EXHIBIT 99.1
 | HERSHA HOSPITALITY TRUST 510 Walnut Street | 9th Floor Philadelphia | PA | 19106 p. 215.238.1046 | f. 215.238.0157 hersha.com |
HERSHA HOSPITALITY ANNOUNCES THIRD QUARTER RESULTS
- Consolidated Hotel Occupancy of 81% -
- Consolidated Hotel RevPAR Improved 2.1% -
- Consolidated Average Daily Rate Increased 2.3% -
Philadelphia, PA, October 31, 2012 -- Hersha Hospitality Trust (NYSE: HT), owner of upscale hotels in urban gateway markets, today announced results for the third quarter ended September 30, 2012.
Third Quarter 2012 Financial Results
Net income applicable to common shareholders increased significantly by $27.7 million to $2.7 million for the third quarter ended September 30, 2012, compared to a net loss of $(25.0) million for the comparable quarter of 2011.
Adjusted Funds from Operations (“AFFO”) in the third quarter were $23.3 million, compared to $24.7 million for the third quarter of 2011. The decrease was driven largely by a $4.4 million reduction in Hotel EBITDA from the sale of the 18 asset non-core portfolio completed earlier in 2012. AFFO per diluted common share and unit of limited partnership interest in Hersha Hospitality Limited Partnership (“OP Unit”) were $0.11 compared to $0.14 in same quarter in 2011. The Company’s weighted average diluted common shares and OP Units outstanding was approximately 206.6 million in the third quarter of 2012, up from approximately 179.5 million in the comparable quarter of 2011.
“Our portfolio delivered another quarter of rate-driven RevPAR growth in the majority of our key urban markets, although the unexpected weakness at some of our hotels in New York City had a disproportionate impact on our quarterly results,” commented Mr. Jay H. Shah, the Company’s Chief Executive Officer. “While the New York market was more challenging in the quarter, we are very encouraged by industry-leading contributions from our Boston and Philadelphia hotels, and the outperformance of our recently renovated Washington DC Urban and Metro hotels.”
Mr. Shah concluded, “We remain confident in the strength and long term sustainability of the New York market and are encouraged to see fourth quarter trends tracking better than the third quarter. As evidenced by our most recent acquisition of the Hilton Garden Inn, in the Midtown East submarket, we are long term investors in New York and believe that it remains one of the best lodging markets in the country and one that should continue to outperform the overall industry. Our market leverage and asset management focus, combined with the favorable supply/demand environment and the embedded growth in our young portfolio of hotels, will allow Hersha to drive continued RevPAR growth.”
Third Quarter 2012 Operating Results
An explanation of Funds from Operations (“FFO”), AFFO, Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA and Hotel EBITDA, as well as reconciliations of FFO, AFFO, EBITDA and Adjusted EBITDA to net income or loss, the most directly comparable U.S. GAAP measures, is included at the end of this release.
For the quarter ended September 30, 2012, revenue per available room (“RevPAR”) for the Company's consolidated hotels, 56 hotels at September 30, 2012 compared to 50 hotels as of September 30, 2011, was up 2.1% to $130.17 compared to $127.48 in the prior year period. The Company’s ADR for its consolidated hotels increased by 2.3% to $161.58, while occupancy for its consolidated hotels decreased by 19 basis points to 80.56%.
Hotel EBITDA for the Company’s consolidated hotels grew approximately 11.7% or $3.9 million to $37.3 million for the quarter ended September 30, 2012 compared to the same period in 2011. Hotel EBITDA margins were 38.6% in the third quarter of 2012 compared to 41.7% in the same quarter of 2011. Hotel EBITDA margins decreased 1.1% year over year excluding the Rittenhouse Hotel in Philadelphia and the Sheraton Wilmington South in Delaware. Both hotels were acquired or opened within the past year and are full service hotels with a meaningfully lower average operating margin than the Company average.
On a same-store basis (52 hotels), RevPAR for the Company’s consolidated hotels for the quarter ended September 30, 2012 was up 1.3% to $130.34 compared to $128.65 in the prior year period. ADR for the Company’s same-store consolidated hotels increased by 0.9% to $160.91, while occupancy for its same-store consolidated hotels increased by 0.3% to 81.00%.
