7a2f70c16ab742c

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2013

 

OR

          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____ to ____

 

COMMISSION FILE NUMBER: 001-14765

 

HERSHA HOSPITALITY TRUST

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland

 

251811499

(State or Other Jurisdiction of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

 

44 Hersha Drive, Harrisburg, PA

 

17102

(Address of Registrant’s Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (717) 236-4400

 

Indicate by check mark whether the registrant (i) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days.

xYes No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

xYes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

 

 

 

Large accelerated filer x

Accelerated filer 

 

Non-accelerated filer 

Small reporting company 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes xNo

 

As of August 1, 2013, the number of Class A common shares of beneficial interest outstanding was 202,669,197 and there were no Class B common shares outstanding.

 

 


 

 

 Hersha Hospitality Trust

Table of Contents

 

 

 

 

 

 

 

 

PART I.  FINANCIAL INFORMATION

Page

Item 1.

Financial Statements.

 

 

Consolidated Balance Sheets as of June 30, 2013 [Unaudited] and December 31, 2012

 

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2013 and 2012 [Unaudited]

 

Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2013 and 2012 [Unaudited]

 

Consolidated Statements of Equity for the Six Months Ended June 30, 2013 and 2012 [Unaudited]

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012 [Unaudited]

 

Notes to the Consolidated Financial Statements

11 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

37 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

52 

Item 4.

Controls and Procedures.

54 

 

 

 

PART II.  OTHER INFORMATION

 

Item 1.

Legal Proceedings.

55 

 Item 1A.

Risk Factors.

55 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

55 

Item 3.

Defaults Upon Senior Securities.

55 

Item 4.

Mine Safety Disclosures.

55 

Item 5.

Other Information.

55 

Item 6.

Exhibits.

55 

 

 

 

 

Signatures

56 

 

 

 

 

 

 

 

 

 

2


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2013 [UNAUDITED] AND DECEMBER 31, 2012

[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,
2013

 

December 31,
2012

Assets:

 

 

 

 

 

 

Investment in Hotel Properties, net of Accumulated Depreciation, (including consolidation of variable interest entity assets of $86,515 and $86,657)

 

$

1,672,120 

 

$

1,466,713 

Investment in Unconsolidated Joint Ventures

 

 

14,365 

 

 

16,007 

Development Loans Receivable

 

 

 -

 

 

28,425 

Cash and Cash Equivalents

 

 

29,294 

 

 

69,059 

Escrow Deposits

 

 

33,394 

 

 

26,792 

Hotel Accounts Receivable, net of allowance for doubtful accounts of $19 and $365

 

 

13,974 

 

 

11,538 

Deferred Financing Costs, net of Accumulated Amortization of $5,945 and $4,841

 

 

9,098 

 

 

8,695 

Due from Related Parties

 

 

5,776 

 

 

8,488 

Intangible Assets, net of Accumulated Amortization of $3,119 and $2,413

 

 

8,251 

 

 

8,698 

Deposits on Hotel Acquisitions

 

 

16,486 

 

 

37,750 

Other Assets

 

 

21,304 

 

 

25,514 

Hotel Assets Held for Sale

 

 

8,193 

 

 

 -

 

 

 

 

 

 

 

Total Assets

 

$

1,832,255 

 

$

1,707,679 

 

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

 

 

Line of Credit

 

$

66,200 

 

$

 -

Unsecured Term Loan

 

 

150,000 

 

 

100,000 

Unsecured Notes Payable

 

 

51,548 

 

 

51,548 

Mortgages Payable, including net Unamortized Premium (including consolidation of variable interest entity debt of $56,488 and $57,256)

 

 

649,680 

 

 

641,160 

Accounts Payable, Accrued Expenses and Other Liabilities

 

 

34,641 

 

 

33,838 

Dividends and Distributions Payable

 

 

15,949 

 

 

15,621 

Due to Related Parties

 

 

6,139 

 

 

4,403 

 

 

 

 

 

 

 

Total Liabilities

 

 

974,157 

 

 

846,570 

 

 

 

 

 

 

 

