0f2589577f564b8

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2014

 

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.

Yes 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).

Yes 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 

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 No

 

As of May 2, 2014, the number of Class A common shares of beneficial interest outstanding was 200,624,864 and there were no Class B common shares of beneficial interest outstanding.

 

 


 

 

 Hersha Hospitality Trust

Table of Contents

 

 

 

 

 

 

 

 

PART I.  FINANCIAL INFORMATION

Page

Item 1.

Financial Statements.

 

 

Consolidated Balance Sheets as of March 31, 2014 [Unaudited] and December 31, 2013

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2014 and 2013 [Unaudited]

 

Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2014 and 2013 [Unaudited]

 

Consolidated Statements of Equity for the Three Months Ended March 31, 2014 and 2013 [Unaudited]

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013 [Unaudited]

 

Notes to the Consolidated Financial Statements

11 

Item 2.

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

34 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

47 

Item 4.

Controls and Procedures.

48 

 

 

 

PART II.  OTHER INFORMATION

 

Item 1.

Legal Proceedings.

49 

Item 1A.

Risk Factors.

49 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

49 

Item 3.

Defaults Upon Senior Securities.

49 

Item 4.

Mine Safety Disclosures.

49 

Item 5.

Other Information.

49 

Item 6.

Exhibits.

50 

 

 

 

 

Signatures

51 

 

 

 

 

 

 

 

 

 

2


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2014 [UNAUDITED] AND DECEMBER 31, 2013

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2014

 

December 31, 2013

Assets:

 

 

 

 

 

 

Investment in Hotel Properties, Net of Accumulated Depreciation, Including Consolidation of Variable Interest Entity Assets of $85,388 and $85,759

 

$

1,558,833 

 

$

1,535,835 

Investment in Unconsolidated Joint Ventures

 

 

11,624 

 

 

12,044 

Cash and Cash Equivalents

 

 

24,312 

 

 

36,213 

Escrow Deposits

 

 

21,868 

 

 

25,938 

Hotel Accounts Receivable, Net of Allowance for Doubtful Accounts of $60 and $43

 

 

10,822 

 

 

9,141 

Deferred Financing Costs, Net of Accumulated Amortization of $5,866 and $7,070

 

 

8,611 

 

 

7,570 

Due from Related Parties

 

 

5,345 

 

 

11,124 

Intangible Assets, Net of Accumulated Amortization of $3,194 and $3,227

 

 

7,499 

 

 

7,603 

Deposits on Hotel Acquisitions

 

 

16,486 

 

 

18,586 

Other Assets

 

 

24,836 

 

 

27,460 

Hotel Assets Held for Sale

 

 

28,331 

 

 

56,583 

Total Assets

 

$

1,718,567 

 

$

1,748,097 

 

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

 

 

Line of Credit

 

$

23,000 

 

$

 -

Unsecured Term Loan

 

 

150,000 

 

 

150,000 

Unsecured Notes Payable

 

 

51,548 

 

 

51,548 

Mortgages Payable, including Net Unamortized Premium and Consolidation of Variable Interest Entity Debt of $55,313 and $55,714

 

 

571,767 

 

 

571,953 

Accounts Payable, Accrued Expenses and Other Liabilities

 

 

49,901 

 

 

40,852 

Dividends and Distributions Payable

 

 

15,868 

 

 

15,955 

Due to Related Parties

 

 

6,722 

 

 

4,815 

Liabilities Related to Hotel Assets Held for Sale

 

 

18,387 

 

 

45,835 

Total Liabilities

 

 

887,193 

 

 

880,958 

 

 

 

 

 

 

 

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 March 31, 2014 and December 31, 2013, with Liquidation Preferences of $25 Per Share (Note 1)

 

$

76 

 

$

76 

Common Shares:  Class A, $.01 Par Value, 300,000,000 Shares Authorized at March 31, 2014 and December 31, 2013, 200,622,708 and 202,759,419 Shares Issued and Outstanding at March 31, 2014 and December 31, 2013, respectively

 

 

2,006 

 

 

2,028 

Common Shares:  Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding at March 31, 2014 and December 31, 2013

 

 

 -

 

 

 -

Accumulated Other Comprehensive Loss

 

