. The proposed transaction is expected to close in the second quarter of 2014, and is subject to a variety of closing conditions. As a result, there can be no assurance that the Company will be able to consummate the disposition on the schedule or on the terms described.
New Credit Facility
The company has received a commitment from its existing bank group and is in the process of amending its current $400 million senior unsecured credit facility (the “Facility”) which would allow the Company to increase the size of the facility, while simultaneously extending the tenor and reducing the pricing. The revised credit facility is expected to close by the end of the first quarter of 2014.
The Company is introducing operating expectations for 2014 for the Company’s consolidated portfolio. Based on management’s current outlook, the Company’s 2014 operating expectations are as follows:
Total consolidated RevPAR growth: 5.0% - 7.0%
Total consolidated Hotel EBITDA margin growth: 25 bps – 75 bps
Hersha paid a dividend of $0.50 per Series B Preferred Share and $0.4297 per Series C Preferred Share for the fourth quarter ended December 31, 2013 on January 15, 2014 to holders of record as of January 1, 2014.
The Company also paid a dividend of $0.06 per Common Share and per OP Unit for the fourth quarter ended December 31, 2013 on January 16, 2014 to holders of record as of January 2, 2014.
Fourth 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, February 26, 2014. 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 1-888-417-8533 or 1-719-325-2429 for international participants. A replay of the call will be available from 12:00 p.m. Eastern Time on Wednesday, February 26, 2014, through midnight Eastern Time on March 12, 2014. The replay can be accessed by dialing 1-877-870-5176 or 1-858-384-5517 for international participants. The passcode for the call and the replay is 9906295. A replay of the webcast will be available on the Company’s website for a limited time.
To view all tables and supplemental documents corresponding with this release please visit: http://www.snl.com/irweblinkx/file.aspx?IID=4019891&FID=22210422
Tags: hersha hospitality trust,
q4 2013 results
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