Redeemable Noncontrolling Interests - Common Units (Note 1)

 

$

 -

 

$

15,321 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

Preferred Shares:  $.01 Par Value, 29,000,000 shares Authorized, 7,600,000 Series B and C Shares Issued and Outstanding at June 30, 2013 and
7,000,000 Series A and B Shares Issued and Outstanding at December 31, 2012, with Liquidation Preferences of $25 per Share (Note 1)

 

 

76 

 

 

70 

Common Shares:  Class A, $.01 Par Value,  300,000,000 Shares Authorized at June 30, 2013 and December 31, 2012, 202,667,646 and
198,672,356 Shares Issued and Outstanding at June 30, 2013 and December 31, 2012, respectively

 

 

2,027 

 

 

1,986 

Common Shares:  Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding

 

 

 -

 

 

 -

Accumulated Other Comprehensive Income (Loss)

 

 

577 

 

 

(1,786)

Additional Paid-in Capital

 

 

1,196,914 

 

 

1,178,292 

Distributions in Excess of Net Income

 

 

(370,709)

 

 

(348,734)

Total Shareholders' Equity

 

 

828,885 

 

 

829,828 

 

 

 

 

 

 

 

Noncontrolling Interests (Note 1):

 

 

 

 

 

 

Noncontrolling Interests - Common Units

 

 

29,167 

 

 

15,484 

Noncontrolling Interests - Consolidated Variable Interest Entity

 

 

46 

 

 

476 

Total Noncontrolling Interests

 

 

29,213 

 

 

15,960 

 

 

 

 

 

 

 

Total Equity

 

 

858,098 

 

 

845,788 

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

1,832,255 

 

$

1,707,679 

 

The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.

 

 

3


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012 [UNAUDITED]

[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

2013

 

2012

 

2013

 

2012

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Hotel Operating Revenues

 

$

106,092 

 

$

94,785 

 

$

182,095 

 

$

158,855 

Interest Income from Development Loans

 

 

12 

 

 

518 

 

 

158 

 

 

1,139 

Other Revenues

 

 

60 

 

 

52 

 

 

94 

 

 

114 

Total Revenues

 

 

106,164 

 

 

95,355 

 

 

182,347 

 

 

160,108 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Hotel Operating Expenses

 

 

55,765 

 

 

50,130 

 

 

103,442 

 

 

89,849 

Gain on Insurance Settlements

 

 

 -

 

 

 -

 

 

(403)

 

 

 -

Hotel Ground Rent

 

 

266 

 

 

214 

 

 

494 

 

 

408 

Real Estate and Personal Property Taxes and Property Insurance

 

 

6,425 

 

 

5,090 

 

 

13,023 

 

 

10,122 

General and Administrative (including Share Based Payments of $2,439 and $2,266 and $4,827 and $4,399 for the three and six months ended, respectively)

 

 

5,699 

 

 

5,340 

 

 

10,695 

 

 

10,508 

Acquisition and Terminated Transaction Costs

 

 

773 

 

 

124 

 

 

776 

 

 

1,082 

Depreciation and Amortization

 

 

16,083 

 

 

13,924 

 

 

30,957 

 

 

27,155 

Gain on Hotel Acquisitions, net

 

 

(12,107)

 

 

 -

 

 

(12,107)

 

 

 -

Total Operating Expenses

 

 

72,904 

 

 

74,822 

 

 

146,877 

 

 

139,124 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

33,260 

 

 

20,533 

 

 

35,470 

 

 

20,984 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

469 

 

 

346 

 

 

925 

 

 

452 

Interest Expense

 

 

11,138 

 

 

10,442 

 

 

21,558 

 

 

21,925 

Other Expense

 

 

350 

 

 

287 

 

 

584 

 

 

522 

Loss on Debt Extinguishment

 

 

284 

 

 

240 

 

 

545 

 

 

246 

Income (loss) before Income (loss) from Unconsolidated Joint Venture
Investments, Income Taxes and Discontinued Operations

 

 

21,957 

 

 

9,910 

 

 

13,708 

 

 

(1,257)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from Unconsolidated Joint Ventures

 