 

(476)

 

 

(376)

Additional Paid-in Capital

 

 

1,189,372 

 

 

1,200,798 

Distributions in Excess of Net Income

 

 

(387,863)

 

 

(364,568)

Total Shareholders' Equity

 

 

803,115 

 

 

837,958 

 

 

 

 

 

 

 

Noncontrolling Interests (Note 1):

 

 

 

 

 

 

Noncontrolling Interests - Common Units

 

 

28,777 

 

 

29,523 

Noncontrolling Interests - Consolidated Variable Interest Entity

 

 

(518)

 

 

(342)

Total Noncontrolling Interests

 

 

28,259 

 

 

29,181 

 

 

 

 

 

 

 

Total Equity

 

 

831,374 

 

 

867,139 

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

1,718,567 

 

$

1,748,097 

 

 

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 MONTHS ENDED MARCH 31, 2014 AND 2013 [UNAUDITED]

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

Revenue:

 

 

 

 

 

 

 

Hotel Operating Revenues

 

$

79,917 

 

$

65,242 

 

Interest Income from Development Loans

 

 

 -

 

 

146 

 

Other Revenues

 

 

33 

 

 

205 

 

Total Revenues

 

 

79,950 

 

 

65,593 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

Hotel Operating Expenses

 

 

48,776 

 

 

40,176 

 

Insurance Recoveries

 

 

(2,045)

 

 

(403)

 

Hotel Ground Rent

 

 

410 

 

 

228 

 

Real Estate and Personal Property Taxes and Property Insurance

 

 

6,806 

 

 

5,816 

 

General and Administrative (including Share Based Payments of $1,112 and $2,388 for the three months ended March 31, 2014 and 2013, respectively)

 

 

3,902 

 

 

5,150 

 

Acquisition and Terminated Transaction Costs

 

 

134 

 

 

 

Depreciation and Amortization

 

 

16,343 

 

 

12,698 

 

Total Operating Expenses

 

 

74,326 

 

 

63,668 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

5,624 

 

 

1,925 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

398 

 

 

456 

 

Interest Expense

 

 

10,048 

 

 

9,415 

 

Other Expense

 

 

198 

 

 

 -

 

Loss on Debt Extinguishment

 

 

644 

 

 

261 

 

Loss Before Loss from Unconsolidated Joint Venture Investments, Income Taxes and Discontinued Operations

 

 

(4,868)

 

 

(7,295)

 

 

 

 

 

 

 

 

 

Loss from Unconsolidated Joint Venture Investments

 

 

(420)

 

 

(396)

 

 

 

 

 

 

 

 

 

Loss Before Income Taxes

 

 

(5,288)

 

 

(7,691)

 

 

 

 

 

 

 

 

 

Income Tax Benefit

 

 

108 

 

 

1,130 

 

 

 

 

 

 

 

 

 

Loss from Continuing Operations

 

 

(5,180)

 

 

(6,561)

 

 

 

 

 

 

 

 

 

Discontinued Operations  (Note 11):

 

 

 

 

 

 

 

Gain on Disposition of Hotel Properties

 

 

138 

 

 

 -

 

Impairment of Discontinued Assets

 

 

(1,800)

 

 

 -

 

Income (Loss) from Discontinued Operations, Net of Income Taxes

 

 

329 

 

 

(1,115)

 

Loss from Discontinued Operations

 

 

(1,333)

 

 

(1,115)

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(6,513)

 

 

(7,676)

 

 

 

 

 

 

 

 

 

Loss Allocated to Noncontrolling Interests

 

 

507 

 

 

673 

 

Preferred Distributions

 

 

(3,589)

 

 

(3,844)

 

Extinguishment of Issuance Costs Upon Redemption of Series A Preferred Shares

 

 

 -

 

 

(2,250)

 

 

 

 

 

 

 

 

 

Net Loss Applicable to Common Shareholders

 

$

(9,595)

 

$

(13,097)

 

 

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 MONTHS ENDED MARCH 31, 2014 AND 2013 [UNAUDITED]

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

2014

 

2013

 

 

Earnings Per Share:

 

 

 

 

 

 

 

 

BASIC

 

 

 

 

 

 