Hotel EBITDA for the Company’s same-store consolidated hotels for the quarter ended September 30, 2012 decreased approximately 1.1% or $0.4 million to $35.3 million compared to the quarter ended September 30, 2011. Hotel EBITDA margins for the Company’s same-store consolidated hotels decreased by 110 basis points to a 40.9% in the third quarter of 2012 compared to 42.0% in the third quarter of 2011 driven largely by lower ADR.
The New York City and Manhattan portfolio ran at occupancy levels in excess of 90% and recorded strong Hotel EBITDA margins of 42.9% and 45.6%, respectively. The Company’s same-store Hotel EBITDA margins were primarily impacted by ADR based RevPAR loss in the Company’s New York City portfolio.
The Company’s top performing market during the quarter was Philadelphia Urban which recorded RevPAR growth of 15.6%. The Company’s Boston, California-Arizona and Washington D.C. portfolio also recorded strong quarterly results with RevPAR growth of 7.2%, 6.0% and 4.9%, respectively.
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New York City and Manhattan
The New York City hotel portfolio, which includes the five boroughs, consisted of 15 hotels as of September 30, 2012. For the third quarter of 2012, the Company’s same-store New York City hotel portfolio (15 hotels) recorded a 0.9% decrease in RevPAR to $186.00, as ADR decreased 0.7% to $206.12 and occupancy decreased 0.2% to 90.24%. Hotel EBITDA margins decreased 320 basis points to 42.9%. Despite the weakness in the third quarter, our New York City portfolio has posted 6.4% RevPAR growth year to date through the third quarter.
The Manhattan hotel portfolio consisted of 12 hotels as of September 30, 2012. For the third quarter of 2012, the Company’s same-store Manhattan hotel portfolio (12 hotels) recorded a 1.1% increase in RevPAR to $198.32 as occupancy increased 1.2% to 91.59% while ADR decreased 0.2% to $216.54. Hotel EBITDA margins decreased 220 basis points to 45.6%. Year to date through the third quarter, the Manhattan portfolio has delivered 9.2% RevPAR growth with 40 basis points of EBITDA margin expansion.
The weakness that impacted the Company’s New York City performance during the quarter was primarily due to the disappointing September results for the entire market. The weaker than anticipated performance was primarily the result of the timing of two Jewish holidays, significant cancellations by foreign delegations resulting in less than anticipated demand from the UN General Assembly, and an overall lack of compression from low group demand during the quarter.
October RevPAR performance for the Company’s Manhattan portfolio is up approximately 6.3% and both the group and transient booking trends continue to show relative strength for the fourth quarter. Prior to the announcement of Hurricane Sandy on October 24th, the Manhattan portfolio was tracking to an 8% RevPAR growth for October.
Financing
As of September 30, 2012, the Company had $28.0 million of borrowings on its $250.0 million secured credit facility and $83.1 million in cash and escrows. Excluding borrowings under the Company’s secured credit facility, approximately 97.6% of the Company’s consolidated debt as of September 30, 2012 is fixed rate debt or effectively fixed through interest rate swaps and caps and has a weighted average interest rate of approximately 5.62%. The weighted average life to maturity of total consolidated debt is approximately 5.0 years, excluding borrowings under the Company’s secured credit facility.
During the quarter, the Company refinanced its loan on its Courtyard Miami Beach Oceanfront. The new $60.0 million loan has a fixed interest rate of 4.32% and is interest only for the full four-year term.
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Acquisitions
The Company purchased the remaining 50% interest it did not previously own in the 130-room Courtyard by Marriott located in Ewing, New Jersey for an assumption of debt and nominal cash considerations.
Subsequent Events
October 2012
The Company entered into a purchase and sale agreement to acquire the 205 room Hilton Garden Inn in New York City for total consideration of $74.0 million, or approximately $361,000 per key. The transaction is expected to close shortly after the developer completes the hotel’s construction, anticipated in the fourth quarter of 2013.