 

148 

 

 

414 

 

 

(248)

 

 

(316)

Loss from Remeasurement of Investment in Unconsolidated Joint Venture

 

 

 -

 

 

(224)

 

 

 -

 

 

(224)

Income (loss) from Unconsolidated Joint Venture Investments

 

 

148 

 

 

190 

 

 

(248)

 

 

(540)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) Before Income Taxes

 

 

22,105 

 

 

10,100 

 

 

13,460 

 

 

(1,797)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

 

(1,438)

 

 

 -

 

 

(309)

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from Continuing Operations

 

 

20,667 

 

 

10,100 

 

 

13,151 

 

 

(1,797)

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued Operations  (Note 12):

 

 

 

 

 

 

 

 

 

 

 

 

Gain on Disposition of Hotel Properties

 

 

1,043 

 

 

6,949 

 

 

1,043 

 

 

11,452 

Impairment of Discontinued Assets

 

 

(3,723)

 

 

 -

 

 

(3,723)

 

 

 -

Income (loss) from Discontinued Operations

 

 

98 

 

 

340 

 

 

(62)

 

 

(180)

(Loss) Income from Discontinued Operations

 

 

(2,582)

 

 

7,289 

 

 

(2,742)

 

 

11,272 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

 

18,085 

 

 

17,389 

 

 

10,409 

 

 

9,475 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Income) Loss Allocated to Noncontrolling Interests

 

 

(210)

 

 

(796)

 

 

463 

 

 

(55)

Preferred Distributions

 

 

(3,589)

 

 

(3,500)

 

 

(7,433)

 

 

(7,000)

Extinguishment of Issuance Costs Upon Redemption of Series A Preferred Stock

 

 

 -

 

 

 -

 

 

(2,250)

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income applicable to Common Shareholders

 

$

14,286 

 

$

13,093 

 

$

1,189 

 

$

2,420 

 

The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.

 

 

4


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012 [UNAUDITED]

[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

2013

 

2012

 

2013

 

2012

 

Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from Continuing Operations applicable to Common Shareholders

 

$

0.08 

 

$

0.03 

 

$

0.01 

 

$

(0.05)

 

(Loss) Income from Discontinued Operations applicable to Common Shareholders

 

 

(0.01)

 

 

0.04 

 

 

(0.01)

 

 

0.06 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income applicable to Common Shareholders

 

$

0.07 

 

$

0.07 

 

$

 -

 

$

0.01 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DILUTED

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from Continuing Operations applicable to Common Shareholders

 

$

0.08 

 

$

0.03 

 

$

0.01 

 

$

(0.05)

 

(Loss) Income from Discontinued Operations applicable to Common Shareholders

 

 

(0.01)

 

 

0.04 

 

 

(0.01)

 

 

0.06 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income applicable to Common Shareholders

 

$

0.07 

 

$

0.07 

 

$

 -

 

$

0.01 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

198,633,051 

 

 

186,264,437 

 

 

197,835,465 

 

 

178,345,932 

 

Diluted

 

 

201,201,337 

 

*

189,011,990 

 

*

201,083,900 

 

*

178,345,932 

*

 

*       Income (loss) allocated to noncontrolling interest in Hersha Hospitality Limited Partnership has been excluded from the numerator and units of limited partnership interest in Hersha Hospitality Limited Partnership have been omitted from the denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the numerator and denominator would have no impact.  In addition, potentially dilutive common shares, if any, have been excluded from the denominator if they are anti-dilutive to income (loss) from continuing operations applicable to common shareholders.

 

The following table summarizes potentially dilutive securities that have been excluded from the denominator for the purpose of computing diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

Three Months Ended

 

 

Six Months Ended

   

 

 

June 30, 2013

 

 

June 30, 2012

 

 

June 30, 2013

 

 

June 30, 2012

   

 

 

 

 

 

 

 

 

 

 

 

 

Common Units of Limited Partnership Interest

 

 

6,944,496 

 

 

7,257,604 

 

 

7,022,238 

 

 

7,260,561 

Unvested Stock Awards Outstanding

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Contingently Issuable Share Awards

 

 

 -

 

 

 -

 

 

 -

 

 

2,188,470 

Options to Acquire Common Shares Outstanding

 

 

 -

 

 

 -

 

 

 -

 

 

554,189 

Total potentially dilutive securities excluded from the denominator

 

 

6,944,496 

 

 

7,257,604 

 

 

7,022,238 

 

 

10,003,220 

 

The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.