 

 

Loss from Continuing Operations Applicable to Common Shareholders

 

$

(0.04)

 

$

(0.06)

 

 

Loss from Discontinued Operations Applicable to Common Shareholders

 

 

(0.01)

 

 

(0.01)

 

 

Net Loss Income Applicable to Common Shareholders

 

$

(0.05)

 

$

(0.07)

 

 

 

 

 

 

 

 

 

 

 

DILUTED

 

 

 

 

 

 

 

 

Loss from Continuing Operations Applicable to Common Shareholders

 

$

(0.04)

 

$

(0.06)

 

 

Loss from Discontinued Operations Applicable to Common Shareholders

 

 

(0.01)

 

 

(0.01)

 

 

Net Loss Income Applicable to Common Shareholders

 

$

(0.05)

 

$

(0.07)

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

200,743,751 

 

 

197,029,017 

 

 

Diluted

 

 

200,743,751 

*

 

197,029,017 

*

 

 

*Income (loss) allocated to noncontrolling interest in Hersha Hospitality Limited Partnership (the “Operating Partnership” or “HHLP”) has been excluded from the numerator and common units of limited partnership interest (“Common Units”) in the Operating Partnership have been omitted from the denominator for the purpose of computing diluted earnings per share since the effect of including these shares and units 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 March 31,

 

   

 

 

2014

 

 

2013

 

   

 

 

 

 

 

 

 

Common Units of Limited Partnership Interest

 

 

6,914,716 

 

 

7,100,844 

 

Unvested Stock Awards Outstanding

 

 

650,379 

 

 

1,779,890 

 

Contingently Issuable Share Awards

 

 

650,809 

 

 

3,027,599 

 

Total Potentially Dilutive Securities Excluded from the Denominator

 

 

8,215,904 

 

 

11,908,333 

 

 

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

 

 

 

5


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

 

2013

 

Net Loss

$

(6,513)

 

 

(7,676)

 

Other Comprehensive Loss

 

 

 

 

 

 

Change in Fair Value of Derivative Instruments

 

256 

 

 

452 

 

Less: Reclassification Adjustment for Change in Fair Value of Derivative Instruments Included in Net Income

 

(356)

 

 

(296)

 

 

 

 

 

 

 

 

Comprehensive Loss

 

(6,613)

 

 

(7,520)

 

Less:  Comprehensive Loss Attributable to Noncontrolling Interests

 

507 

 

 

673 

 

Less:  Preferred Distributions

 

(3,589)

 

 

(3,844)

 

Less:  Extinguishment of Issuance Costs Upon Redemption of Series A Preferred Shares

 

 -

 

 

(2,250)

 

Comprehensive Loss Attributable to Common Shareholders

$

(9,695)

 

$

(12,941)

 

 

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

 

 

6


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

Noncontrolling Interests

 

 

Common Shares

Class A Common Shares ($)

Class B Common Shares ($)

Preferred Shares

Preferred Shares ($)

Additional Paid-In Capital ($)

Accumulated Other Comprehensive Loss ($)

Distributions in Excess of Net Earnings ($)

Total Shareholders' Equity ($)

 

Shares

Common Units ($)

Consolidated Variable Interest Entity ($)

Total Noncontrolling Interests ($)

Total Equity ($)

Balance at December 31, 2013

202,759,419 
2,028 

 -

7,600,000 
76 
1,200,798 
(376)
(364,568)
837,958 

 

6,914,716 
29,523 
(342)
29,181 
867,139 

Repurchase of Common Stock

(2,626,854)
(26)

 -

 -

 -

(13,637)

 -

(1,621)
(15,284)

 

 -

 -

 -

 -

(15,284)

Dividends and Distributions declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock ($0.06 per share)

 -

 -

 -

 -

 -

 -

 -

(12,079)
(12,079)

 

 -

 -

 -

 -

(12,079)

Preferred Stock

 -

 -

 -

 -

 -

 -

 -

(3,589)
(3,589)

 

 -

 -

 -

 -

(3,589)

Common Units ($0.06 per share)

 -

 -

 -

 -

 -

 -

 -

 -

 -

 

 -

(415)

 -

(415)
(415)