The Company also announced that it has received commitments for a new credit facility of $400 million expandable to $550 million at the Company’s option. Initially the facility will consist of a $250 million senior unsecured revolving line of credit and a $150 million senior unsecured term loan. The interest rate for the new credit facility is based on a pricing grid with a range of 175 to 265 basis points over LIBOR, based on the Company’s leverage ratio. The all in rate, inclusive of swaps, will be 2.60% to 3.50%.
The Revolving Credit Facility, which was formerly a secured facility, will be unsecured and matures three years from the closing date, with the option for an additional one year extension. The Term Loan will be funded as a single draw of $100 million on the closing date and up to $50 million will be available on a delayed draw basis for up to sixty days after the closing date. The Term Loan also matures three years from the closing date with two additional one year extension options. The Company anticipates closing on the new Facility in November 2012.
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Outlook for 2012
The Company is amending its 2012 Outlook to reflect third quarter performance, the impact of Hurricane Sandy and its outlook for the fourth quarter. This outlook reflects management’s best estimates of disruption resulting from the storm, but it is an evolving situation with many factors, such as the repair work, full power restoration in New York City and other factors beyond the Company’s control. Based on these estimates, the Company is issuing the following operating expectations for 2012:
| Metric | 2012 Expectation |
| Total consolidated RevPAR growth: | 5.0% to 6.5% |
| Same-store consolidated RevPAR growth: | 3.0% to 4.5% |
Dividend
For the third quarter of 2012, the Company paid dividends of $0.06 per common share and OP Unit and $0.50 per Series A and Series B preferred share.
Third Quarter 2012 Conference Call
The Company will host a conference call to discuss its financial results at 9:00 AM Eastern time on Thursday, November 1, 2012. 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 (888) 452-4023 or (719) 325-2469 for international participants. A replay of the call will be available from 12:00 noon Eastern Time on November 1, 2012, through midnight Eastern Time on November 15, 2012. The replay can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international participants. The passcode for the call and the replay is 9289141. A replay of the webcast will be available on the Company’s website for a limited time.
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About Hersha Hospitality
Hersha Hospitality Trust is a self-advised real estate investment trust, which owns 64 hotels in major urban gateway markets including New York City, Washington DC, Boston, Philadelphia, Los Angeles and Miami totaling 9,221 rooms. HT follows a highly selective investment approach and leverages operational advantage through rigorous and sustainable asset management practices. For further information on the Company visit our website at www.hersha.com.
Forward Looking Statement
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. These forward-looking statements may include statements related to the Company’s ability to outperform, the ongoing recovery of the lodging industry and the markets in which the Company’s hotel properties are located, the Company’s ability to generate internal and external growth, the completion of acquisitions under contract, the Company’s ability to identify and complete the acquisition of hotel properties in new markets, the Company’s ability to enter into contracts for and complete the disposition of non-core assets, the Company’s ability to complete the hotel redevelopment projects, the Company’s ability to increase margins, including Hotel EBITDA margins, and the Company’s operating expectations for the full 2012 calendar year. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-looking statements, please review the information under the heading “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed by the Company with the Securities and Exchange Commission on February 29, 2012 and other documents filed by the Company with the Securities and Exchange Commission.