 

 

 

5


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

AS OF JUNE 30, 2013 [UNAUDITED] AND DECEMBER 31, 2012

[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2013

 

 

2012

 

 

2013

 

 

2012

Net income

$

18,085 

 

$

17,389 

 

$

10,409 

 

$

9,475 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of derivative instruments

 

2,519 

 

 

107 

 

 

2,971 

 

 

401 

Less: Reclassification adjustment for change in fair value of derivative instruments included in net income

 

(312)

 

 

(308)

 

 

(608)

 

 

(575)

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

20,292 

 

 

17,188 

 

 

12,772 

 

 

9,301 

Less:  Comprehensive (income) loss attributable to noncontrolling interests

 

(210)

 

 

(796)

 

 

463 

 

 

(55)

Comprehensive income attributable to common shareholders

$

20,082 

 

$

16,392 

 

$

13,235 

 

$

9,246 

 

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

 

 

6


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

Noncontrolling Interests

 

Redeemable Noncontrolling Interests

 

Class A
Common Shares

Class B
Common Shares

Preferred Shares

Additional Paid-In Capital

Accumulated Other Comprehensive (Loss) Income

Distributions in Excess of Net Earnings

Total Shareholders' Equity

 

Common Units

Consolidated Joint Ventures

Consolidated Variable Interest Entity

Total Noncontrolling Interests

Total Equity

 

Common Units

Balance at December 31, 2012

$     1,986

 -

70 

$        1,178,292

$                (1,786)

$       (348,734)

$          829,828

 

15,484 

$                      -

$                  476

$             15,960

$      845,788

 

$             15,321

Unit Conversion/Redemption

 -

 -

(234)

 -

 -

(233)

 

(767)

 -

 -

(767)
(1,000)

 

 -

Reclassification of Noncontrolling Interest

 -

 -

 -

 -

 -

 -

 -

 

15,251 

 -

 -

15,251 
15,251 

 

(15,251)

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 -

 

 

 

Preferred Stock Offering, net of costs

 -

 -

30 
72,341 

 -

 -

72,371 

 

 -

 -

 -

 -

72,371 

 

 -

Preferred Stock Redemption

 -

 -

(24)
(59,976)

 -

 -

(60,000)

 

 -

 -

 -

 -

(60,000)

 

 -

Dividends and Distributions declared:

 

 

 

 

 

 

 

 

 

 

 

 -

 

 

 

Common Stock ($0.12 per share)

 -

 -

 -

 -

 -

(25,414)
(25,414)

 

 -

 -

 -

 -

(25,414)

 

 -

Preferred Stock

 -

 -

 -

 -

 -

(7,433)
(7,433)

 

 -

 -

 -

 -

(7,433)

 

 -

Common Units ($0.12 per share)

 -

 -

 -

 -

 -

 -

 -

 

(838)

 -

 -

(838)
(838)

 

 -

Dividend Reinvestment Plan

 -

 -

 -

19 

 -

 -

19 

 

 -

 -

 -

 -

19 

 

 -

Stock Based Compensation

 

 

 

 

 

 

 

 

 

 

 

 -

 

 

 

Grants

40 

 -

 -

285 

 -

 -

325 

 

 -

 -

 -

 -

325 

 

 -

Amortization

 -

 -

 -

6,187 

 -

 -

6,187 

 

 -

 -

 -

 -

6,187 

 

 -

Change in Fair Value of Derivative Instruments

 -

 -

 -

 -

2,363 

 -

2,363 

 

 -

 -

 -

 -

2,363 

 

 -

Net Income (Loss)

 -

 -

 -

 -

 -

10,872 
10,872 

 

37 

 -

(430)
(393)
10,479 

 

(70)