Dividend Reinvestment Plan

2,154 

 -

 -

 -

 -

11 

 -

 -

11 

 

 -

 -

 -

 -

11 

Stock Based Compensation

 

 

 

 -

 

 

 

 

 

 

 -

 

 

 -

 

Grants

487,989 

 -

 -

 -

(4)

 -

 -

 -

 

 -

 -

 -

 -

 -

Amortization

 -

 -

 -

 -

 -

2,204 

 -

 -

2,204 

 

 -

 -

 -

 -

2,204 

Change in Fair Value of Derivative Instruments

 -

 -

 -

 -

 -

 -

(100)

 -

(100)

 

 -

 -

 -

 -

(100)

Net Loss

 -

 -

 -

 -

 -

 -

 -

(6,006)
(6,006)

 

 -

(331)
(176)
(507)
(6,513)

Balance at March 31, 2014

200,622,708 
2,006 

 -

7,600,000 
76 
1,189,372 
(476)
(387,863)
803,115 

 

6,914,716 
28,777 
(518)
28,259 
831,374 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 THREE MONTHS ENDED MARCH 31, 2014 AND 2013 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

Noncontrolling Interests

 

Redeemable Noncontrolling Interests

 

Common Shares

Class A Common Shares ($)

Class B Common Shares ($)

Preferred Shares

Preferred Shares ($)

Additional Paid-In Capital ($)

Accumulated Other Comprehensive Loss ($)

Distributions in Excess of Net Earnings ($)

Total Shareholders' Equity ($)

 

Shares

Common Units ($)

Consolidated Variable Interest Entity ($)

Total Noncontrolling Interests ($)

Total Equity ($)

 

Shares

Common Units ($)

Balance at December 31, 2012

198,672,356 
1,986 

 -

7,000,000 
70 
1,178,292 
(1,786)
(348,734)
829,828 

 

4,048,254 
15,484 
476 
15,960 
845,788 

 

3,064,252 
15,321 

Unit Conversion

17,790 

 -

 -

 -

69 

 -

 -

70 

 

(17,790)
(70)

 -

(70)

 -

 

 -

 -

Reallocation of Noncontrolling Interest

 -

 -

 -

 -

 -

 -

 -

 -

 -

 

3,064,252 
15,251 

 -

15,251 
15,251 

 

(3,064,252)
(15,251)

Preferred Stock

 -

 

 

 -

 

 

 

 

 

 

 -

 

 

 

 

 

 -

 

Preferred Stock Offering, Net of Costs

 -

 -

 -

 -

30 
72,389 

 -

 -

72,419 

 

 -

 -

 -

 -

72,419 

 

 -

 -

Preferred Stock Redemption

 -

 -

 -

 -

(24)
(59,976)

 -

 

(60,000)

 

 -

 -

 -

 -

(60,000)

 

 -

 -

Dividends and Distributions declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock ($0.06 per share)

 -

 -

 -

 -

 -

 -

 -

(13,250)
(13,250)

 

 -

 -

 -

 -

(13,250)

 

 -

 -

Preferred Stock

 -

 -

 -

 -

 -

 -

 -

(3,844)
(3,844)

 

 -

 -

 -

 -

(3,844)

 

 -

 -

Common Units ($0.06 per share)

 -

 -

 

 -

 

 -

 -

 -

 -

 

 -

(426)

 -

(426)
(426)

 

 -

 -

Dividend Reinvestment Plan

2,097 

 -

 -

 -

 -

10 

 -

 -

10 

 

 -

 -

 -

 -

10 

 

 -

 -

Stock Based Compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grants

3,860,907 
39 

 -

 -

 -

(39)

 -

 -

 -

 

 -

 -

 -

 -

 -

 

 -

 -

Amortization

 -

 -

 -

 -

 -

4,094 

 -

 -

4,094 

 

 -

 -

 -

 -

4,094 

 

 -

 -

Change in Fair Value of Derivative Instruments

 -

 -

 -

 -

 -

 -

156 

 -

156 

 

 -

 -

 -

 -

156 

 

 -

 -

Net Loss

 -

 -

 -

 -

 -

 -

 -

(7,003)
(7,003)

 

 -

(402)
(201)
(603)
(7,606)