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HERSHA HOSPITALITY TRUST
Balance Sheet (unaudited)
(in thousands, except shares and per share data)
| September 30, 2012 | December 31, 2011 | |||||||
| Assets: | ||||||||
| Investment in Hotel Properties, net of Accumulated Depreciation, (including consolidation of variable interest entity assets of $89,661 and $0) | $ | 1,477,151 | $ | 1,340,876 | ||||
| Investment in Unconsolidated Joint Ventures | 16,581 | 38,839 | ||||||
| Development Loans Receivable | 33,425 | 35,747 | ||||||
| Cash and Cash Equivalents | 57,274 | 24,568 | ||||||
| Escrow Deposits | 25,874 | 27,321 | ||||||
| Hotel Accounts Receivable, net of Allowance for Doubtful Accounts of $180 and $495 | 15,273 | 11,353 | ||||||
| Deferred Financing Costs, net of Accumulated Amortization of $9,882 and $9,138 | 8,245 | 9,023 | ||||||
| Due from Related Parties | 8,729 | 6,189 | ||||||
| Intangible Assets, net of Accumulated Amortization of $2,038 and $1,357 | 9,061 | 8,013 | ||||||
| Deposits on Hotel Acquisitions | 36,000 | 19,500 | ||||||
| Other Assets | 14,332 | 15,651 | ||||||
| Hotel Assets Held for Sale | - | 93,829 | ||||||
| Total Assets | $ | 1,701,945 | $ | 1,630,909 | ||||
| Liabilities and Equity: | ||||||||
| Line of Credit | $ | 28,000 | $ | 51,000 | ||||
| Mortgages and Notes Payable, including net Unamortized Premium (including consolidation of variable interest entity debt of $57,639 and $0) | 751,999 | 707,374 | ||||||
| Accounts Payable, Accrued Expenses and Other Liabilities | 33,348 | 31,140 | ||||||
| Dividends and Distributions Payable | 15,616 | 13,908 | ||||||
| Due to Related Parties | 5,143 | 2,932 | ||||||
| Liabilities Related to Assets Held for Sale | - | 61,758 | ||||||
| Total Liabilities | 834,106 | 868,112 | ||||||
| Redeemable Noncontrolling Interests - Common Units | $ | 15,015 | $ | 14,955 | ||||
| Equity: | ||||||||
| Shareholders' Equity: | ||||||||
| Preferred Shares: 8% Series A, $.01 Par Value, 29,000,000 shares authorized, 2,400,000 Shares Issued and Outstanding (Aggregate Liquidation Preference $60,000) at September 30, 2012 and December 31, 2011 | 24 | 24 | ||||||
| Preferred Shares: 8% Series B, $.01 Par Value, 4,600,000 shares authorized, 4,600,000 Shares Issued and Outstanding (Aggregate Liquidation Preference $115,000) at September 30, 2012 and December 31, 2011 | 46 | 46 | ||||||
| Common Shares: Class A, $.01 Par Value, 300,000,000 Shares Authorized at September 30, 2012 and December 31, 2011, 198,539,261 and 169,969,973 Shares Issued and Outstanding at September 30, 2012 and December 31, 2011, respectively | 1,985 | 1,699 | ||||||
| Common Shares: Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding | - | - | ||||||
| Accumulated Other Comprehensive Loss | (2,247 | ) | (1,151 | ) | ||||
| Additional Paid-in Capital | 1,176,727 | 1,041,027 | ||||||
| Distributions in Excess of Net Income | (340,099 | ) | (310,974 | ) | ||||
| Total Shareholders' Equity | 836,436 | 730,671 | ||||||
| Noncontrolling Interests: | ||||||||
| Noncontrolling Interests - Common Units | 15,855 | 16,864 | ||||||
| Noncontrolling Interests - Consolidated Joint Ventures | - | 307 | ||||||
| Noncontrolling Interests - Consolidated Variable Interest Entity | 533 | - | ||||||
| Total Noncontrolling Interests | 16,388 | 17,171 | ||||||
| Total Equity | 852,824 | 747,842 | ||||||
| Total Liabilities and Equity | $ | 1,701,945 | $ | 1,630,909 | ||||
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HERSHA HOSPITALITY TRUST
Summary Results (unaudited)
(in thousands, except shares and per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2012 | September 30, 2011 | September 30, 2012 | September 30, 2011 | |||||||||||||
| Revenues: | ||||||||||||||||
| Hotel Operating Revenues | $ | 96,558 | $ | 80,053 | $ | 257,547 | $ | 206,856 | ||||||||
| Interest Income from Development Loans | 463 | 656 | 1,602 | 2,810 | ||||||||||||
| Other Revenue | 50 | 87 | 164 | 237 | ||||||||||||
| Total Revenues | 97,071 | 80,796 | 259,313 | 209,903 | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Hotel Operating Expenses | 53,249 | 41,675 | 144,594 | 112,422 | ||||||||||||
| Hotel Ground Rent | 214 | 182 | 622 | 693 | ||||||||||||