Balance at June 30, 2013

$     2,027

$              -

$            76

$        1,196,914

$                     577

$       (370,709)

$          828,885

 

29,167 

$                      -

$                    46

$             29,213

$      858,098

 

$                        -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

 

 

7


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

Noncontrolling Interests

 

Redeemable Noncontrolling Interests

 

Class A
Common Shares

Class B
Common Shares

Preferred Shares

Additional Paid-In Capital

Accumulated Other Comprehensive Loss

Distributions in Excess of Net Earnings

Total Shareholders' Equity

 

Common Units

Consolidated Joint Ventures

Consolidated Variable Interest Entity

Total Noncontrolling Interests

Total Equity

 

Common Units

Balance at December 31, 2011

$     1,699

$              -

$            70

$        1,041,027

$                (1,151)

$       (310,974)

$          730,671

 

16,864 

$                  307

$                       -

$             17,171

$      747,842

 

$             14,955

Unit Conversion

 -

 -

 -

52 

 -

 -

52 

 

(52)

 -

 -

(52)

 -

 

 -

Reallocation of Noncontrolling Interest

 -

 -

 -

(1,548)

 -

 -

(1,548)

 

 -

 -

 -

 -

(1,548)

 

1,548 

Common Stock Issuance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock Offering, net of costs

240 

 -

 -

128,457 

 -

 -

128,697 

 

 

 

 

 

128,697 

 

 -

Common Stock Option Cancellation

25 

 -

 -

(25)

 -

 

 -

 

 -

 -

 -

 -

 -

 

 -

Dividends and Distributions declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock ($0.12 per share)

 -

 -

 -

 -

 -

(22,304)
(22,304)

 

 -

 -

 -

 -

(22,304)

 

 -

Preferred Stock

 -

 -

 -

 -

 -

(7,000)
(7,000)

 

 -

 -

 -

 -

(7,000)

 

 -

Common Units ($0.12 per share)

 -

 

 

 -

 -

 -

 -

 

(503)

 -

 -

(503)
(503)

 

(369)

Dividend Reinvestment Plan

 -

 -

 -

 -

 -

 

 -

 -

 -

 -

 

 -

Stock Based Compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grants

20 

 -

 -

2,454 

 -

 -

2,474 

 

 -

 -

 -

 -

2,474 

 

 -

Amortization

 -

 -

 -

3,249 

 -

 -

3,249 

 

 -

 -

 -

 -

3,249 

 

 -

Consolidation of Variable Interest Entity

 -

 -

 -

 -

 -

 -

 -

 

 -

 

956 
956 
956 

 

 -

Deconsolidation of Consolidated Joint Ventures

 -

 -

 -

 -

 -

 -

 -

 

 -

(307)

 -

(307)
(307)

 

 -

Change in Fair Value of Derivative Instruments

 -

 -

 -

 -

(174)

 -

(174)

 

 -

 -

 -

 -

(174)

 

 -

Net Income (Loss)

 -

 -

 -

 -

 -

9,420 
9,420 

 

57 

 -

(43)
14 
9,434 

 

41 

Balance at June 30, 2012

$     1,984

$              -

70 

$        1,173,674

$                (1,325)

$       (330,858)

$          843,545

 

16,366 

$                        -

$                  913

$             17,279

$      860,824

 

$             16,175

 

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

 

 

 

8


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

2012

Operating activities:

 

 

 

 

 

 

Net income

 

$

10,409 

 

$

9,475 

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

Gain on acquisition of hotel assets

 

 

(12,107)

 

 

 -

Gain on disposition of hotel assets

 

 

(1,043)

 

 

(11,452)

Impairment of assets

 

 

3,723 

 

 

 -

Deferred taxes

 

 

309 

 

 

 -

Depreciation

 

 

30,690 

 

 

27,127 

Amortization

 

 

1,246 

 

 

1,982 

Debt extinguishment

 

 

470 

 

 

Development loan interest added to principal

 

 

 -

 

 

(678)

Equity in loss of unconsolidated joint ventures

 

 

248 

 

 