 

 -

(70)

Balance at March 31, 2013

202,553,150 
2,026 

 -

7,000,000 
76 
1,194,839 
(1,630)
(372,831)
822,480 

 

7,094,716 
29,837 
275 
30,112 
852,592 

 

 -

 -

 

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 THREE MONTHS ENDED MARCH 31, 2014 AND 2013 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

Operating Activities:

 

 

 

 

 

 

Net Loss

 

$

(6,513)

 

$

(7,676)

Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:

 

 

 

 

 

 

Gain on Disposition of Hotel Assets

 

 

(138)

 

 

 -

Impairment of Assets

 

 

1,800 

 

 

 -

Deferred Taxes

 

 

(108)

 

 

(1,130)

Depreciation

 

 

16,244 

 

 

14,741 

Amortization

 

 

622 

 

 

720 

Debt Extinguishment

 

 

552 

 

 

207 

Equity in Loss (Income) of Unconsolidated Joint Ventures

 

 

420 

 

 

396 

Loss Recognized on Change in Fair Value of Derivative Instrument

 

 

12 

 

 

Stock Based Compensation Expense

 

 

1,112 

 

 

2,388 

Change in Assets and Liabilities:

 

 

 

 

 

 

(Increase) Decrease in:

 

 

 

 

 

 

Hotel Accounts Receivable

 

 

(1,846)

 

 

353 

Escrows

 

 

(2,103)

 

 

(3,091)

Other Assets

 

 

3,299 

 

 

940 

Due from Related Parties

 

 

5,779 

 

 

(3,576)

Increase (Decrease) in:

 

 

 

 

 

 

Due to Related Parties

 

 

2,210 

 

 

685 

Accounts Payable, Accrued Expenses and Other Liabilities

 

 

(2,400)

 

 

7,265 

Net Cash Provided by Operating Activities

 

$

18,942 

 

$

12,229 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

Purchase of Hotel Property Assets

 

$

(16,500)

 

$

 -

Deposits on Hotel Acquisitions, Net

 

 

(1,000)

 

 

(2,486)

Capital Expenditures

 

 

(11,092)

 

 

(12,603)

Cash Paid for Hotel Development Projects

 

 

(2,396)

 

 

(4,916)

Proceeds from Disposition of Hotel Properties

 

 

13,397 

 

 

 -

Net Changes in Capital Expenditure Escrows

 

 

3,025 

 

 

(1,792)

Proceeds from Insurance Claims

 

 

1,033 

 

 

400 

Repayment of Development Loans Receivable

 

 

 -

 

 

13,143 

Distributions from Unconsolidated Joint Venture

 

 

 -

 

 

1,353 

Net Cash Used in Investing Activities

 

$

(13,533)

 

$

(6,901)

 

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 THREE MONTHS ENDED MARCH 31, 2014 AND 2013 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

Financing Activities:

 

 

 

 

 

 

Proceeds from (Repayments of) Borrowings Under Line of Credit, Net

 

$

23,000 

 

$

 -

Proceeds from Unsecured Term Loan Borrowing

 

 

 -

 

 

50,000 

Principal Repayment of Mortgages and Notes Payable

 

 

(16,129)

 

 

(41,288)

Proceeds from Mortgages and Notes Payable

 

 

9,500 

 

 

5,000 

Cash Paid for Deferred Financing Costs

 

 

(2,239)

 

 

(80)

Proceeds from Issuance of Preferred Stock, Net

 

 

 -

 

 

72,419 

Redemption of Series A Preferred Shares

 

 

 -

 

 

(60,000)

Repurchase of Common Shares

 

 

(15,284)

 

 

 -

Settlement of Interest Rate Cap

 

 

 -

 

 

(565)

Dividends Paid on Common Shares

 

 

(12,154)

 

 

(11,910)

Dividends Paid on Preferred Shares

 

 

(3,589)

 

 

(4,473)

Distributions Paid on Common Partnership Units

 

 

(415)

 

 

(430)

Net Cash (Used In) Provided by Financing Activities

 

$

(17,310)

 

$

8,673 

 

 

 

 

 

 

 

Net (Decrease) Increase in Cash and Cash Equivalents

 

$

(11,901)

 

$

14,001 

Cash and Cash Equivalents - Beginning of Period

 

 

36,213 

 

 

69,059 

 

 

 

 

 

 

 

Cash and Cash Equivalents - End of Period

 

$

24,312 

 

$

83,060 

 

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 MONTHS ENDED MARCH 31, 2014 AND 2013 [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 months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 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, 2013, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, 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 March 31, 2014, we owned an approximate 96.7% partnership interest in HHLP, including a 1.0% general partnership interest.