| Real Estate and Personal Property Taxes and Property Insurance | 5,804 | 4,781 | 16,083 | 14,203 | ||||||||||||
| General and Administrative | 2,782 | 2,481 | 8,891 | 6,491 | ||||||||||||
| Stock Based Compensation | 1,923 | 1,495 | 6,322 | 4,765 | ||||||||||||
| Acquisition and Terminated Transaction Costs | 85 | 147 | 1,167 | 2,263 | ||||||||||||
| Depreciation and Amortization | 14,719 | 12,839 | 42,304 | 37,587 | ||||||||||||
| Total Operating Expenses | 78,776 | 63,600 | 219,983 | 178,424 | ||||||||||||
| Operating Income | 18,295 | 17,196 | 39,330 | 31,479 | ||||||||||||
| Interest Income | 407 | 144 | 859 | 363 | ||||||||||||
| Interest Expense | 11,149 | 10,145 | 33,073 | 29,516 | ||||||||||||
| Other Expense | 42 | 300 | 565 | 866 | ||||||||||||
| Loss on Debt Extinguishment | 3 | 21 | 249 | 55 | ||||||||||||
| Income before Income (Loss) from Unconsolidated Joint Venture Investments and Discontinued Operations | 7,508 | 6,874 | 6,302 | 1,405 | ||||||||||||
| Unconsolidated Joint Ventures | ||||||||||||||||
| Income (Loss) from Unconsolidated Joint Ventures | 237 | 107 | (79 | ) | (1,072 | ) | ||||||||||
| Impairment of Investment in Unconsolidated Joint Venture | - | (1,677 | ) | - | (1,677 | ) | ||||||||||
| (Loss) Gain from Remeasurement of Investment in Unconsolidated Joint Ventures | (1,668 | ) | - | (1,892 | ) | 2,757 | ||||||||||
| (Loss) Income from Unconsolidated Joint Venture Investments | (1,431 | ) | (1,570 | ) | (1,971 | ) | 8 | |||||||||
| Income from Continuing Operations | 6,077 | 5,304 | 4,331 | 1,413 | ||||||||||||
| Discontinued Operations | ||||||||||||||||
| (Loss) Gain on Disposition of Hotel Properties | (183 | ) | 843 | 11,269 | 843 | |||||||||||
| Impairment of Assets Held for Sale | - | (30,248 | ) | - | (30,248 | ) | ||||||||||
| Income (Loss) from Discontinued Operations | - | 1,597 | (231 | ) | 418 | |||||||||||
| (Loss) Income from Discontinued Operations | (183 | ) | (27,808 | ) | 11,038 | (28,987 | ) | |||||||||
| Net Income (Loss) | 5,894 | (22,504 | ) | 15,369 | (27,574 | ) | ||||||||||
| Loss Allocated to Noncontrolling Interests | 279 | 1,000 | 223 | 1,619 | ||||||||||||
| Preferred Distributions | (3,500 | ) | (3,500 | ) | (10,500 | ) | (6,999 | ) | ||||||||
| Net Income (Loss) Applicable to Common Shareholders | $ | 2,673 | $ | (25,004 | ) | $ | 5,092 | $ | (32,954 | ) | ||||||
| Earnings per Share: | ||||||||||||||||
| BASIC | ||||||||||||||||
| Income (Loss) from Continuing Operations Applicable to Common Shareholders | $ | 0.01 | $ | 0.01 | $ | (0.03 | ) | $ | (0.03 | ) | ||||||
| Income (Loss) from Discontinued Operations | 0.00 | (0.16 | ) | 0.06 | (0.17 | ) | ||||||||||
| Net Income (Loss) Applicable to Common Shareholders | $ | 0.01 | $ | (0.15 | ) | $ | 0.03 | $ | (0.20 | ) | ||||||
| DILUTED | ||||||||||||||||
| Income (Loss) from Continuing Operations Applicable to Common Shareholders | $ | 0.01 | $ | 0.01 | $ | (0.03 | ) | $ | (0.03 | ) | ||||||
| Income (Loss) from Discontinued Operations | 0.00 | (0.16 | ) | 0.06 | (0.17 | ) | ||||||||||
| Net Income (Loss) Applicable to Common Shareholders | $ | 0.01 | $ | (0.15 | ) | $ | 0.03 | $ | (0.20 | ) | ||||||
| Weighted Average Common Shares Outstanding: | ||||||||||||||||
| Basic | 196,360,325 | 168,985,193 | 184,394,561 | 168,666,752 | ||||||||||||
| Diluted | 199,392,955 | 172,266,298 | 184,394,561 | 168,666,752 | ||||||||||||
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Non-GAAP Measures
FFO and AFFO
The National Association of Real Estate Investment Trusts (“NAREIT”) developed Funds from Operations (“FFO”) as a non-GAAP financial measure of performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. We calculate FFO applicable to common shares and Common Units in accordance with the April 2002 National Policy Bulletin of NAREIT, which we refer to as the White Paper. The White Paper defines FFO as 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 loss from impairment of assets and depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our interpretation of the NAREIT definition is that noncontrolling interest in net income (loss) should be added back to (deducted from) net income (loss) as part of reconciling net income (loss) to FFO. Our FFO computation may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we do.
