SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): September 1, 1999
HERSHA HOSPITALITY TRUST
(Exact name of registrant as specified in its charter)
Maryland 005-55249 251811499
(State or other jurisdiction (Commission File No.) I.R.S. Employer
of incorporation) (Identification No.)
148 Sheraton Drive, Box A
New Cumberland, Pennsylvania 17070
(Address of principal executive offices)
(717) 770-2405
(Registrant's telephone number, including area code)
N/A
(former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
On July 27, 1999, the Board of Trustees of Hersha Hospitality Trust (the
"Company") approved the acquisition of all the partnership interests in 2844
Associates, a Pennsylvania limited partnership and, through the ownership of
2844 Associates, a 77-room Clarion Inn & Suites hotel located in Harrisburg,
Pennsylvania. The Board of Trustees also approved the acquisition of a Hampton
Inn hotel located in Danville, Pennsylvania from 3544 Associates. Collectively,
the Clarion Inn & Suites and the Hampton Inn hotels are referred to as the
("Hersha Acquisition Hotels").
2844 and 3544 Associates were established as Pennsylvania limited
partnerships owned by Hasu P. Shah and certain executive members and affiliates
of the Company (the "Hersha Affiliates").
Shree Associates, JSK II Associates, Devi Associates, Shreeji Associates,
Kunj Associates and Shanti III Associates (all Pennsylvania limited partnerships
controlled by certain Hersha Affiliates); Neil H. Shah and David L. Desfor (both
Hersha Affiliates); and Shreenathji Enterprises, Ltd. (a Pennsylvania
corporation controlled by certain Hersha Affiliates) contributed their
partnership interests in the Clarion Inn & Suites to 2844 Associates.
All of the limited partnership interests in 2844 Associates were
contributed to Hersha Hospitality Limited Partnership ("HHLP" or the
"Partnership"). Further, the general partnership interest in 2844 Associates,
which was owned by Shreenathji Enterprises, Ltd., was contributed to Hersha
Hospitality, LLC, a Virginia limited liability company ("HHLLC"). HHLP is the
sole member of HHLLC. Upon the transfer of both limited partnership and general
partnership interests by the Hersha Affiliates, 2844 became a wholly-owned
subsidiary of HHLP. 2844 Associates does not own any assets other than this
recently-acquired Clarion Inn & Suites hotel.
144 Associates, 344 Associates, 544 Associates and 644 Associates, all
Pennsylvania limited partnerships controlled by certain Hersha Affiliates, sold
their interests in the Hampton Inn, Danville along with the land and
improvements to 3544 Associates, a wholly-owned subsidiary of the Partnership.
3544 Associates does not own any assets other than this recently-acquired
Hampton Inn hotel along with the land and improvements.
The purchase prices for the Hampton Inn and Clarion Inn & Suites are $3.6
million and $2.7 million, respectively. The purchase price valuations for the
properties acquired from the Hersha Affiliates were based upon the rent to be
paid by the Lessee under percentage leases. The purchase prices of these hotels
will be adjusted on December 31, 2001 by applying a pricing methodology to such
hotels' cash flows in a manner similar to that of the other hotels purchased by
HHLP from the Hersha Affiliates. The adjustments must be approved by a majority
of the Company's independent trustees.
The Partnership acquired the Hampton Inn in exchange for (i) subordinated
units of limited partnership interest in the Partnership that will be
redeemable, subject to certain limitations, for an aggregate of approximately
173,333 of the Company's Class B common shares of beneficial interest with a
value of approximately $1.0 million, and (ii) the assumption of approximately
$2.6 million of mortgage indebtedness. The Company's Priority Class A common
shares of beneficial interest are entitled to a priority over the subordinated
units and Class B common shares with respect to distributions and amounts
payable upon liquidation for a period of time based upon the trading price of
the Priority Class A common shares, but in no event ending later than January
26, 2004. The purchase price of the Clarion Inn & Suites was paid through the
assumption of mortgage indebtedness of approximately $2.1 million and borrowings
under the Company's line of credit. Both the Hampton Inn and the Clarion Inn &
Suites were purchased as of September 1, 1999 (the "Settlement Date").
2
Following the acquisition of the hotel properties by the Partnership, both
properties will be leased by the Partnership to Hersha Hospitality Management,
L.P. (the "Lessee"), the lessee of the Partnership's other hotel properties. The
hotels will be leased pursuant to percentage leases that provide for rent based
in part on the room revenues from the hotels. The leases went into effect on the
Settlement Date.
The following table sets forth (i) the Initial Fixed Rent, (ii) Annual
Base Rent, and (iii) the annual Percentage Rent formula currently anticipated
for the Hampton Inn and the Clarion Inn & Suites, respectively.
Acquired Initial Base
Hotel Fixed Rent Rent Percentage Rent Formula
- ----- ---------- ---- -----------------------
Hampton Inn $504,116 $234,000 43.2% of room revenue up to
Danville, PA $916,749, plus 65% of room
revenue in excess of $916,749
but less than $1,078.528, plus
29.0% of room revenue in
excess of $1,078,528, plus
8.0% of all non-room revenue.
Clarion Inn & Suites $404,031 $175,500 35.3% of room revenue up to
Harrisburg, PA $855,611, plus 65% of room
revenue in excess of $855,611
but less than $1,006,601, plus
29.0% of room revenue in
excess of $1,006,601, plus
8.0% of all non-room revenue.
In connection with the sale of the Clarion Inn & Suites to the Company,
2844 Associates entered into an option agreement, dated September 1, 1999, with
2944 Associates, a Pennsylvania limited partnership owned by Hasu P. Shah and
certain executive members and affiliates of the Company. Under this option
agreement, 2844 Associates granted to 2944 Associates an option to purchase an
outparcel of land adjacent to the Clarion Inn & Suites. In consideration for the
grant of this option, 2944 Associates agreed to assume a debt of 2844 Associates
to Shreenathji Enterprises, Ltd. in the amount of $500,000. The purchase price
for this parcel shall be one dollar ($1.00), payable at the time of settlement.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements.
The combined balance sheets and statements of operations, partners'
equity and cash flows of the Hersha Acquisition Hotels as of
December 31, 1998 and June 30, 1999 are included as Exhibit 99.1 to
this Form 8-K/A.
(b) Pro Forma Financial Information.
The pro forma financial (unaudited) as of June 30, 1999 and for the
six months ended June 30, 1999 and the twelve months ended December
31, 1998 reflecting all of the acquisitions made by the Company
since its inception, including the acquisitions of the Hersha
Acquisition Hotels, is included as Exhibit 99.2 to this Form 8-K/A.
(c) Exhibits.
10.1 Option Agreement, dated September 1, 1999, between 2844
Associates and 2944 Associates
99.1 The combined balance sheets and statements of
operations, partners' equity and cash flows of the Hersha
Acquisition Hotels as of December 31, 1998 and June 30, 1999.
99.2 The pro forma financial (unaudited) as of June 30, 1999 and
for the six months ended June 30, 1999 and the twelve months
ended December 31, 1998.
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Hersha Hospitality Trust
By: /s/ Hasu P. Shah
--------------------
Hasu P. Shah
Chief Executive Officer
Date: November 15, 1999
4
EXHIBIT INDEX
10.1 Option Agreement, dated September 1, 1999, between 2844 Associates and
2944 Associates
99.1 The combined balance sheets and statements of operations, partners' equity
and cash flows of the Hersha Acquisition Hotels as of December 31, 1998
and June 30, 1999.
99.2 The pro forma financial (unaudited) as of June 30, 1999 and for the six
months ended June 30, 1999 and the twelve months ended December 31, 1998.
5