540 

Distributions from unconsolidated joint ventures

 

 

12 

 

 

1,132 

Loss recognized on change in fair value of derivative instrument

 

 

106 

 

 

218 

Stock based compensation expense

 

 

4,827 

 

 

4,399 

Change in assets and liabilities:

 

 

 

 

 

 

(Increase) decrease in:

 

 

 

 

 

 

Hotel accounts receivable

 

 

(2,436)

 

 

(1,989)

Escrows

 

 

(4,048)

 

 

(2,023)

Other assets

 

 

(6)

 

 

95 

Due from related parties

 

 

2,712 

 

 

(4,583)

Increase (decrease) in:

 

 

 

 

 

 

Due to related parties

 

 

1,736 

 

 

1,366 

Accounts Payable, Accrued Expenses and Other Liabilities

 

 

3,861 

 

 

367 

Net cash provided by operating activities

 

 

40,709 

 

 

25,983 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

Purchase of hotel property assets

 

 

(166,390)

 

 

(68,008)

Deposits on hotel acquisitions, net

 

 

264 

 

 

(15,500)

Capital expenditures

 

 

(25,739)

 

 

(18,582)

Cash paid for hotel development projects

 

 

(9,907)

 

 

(5,956)

Proceeds from disposition of hotel properties and investment in unconsolidated joint venture

 

 

3,855 

 

 

63,921 

Net changes in capital expenditure escrows

 

 

(1,667)

 

 

(2,044)

Investment in notes receivable

 

 

 -

 

 

(150)

Repayment of notes receivable

 

 

 -

 

 

1,720 

Proceeds from insurance claims

 

 

2,189 

 

 

 -

Repayment of development loans receivable

 

 

15,122 

 

 

3,000 

Distributions from unconsolidated joint venture

 

 

1,382 

 

 

287 

Advances and capital contributions to unconsolidated joint ventures

 

 

 -

 

 

(130)

Net cash used in investing activities

 

 

(180,891)

 

 

(41,442)

 

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

 

 

9


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

2012

Financing activities:

 

 

 

 

 

 

Proceeds from (repayments of) borrowings under line of credit, net

 

 

66,200 

 

 

(21,000)

Proceeds from unsecured term loan borrowing

 

 

50,000 

 

 

 -

Principal repayment of mortgages and notes payable

 

 

(50,908)

 

 

(100,927)

Proceeds from mortgages and notes payable

 

 

60,000 

 

 

45,999 

Cash paid for deferred financing costs

 

 

(2,235)

 

 

(57)

Proceeds from issuance of preferred stock, net

 

 

72,371 

 

 

 -

Proceeds from issuance of common stock, net

 

 

 -

 

 

128,697 

Redemption of Preferred Stock

 

 

(60,000)

 

 

 -

Redemption of Common Partnership Units

 

 

(1,000)

 

 

 -

Settlement of interest rate cap

 

 

(661)

 

 

(69)

Distributions to partners in consolidated joint ventures

 

 

 

 

 

 -

Dividends paid on common shares

 

 

(25,154)

 

 

(20,589)

Dividends paid on preferred shares

 

 

(7,344)

 

 

(7,000)

Distributions paid on common partnership units

 

 

(852)

 

 

(872)

Net cash provided by financing activities

 

 

100,417 

 

 

24,182 

 

 

 

 

 

 

 

Net  (decrease) increase in cash and cash equivalents

 

 

(39,765)

 

 

8,723 

Cash and cash equivalents - beginning of period

 

 

69,059 

 

 

24,568 

 

 

 

 

 

 

 

Cash and cash equivalents - end of period

 

$

29,294 

 

$

33,291 

 

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

 

 

 

 

10


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012 [UNAUDITED]

[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

 

NOTE 1 – BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements of Hersha Hospitality Trust (“we,” “us,” “our” or the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) for interim financial information and with the general instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any future period.  Accordingly, readers of these consolidated interim financial statements should refer to the Company’s audited financial statements prepared in accordance with US GAAP, and the related notes thereto, for the year ended December 31, 2012, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, as certain footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted from this report pursuant to the rules of the Securities and Exchange Commission.