The GAAP measure that we believe to be most directly comparable to FFO, net income (loss) applicable to common shareholders, includes loss from the impairment of certain depreciable assets, our investment in unconsolidated joint ventures and land, depreciation and amortization expenses, gains or losses on property sales, noncontrolling interest and preferred dividends. In computing FFO, we eliminate these items because, in our view, they are not indicative of the results from our property operations. We determined that the loss from the impairment of certain depreciable assets, including investments in unconsolidated joint ventures and land, was driven by a measurable decrease in the fair value of certain hotel properties and other assets as determined by our analysis of those assets in accordance with applicable GAAP. As such, these impairments have been eliminated from net income (loss) to determine FFO.
Hersha also presents Adjusted Funds from Operations (AFFO), which reflects FFO in accordance with the NAREIT definition further adjusted by:
| · | adding back write-offs of deferred financing costs on debt extinguishment, both for consolidated and unconsolidated properties; |
| · | adding back amortization of deferred financing costs; |
| · | making adjustments for the amortization of original issue discount/premium; |
| · | adding back non-cash stock expense; |
| · | adding back acquisition and terminated transaction expenses; |
| · | adding back FFO attributed to our partners in consolidated joint ventures; 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. |
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FFO and AFFO 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 the Company’s performance or to cash flow as a measure of liquidity or ability to make distributions. We consider FFO and AFFO to be meaningful, additional measures of our 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 performance measures. We show both FFO from consolidated hotel operations and FFO from unconsolidated joint ventures because we believe it is meaningful for the investor to understand the relative contributions from our consolidated and unconsolidated hotels. The display of both FFO from consolidated hotels and FFO from unconsolidated joint ventures allows for a detailed analysis of the operating performance of our hotel portfolio by management and investors. We present FFO and AFFO applicable to common shares and Partnership units because our Partnership units are redeemable for common shares. We believe it is meaningful for the investor to understand FFO and AFFO applicable to all common shares and Partnership units.
