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 Hersha Hospitality Reports 2nd Qtr Net Income Up 159.3% to $3.76 million, 
Compared to $1.45 million for the 2004 2nd Qtr
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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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Contact:
Hersha Hospitality Trust
Ashish Parikh
215-238-1046
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Also See: Hersha Hospitality Trust Forms Joint Venture with Waterford Hospitality Group; HT Acquires Preferred Equity Interest in Nine Marriott and Hilton Hotels / June 2005
Hersha Hospitality Trust to Acquire Five-Hotel Portfolio in Philadelphia and Wilmington Metros; 480 Limited Service Rooms for $48.9 million / May 2005


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