 

We are a self-administed Maryland real estate investment trust that was organized in May 1998 and completed our initial public offering in January 1999. Our common shares are traded on the New York Stock Exchange (the “NYSE”) under the symbol “HT.” We own our hotels and our investments in joint ventures through our operating partnership, Hersha Hospitality Limited Partnership (“HHLP”), for which we serve as the sole general partner.  As of June 30, 2013, we owned an approximate 96.7% partnership interest in our operating partnership, including a 1.0% general partnership interest.

 

Noncontrolling Interest

 

We classify the noncontrolling interests of our consolidated joint ventures and certain common units of limited partnership interest in HHLP (“Common Units”) that are nonredeemable (“Nonredeemable Common Units”) as equity. The noncontrolling interest of Nonredeemable Common Units totaled $29,167 as of June 30, 2013 and $15,484 as of December 31, 2012.  As of June 30, 2013, there were 6,914,716 Nonredeemable Common Units outstanding with a fair market value of $38,999, based on the price per share of our common shares on the NYSE on such date. In accordance with the partnership agreement of the Partnership, holders of these units may redeem them for cash unless we, in our sole and absolute discretion, elect to issue common shares on a one-for-one basis in lieu of paying cash.

 

Prior to February 1, 2013, certain Common Units (“Redeemable Common Units”) had been pledged as collateral in connection with a pledge and security agreement entered into by the Company and the holders of the Redeemable Common Units. The redemption feature contained in the pledge and security agreement where the Redeemable Common Units served as collateral contained a provision that could have resulted in a net cash settlement outside of the control of the Company. As a result, prior to February 1, 2013, the Redeemable Common Units were classified in the mezzanine section of the consolidated balance sheets as they did not meet the requirements for equity classification under US GAAP. The carrying value of the Redeemable Common Units equaled the greater of carrying value based on the accumulation of historical cost or the redemption value.  As of February 1, 2013, the aforementioned pledge and security agreement is no longer in effect, the Common Units subject to the pledge and security agreement have been released and such Common Units are treated as Nonredeemable Common Units.  As of June 30, 2013, there were no outstanding Common Units designated as Redeemable Common Units. As of December 31, 2012, the Redeemable Common Units were valued on the consolidated balance sheets at redemption value because the Redeemable Common Units redemption value was greater than historical cost of $11,753.

 

Net income or loss attributed to Nonredeemable Common Units and Redeemable Common Units, as well as the net income or loss related to the noncontrolling interests of our consolidated joint ventures and consolidated variable interest entity, is included in net income or loss in the consolidated statements of operations. Net income or loss attributed to the Common Units and the noncontrolling interests of our consolidated joint ventures and consolidated variable interest entity is excluded from net income or loss applicable to common shareholders in the consolidated statements of operations.

11


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012 [UNAUDITED]

[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

 

NOTE 1 – BASIS OF PRESENTATION (CONTINUED)

 

Shareholders’ Equity

 

On February 25, 2013, we completed a public offering of 3,000,000 6.875% Series C Cumulative Redeemable Preferred Shares. These shares have a par value of $0.01 per share with a $25.00 liquidation preference per share. Net proceeds of the offering, after deducting the underwriting discount and the offering expenses payable by us, were approximately $72,371. We utilized the net proceeds of the offering to redeem all outstanding 8.00% Series A Cumulative Redeemable Preferred Shares on March 28, 2013, and for general corporate purposes.

 

These shares were redeemed at a per share redemption price of $25.00 together with accrued and unpaid dividends to the redemption date for an aggregate per share redemption price of $25.4056.  Dividends ceased accruing on the Series A Preferred Shares on March 28, 2013.

 

Terms of the Series B and Series C preferred shares outstanding at June 30, 2013 and the Series A and Series B preferred shares outstanding at December 31, 2012 are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares Outstanding

 

 

 

 

 

 

 

Dividend Per Share
Six Months Ended

Series

 

June 30, 2013

 

December 31, 2012

 

 

Liquidation Preference

 

Distribution Rate

 

 

June 30, 2013