Certain amounts related to depreciation and amortization and depreciation and amortization from discontinued operations in the prior year FFO reconciliation have been recast to conform to the current year presentation. In addition, based on guidance provided by NAREIT, we have eliminated loss from the impairment of certain depreciable assets, including investments in unconsolidated joint ventures and land, from net (income) loss to arrive at FFO in each year presented. The following table reconciles FFO and AFFO for the periods presented to the most directly comparable GAAP measure, net income (loss) applicable to common shares, for the same periods:
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HERSHA HOSPITALITY TRUST
Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)
(in thousands, except shares and per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2012 | September 30, 2011 | September 30, 2012 | September 30, 2011 | |||||||||||||
| Net income (loss) applicable to common shares | $ | 2,673 | $ | (25,004 | ) | $ | 5,092 | $ | (32,954 | ) | ||||||
| Loss allocated to noncontrolling interest | (279 | ) | (1,000 | ) | (223 | ) | (1,619 | ) | ||||||||
| Loss (income) from unconsolidated joint ventures | 1,431 | 1,570 | 1,971 | (8 | ) | |||||||||||
| Loss (gain) on disposition of hotel properties | 183 | (843 | ) | (11,269 | ) | (843 | ) | |||||||||
| Loss from impairment of depreciable assets | - | 30,248 | - | 30,248 | ||||||||||||
| Depreciation and amortization | 14,719 | 12,839 | 42,304 | 37,587 | ||||||||||||
| Depreciation and amortization from discontinued operations | - | 1,186 | 26 | 4,896 | ||||||||||||
| FFO allocated to noncontrolling interests in consolidated joint ventures | - | - | - | 239 | ||||||||||||
| Funds from consolidated hotel operations applicable to common shares and Partnership units | 18,727 | 18,996 | 37,901 | 37,546 | ||||||||||||
| (Loss) income from unconsolidated joint venture investments | (1,431 | ) | (1,570 | ) | (1,971 | ) | 8 | |||||||||
| Loss (gain) from remeasurement of investment in unconsolidated joint ventures | 1,668 | - | 1,892 | (2,757 | ) | |||||||||||
| Impairment of investment in unconsolidated joint ventures | - | 1,677 | - | 1,677 | ||||||||||||
| Depreciation and amortization of purchase price in excess of historical cost | 161 | 538 | 738 | 1,629 | ||||||||||||
| Interest in depreciation and amortization of unconsolidated joint ventures | 1,506 | 2,437 | 4,210 | 4,425 | ||||||||||||
| Funds from unconsolidated joint venture operations applicable to common shares and Partnership units | 1,904 | 3,082 | 4,869 | 4,982 | ||||||||||||
| Funds from Operations applicable to common shares and Partnership units | 20,631 | 22,078 | 42,770 | 42,528 | ||||||||||||
| Add: | ||||||||||||||||
| FFO allocated to noncontrolling interests in consolidated joint ventures | - | - | - | (239 | ) | |||||||||||
| Non-cash stock compensation expense | 1,923 | 1,495 | 6,322 | 4,765 | ||||||||||||
| Acquisition and terminated transaction costs | 85 | 147 | 1,167 | 2,263 | ||||||||||||
| Amortization of deferred financing costs | 824 | 877 | 2,325 | 2,507 | ||||||||||||
| Amortization of discounts and premiums | (215 | ) | 52 | (218 | ) | 156 | ||||||||||
| Deferred financing costs written off in debt extinguishment | 3 | 21 | 249 | 55 | ||||||||||||
| Straight-line amortization of ground lease expense | 2 | 60 | 38 | 184 | ||||||||||||
| Adjusted Funds from Operations | $ | 23,253 | $ | 24,730 | $ | 52,653 | $ | 52,219 | ||||||||
| AFFO per Diluted Weighted Average Common Shares and Units Outstanding | $ | 0.11 | $ | 0.14 | $ | 0.27 | $ | 0.29 | ||||||||
| Diluted Weighted Average Common Shares and Units Outstanding | 206,565,787 | 179,512,493 | 194,666,980 | 180,746,755 | ||||||||||||
| 510 Walnut Street . 9th Floor | Philadelphia . PA . 19106 | p. 215.238.1046 | f. 215.238.0157 | Page | 11 |
Adjusted EBITDA
Adjusted Earnings Before Interest, Taxes, and Depreciation and Amortization (EBITDA) is a non-GAAP financial measure within the meaning of the Securities and Exchange Commission rules. Our interpretation of Adjusted EBITDA is that EBITDA derived from our investment in unconsolidated joint ventures should be added back to net income (loss) as part of reconciling net income (loss) to Adjusted EBITDA. Our Adjusted EBITDA computation may not be comparable to EBITDA or Adjusted EBITDA reported by other companies that interpret the definition of EBITDA differently than we do. Management believes Adjusted EBITDA to be a meaningful measure of a REIT's performance because it is widely followed by industry analysts, lenders and investors and that it should be considered along with, but not as an alternative to, net income, cash flow, FFO and AFFO, as a measure of the company's operating performance.
