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Hersha Hospitality Trust Declares 18th Consecutive
Dividend Payment; Annual Yield of 8% Maintained
through 3rd Qtr 2003 
HARRISBURG, Pa., November 12, 2003—Hersha Hospitality Trust (AMEX: HT), a real estate investment trust (REIT) and owner of nationally franchised, premium, limited-service hotels, today announced results for the third quarter and nine months ended September 30, 2003.

Total revenues during the 2003 third quarter ended September 30, 2003 were $5.5 million, compared to $4.5 million during the third quarter ended September 30, in the third quarter 2002. Total revenues increased primarily due to the company’s transition to the taxable REIT subsidiary structure in April, under which the company records hotel operating revenues and expenses for four of its properties. The increase in total revenues was offset by a corresponding decline in percentage lease revenues received from these same four properties. 

Third quarter net income allocated to common shareholders was $0.3 million, or $0.11 per share, compared to $0.3 million, or $0.12 per share, in the same period a year earlier. The decrease in net income resulted primarily from distributions to the company’s Series A Preferred Unitholders during the quarter.

Third quarter funds from operation (FFO) attributable to common shareholders was $3.3 million, an increase of 11.2 percent over the 2002 third quarter FFO attributable to common shareholders of $3.0 million. The increase was primarily due to increased fixed lease revenues from Hersha Hospitality Management, LP (HHMLP), increased interest revenue and lower borrowing costs during the quarter. FFO also increased due to improved margins at properties leased to 44 New England Management Company ("44 New England"), the company’s taxable REIT subsidiary (TRS), which was formed to lease the assets previously leased to Noble Investment Group. The leases for two of these properties expired on April 20, 2003, while another two leases expired on May 20, 2003. Third quarter FFO per share was $0.33 on 10,113,351 fully diluted weighted average shares outstanding, compared to FFO per share of $0.39 on 7,675,824 fully diluted weighted average shares outstanding for the 2002 third quarterird quarter 2002 period.

Nine Month Results

Total revenues for the nine months ended September 30, 2003 were $13.7 million, compared to $11.5 million for the similar period in 2002. Nine-month 2003 percentage lease revenues remained essentially flat at $11.3 million, compared the same period in 2002. Total lease revenues benefited from an increase in fixed lease revenue from several properties acquired in prior periods. This increase in fixed lease revenue was partially offset by a decrease in percentage rent income from several owned properties and by a decrease in the percentage lease revenues from properties previously leased to Noble Investment Group Ltd. This increase is revenue was primarily due to the company’s transition to the TRS structure as cited above.

Net income allocated to common shareholders decreased by $0.3 million for the nine months ended September 30, 2003, to $0.6 million, or $0.25 per share, compared to net income of $0.9 million, or $0.37 per share, for the same period in 2002. The decrease in net income is primarily attributable to distributions to the company’s Series A Preferred Unitholders during the period. 

FFO attributable to common shareholders was $7.3 million for the first nine months of nine months ended September 30, 2003, an increase of $0.7 million, or 10.2 percent, compared to $6.6 million of FFO attributable to common shareholders in the comparable period in 2002. The increase in FFO attributable to common shareholders during the 2003 nine monthsperiod was primarily due to the reasons cited above. FFO per share totaled $0.81 for the nine months ended September 30, 2003 nine months on 8,994,821 fully diluted weighted average shares outstanding, compared to FFO per share of $0.87 on 7,600,104 fully diluted weighted average shares outstanding for the similar period in 2002.

On April 21, 2003, May 21, 2003 and August 29, 2003, CNL Hospitality Properties, LP ("CHPLP" or "CNL") purchased $10.0 million, $5.0 million and $4.027 million, respectively, of convertible preferred units of limited partnership interest in the Partnership (the "Series A Preferred Units"). 

Hotel Operations

"Our properties continued to outperform the industry and our segment, which we believe reflects well on the markets in which we operate—largely urban markets primarily in the Northeast with high barriers to new competition and multiple demand generators, markets which have held up well during the economic downturn," said Jay Shah, president and chief operating officer. "We believe these markets will continue to perform well once the economy has recovered." 

Recent Events

On October 21, 2003, the Company completed a public offering of 9.775 million class A common shares at $8.50 per share. Proceeds to the Company, net of underwriting discounts and commissions, structuring fees and expenses, were, which generated net proceeds of app approximately $77.3 million. Of the net offering proceeds to the cCompany, $10.4 million was used to fund the redemption of 1.3 million limited partnership units and $24.0 million was used to repay indebtedness. The remaining net proceeds will be used principally to fund future acquisitions and for general corporate purposes.

The company plans to use the proceeds principally to fund future acquisitions, to repay indebtedness, to fund the redemption of 1.3 million limited partnership units in the company’s operating partnership and for general corporate purposes.

"The combination of our new joint-venture partnership with CNL Hospitality and our most recent public offering establishes a strong growth platform for Hersha to take advantage of hotel acquisition opportunities," said Hasu P. Shah, CEO and chairman. "During the quarter, we acquired the first property in our joint venture with CNL, the Hampton Inn Chelsea in Manhattan. In early October, the REIT acquired two premium limited service properties in strong markets in New Jersey for its own account. All three properties are expected to be accretive to 2003 earnings."

During the third quarter, Hersha’s board of directors separated the CEO and president functions and elected Jay H. Shah as president and chief operating officer. "Jay’s strong real estate and hotel operations background adds depth to our board and to our day-to-day operations," Hasu Shah said. 

A summary of the three and nine months ended September 30, 2003 is presented below: 



Third Quarter Dividend

During the third quarter, the company declared a dividend of $0.18, for an annual yield of 8.0 percent based on Tuesday’s closing price of $8.99. It is the company’s 18th consecutive dividend payment. "We are one of the few hotel REITs to have maintained our dividend over the past three years," Hasu Shah said. "Based on current results and the economic outlook, we believe the dividend remains secure." 

Funds from Operations. 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 under the definition adopted by NAREIT in April 2002 and as presented by us, is net income (loss) (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring or sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We further adjust FFO for preferred stock distributions. FFO does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income) and should not be considered an alternative to net income as an indication of our performance or to cash flow as a measure of liquidity or ability to make distributions. We consider FFO a meaningful, additional measure of operating performance because it primarily excludes the effects of the assumption that the value of real estate assets diminishes predictably over time, and because it is widely used by industry analysts as a performance measure. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs or the use of other definitions of that term.

The following table reconciles FFO and FFO per weighted average diluted share/unit for the three and nine months ended September 30, 2003 and 2002 to their most directly comparable GAAP measures, net income and net income per weighted average diluted share: 

Hersha Hospitality Trust is a self-advised real estate investment trust that focuses primarily on owning and operating high quality, mid-scale limited service hotels in the Eastern United States. The company focuses on acquisition and joint venture opportunities in primary and secondary markets near major metropolitan markets.

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. 


 
Contact:
 Ashish Parikh
Ph: (717) 770-2405
Also See: Jay H. Shah Named President and Chief Operating Officer, Hersha Hospitality Trust / September 2003


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