- Comparable Hotel EBITDA Margins Increase 90 bps -
- Adjusted EBITDA Increases 11.5% to $50.5 Million -
PHILADELPHIA--Hersha Hospitality Trust (NYSE: HT) ("Hersha" or the "Company"), owner of upscale hotels in urban gateway markets, today announced results for the second quarter ended June 30, 2014.
Second Quarter 2014 Financial Results
Adjusted Funds from Operations ("AFFO") in the second quarter 2014 increased $7.3 million to $34.6 million, compared to $27.3 million in the second quarter 2013. AFFO per diluted common share and unit of limited partnership interest in Hersha Hospitality Limited Partnership ("OP Unit") was $0.17, an increase from AFFO of $0.13 per diluted common share and OP Unit in the second quarter 2013. The Company's weighted average diluted common shares and OP Units outstanding were approximately 207.1 million as of June 30, 2014, compared to approximately 208.1 million for the quarter ended June 30, 2013.
Net income applicable to common shareholders was $53.3 million, or $0.27 per diluted common share, for the second quarter 2014 compared to net income applicable to common shareholders of $14.3 million, or $0.07 per diluted common share, for the second quarter 2013. 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 portfolio delivered strong results in the second quarter that provides increased optimism with regard to our outlook for the remainder of the year. This positive view is based upon the continued strength in our core urban gateways and the continued ramp-up of our newer hotels. Our comparable Manhattan portfolio recorded strong 8.2% RevPAR growth with record second quarter portfolio-wide occupancy of 96.5%, highlighting the 8.8% demand increase within the market as a result of robust business transient and international travel. These figures clearly demonstrate the continuing dynamism of the New York City market."
Mr. Shah continued, "The Company continues to execute on its strategic plan, with second quarter performance clearly benefitting from several initiatives undertaken during the past few years. In addition to completing the acquisition of the Parrot Key Hotel and Resort, Hersha successfully concluded all major construction and development projects undertaken across the last several years. Greater exposure to high-growth markets in South Florida and on the West Coast, combined with the addition of two new hotels in Manhattan position the Company to drive outsized results and will allow us to outperform the industry in the years ahead."
Second Quarter 2014 Operating Results
For second quarter 2014, revenue per available room ("RevPAR") at the Company's 47 consolidated hotels as of June 30, 2014, compared to 41 hotels as of June 30, 2013, increased 8.2% to $169.05 compared to $156.26 in second quarter 2013. The Company's average daily rate ("ADR") for the consolidated hotel portfolio increased by 4.0% to $195.15, while occupancy increased 335 basis points to 86.6%. Hotel EBITDA for the consolidated hotel portfolio increased 25.5%, or $9.5 million, to $46.7 million in second quarter 2014 compared to second quarter 2013.
On a comparable basis (42 hotels), RevPAR increased 6.6% to $165.15, with an ADR increase of 3.2% to $190.41 and occupancy growth of 274 basis points to 86.7%. Strong ADR led growth in several of our core markets allowed the comparable portfolio to increase EBITDA margins by 90 basis points to 41.9%. The Company's top performing market during the quarter was Boston, which reported comparable RevPAR growth of 14.0%. Other strong performing markets included the West Coast and South Florida portfolios, which reported 10.6% and 10.4% RevPAR growth, respectively.
New York City and Manhattan
The New York City hotel portfolio, which includes the five boroughs, consisted of 17 hotels as of June 30, 2014. For second quarter 2014, the Company's comparable New York City hotel portfolio (13 hotels) recorded a 6.0% increase in RevPAR to $220.91, as ADR rose 2.6% to $230.67, while occupancy increased 305 basis points to 95.8%.
The Manhattan hotel portfolio consisted of 14 hotels as of June 30, 2014. For second quarter of 2014, the Company's comparable Manhattan hotel portfolio (10 hotels) recorded an 8.2% increase in RevPAR to $237.74, as ADR rose 4.6% to $246.36, and occupancy increased 321 basis points to 96.5%. The Company's Manhattan portfolio recorded very strong EBITDA margins of 48.7% during the second quarter.
As of June 30, 2014, the Company maintained significant financial flexibility with approximately $29.2 million of cash and cash equivalents and significant capacity under the Company's revolving line of credit provided under its credit facility. As of June 30, 2014, 81.7% 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 4.49% and a weighted average life-to-maturity of approximately 4.1 years.
Acquisitions and Development
On May 7, 2014, the Company closed on the purchase of the 148‐room Parrot Key Hotel & Resort in Key West, FL. The purchase price for Parrot Key reflected a forward 12‐month economic capitalization rate of 7.5%. The oceanfront hotel was fully renovated in 2012, requires no immediate capital, and is located in one of the strongest and most resilient lodging markets in the United States due to a combination of year-round demand, limited new supply and high barriers to entry.
On May 30, 2014, the Company opened the brand new 205‐room Hilton Garden Inn Midtown East. On a stabilized basis, the investment represents an economic capitalization rate of 11.0% and a hotel EBITDA multiple of 8.4x. The hotel is only the second hotel built in the Midtown East submarket in the last 15 years.
On June 23, 2014, the Company opened the 81‐room Hampton Inn Downtown Financial District. The hotel is the Company's fifth Hampton Inn in Manhattan, and will seek to leverage transient demand generated by new, high-quality office space, as well as increased tourism-related activity in the Financial District.
The Company has initiated additional guidance and amended its outlook for 2014, incorporating the expected impact of the Company's various development and capital improvement projects, the recent acquisition of the Parrot Key Resort and Hilton Garden Inn Midtown East, the Company's year-to-date performance, continued improvement in operating and economic fundamentals, and assumes no additional acquisitions, dispositions or capital market activities. The Company's revised outlook for 2014 is as follows:
Hersha paid a dividend of $0.50 per Series B Preferred Share and $0.4297 per Series C Preferred Share for second quarter 2014.
The Board of Trustees also declared quarterly cash dividends of $0.06 per common share and per OP Unit for second quarter 2014.
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 Presentations" page of the Company's web site, www.hersha.com.
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Hersha Hospitality Trust (HT) is a self-advised real estate investment trust in the hospitality sector, which owns and operates high quality, upscale hotels in urban gateway markets. The Company's 52 hotels totaling 8,403 rooms are located in New York, Boston, Philadelphia, Washington, DC, South Florida and select markets on the West Coast. The Company's shares are traded on The New York Stock Exchange-Euronext under the ticker "HT". For more information on the Company, and the Company's hotel portfolio, please visit the Company's website at www.hersha.com.