HERSHA HOSPITALITY TRUST
Adjusted EBITDA
(in thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2012 | September 30, 2011 | September 30, 2012 | September 30, 2011 | |||||||||||||
| Net income (loss) applicable to common shares | $ | 2,673 | $ | (25,004 | ) | $ | 5,092 | $ | (32,954 | ) | ||||||
| Loss (income) from unconsolidated joint ventures | 1,431 | 1,570 | 1,971 | (8 | ) | |||||||||||
| Loss (gain) on disposition of hotel properties | 183 | (843 | ) | (11,269 | ) | (843 | ) | |||||||||
| Non-operating interest income | (28 | ) | (40 | ) | (56 | ) | (128 | ) | ||||||||
| Loss allocated to noncontrolling interest | (279 | ) | (1,000 | ) | (223 | ) | (1,619 | ) | ||||||||
| Loss from impairment of assets | - | 30,248 | - | 30,248 | ||||||||||||
| Distributions to Preferred Shareholders | 3,500 | 3,500 | 10,500 | 6,999 | ||||||||||||
| Interest expense from continuing operations | 11,149 | 10,145 | 33,073 | 29,516 | ||||||||||||
| Interest expense from discontinued operations | - | 1,518 | 1,201 | 4,358 | ||||||||||||
| Deferred financing costs written off in debt extinguishment | 3 | 21 | 249 | 55 | ||||||||||||
| Depreciation and amortization from continuing operations | 14,719 | 12,839 | 42,304 | 37,587 | ||||||||||||
| Depreciation and amortization from discontinued operations | - | 1,186 | 26 | 4,896 | ||||||||||||
| Acquisition and terminated transaction costs | 85 | 147 | 1,167 | 2,263 | ||||||||||||
| Non-cash stock compensation expense | 1,923 | 1,495 | 6,322 | 4,765 | ||||||||||||
| Straight-line amortization of ground lease expense | 2 | 60 | 38 | 184 | ||||||||||||
| Adjusted EBITDA from consolidated hotel operations | 35,361 | 35,842 | 90,395 | 85,319 | ||||||||||||
| (Loss) income from unconsolidated joint venture investments | (1,431 | ) | (1,570 | ) | (1,971 | ) | 8 | |||||||||
| Loss (gain) on remeasurement of investment in unconsolidated joint ventures | 1,668 | - | 1,892 | (2,757 | ) | |||||||||||
| Impairment of investment in unconsolidated joint ventures | - | 1,677 | - | 1,677 | ||||||||||||
| Depreciation and amortization of purchase price in excess of historical cost | 161 | 538 | 738 | 1,629 | ||||||||||||
| Adjustment for interest in interest expense, depreciation and amortization of unconsolidated joint ventures | 3,493 | 5,403 | 13,127 | 13,053 | ||||||||||||
| Adjusted EBITDA from unconsolidated joint venture operations | 3,891 | 6,048 | 13,786 | 13,610 | ||||||||||||
| Adjusted EBITDA | $ | 39,252 | $ | 41,890 | $ | 104,181 | $ | 98,929 | ||||||||
| 510 Walnut Street . 9th Floor | Philadelphia . PA . 19106 | p. 215.238.1046 | f. 215.238.0157 | Page | 12 |
Hotel EBITDA
Hotel EBITDA is a commonly used measure of performance in the hotel industry for a specific hotel or group of hotels. We believe Hotel EBITDA provides a more complete understanding of the operating results of the individual hotel or group of hotels. We calculate Hotel EBITDA by utilizing the total revenues generated from hotel operations less all operating expenses, property taxes, insurance and management fees, which calculation excludes Company expenses not specific to a hotel, such as corporate overhead. Because Hotel EBITDA is specific to individual hotels or groups of hotels and not to the Company as a whole, it is not directly comparable to any GAAP measure and should not be relied on as a measure of performance for our portfolio of hotels taken as a whole.
Supplemental Schedules
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.
Contact:
Ashish Parikh, CFO
Ph: (215) 238-1046
| 510 Walnut Street . 9th Floor | Philadelphia . PA . 19106 | p. 215.238.1046 | f. 215.238.0157 | Page | 13 |