 

Noncontrolling Interest

 

We classify the noncontrolling interests of our consolidated variable interest entity 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 $28,777 as of March 31, 2014 and $29,523 as of December 31, 2013.  As of March 31, 2014, there were 6,914,716 Nonredeemable Common Units outstanding with a fair market value of $40,313, based on the price per share of our common shares on the NYSE on such date. In accordance with the partnership agreement of HHLP, 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.

 

Net income or loss attributed to Nonredeemable 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.

 

Shareholders’ Equity

 

Terms of the Series B and Series C Preferred Shares outstanding at March 31, 2014 and December 31, 2013 are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Per Share  

 

 

Shares Outstanding

 

 

 

 

 

 

 

Three Months Ended March 31,

Series

 

March 31, 2014

 

December 31, 2013

 

 

Aggregate Liquidation Preference

 

Distribution Rate

 

 

2014

 

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series B

 

4,600,000 

 

4,600,000 

 

$

115,000 

 

8.000% 

 

$

0.5000 

 

$

0.5000 

Series C

 

3,000,000 

 

3,000,000 

 

 

75,000 

 

6.875% 

 

 

0.4297 

 

 

0.1862 

 

 

7,600,000 

 

7,600,000 

 

 

 

 

 

 

 

 

 

 

 

 

11


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 [UNAUDITED]

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

 

NOTE 1 – BASIS OF PRESENTATION (CONTINUED)

 

In December 2012, our Board of Trustees authorized us to repurchase from time to time up to an aggregate of $75,000 of our outstanding common shares through December 31, 2013. We did not repurchase any common shares prior to the expiration of the share repurchase program. In January 2014, our Board of Trustees again authorized us to repurchase from time to time up to an aggregate of $75,000 of our outstanding common shares. The current share repurchase program will expire on December 31, 2014. For the three months ended March 31, 2014, the Company repurchased 2,626,854 common shares for an aggregate purchase price of $15,284.  Upon repurchase by the Company, these common shares ceased to be outstanding and became authorized but unissued commons shares.

 

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 $72,419.

 

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.  The Series A Preferred 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.

 

 

 

 

 

 

 

 

 

12


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 [UNAUDITED]

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

 

NOTE 2 – INVESTMENT IN HOTEL PROPERTIES

 

Investment in hotel properties consists of the following at March 31, 2014 and December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2014

 

 

December 31, 2013

 

 

 

 

 

 

 

Land

 

$

324,788 

 

$

339,027 

Buildings and Improvements

 

 

1,290,501 

 

 

1,222,639 

Furniture, Fixtures and Equipment

 

 

175,089 

 

 

171,116 

Construction in Progress

 

 

38,411 

 

 

63,168 

 

 

 

1,828,789 

 

 

1,795,950 

 

 

 

 

 

 

 

Less Accumulated Depreciation

 

 

(269,956)

 

 

(260,115)

 

 

 

 

 

 

 

Total Investment in Hotel Properties

 

$

1,558,833 

 

$

1,535,835 

 

During the three months ended March 31, 2014, we acquired the following wholly-owned hotel property:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hotel

 

Acquisition Date

 

 

Land

 

 

Buildings and Improvements

 

 

Furniture Fixtures and Equipment

 

 

Ground Lease Intangible

 

 

Franchise Fees and Loan Costs

 

 

Total Purchase Price

 

 

Assumption of Debt

Hotel Oceana,
Santa Barbara, CA

 

2/28/2014

 

$

 -

 

$

55,080 

 

$

805 

 

$

(14,230)

 

$

273 

 

$

41,928 

 

$

24,924 

 

Acquisition-related cost, such as due diligence, legal and accounting fees, are not capitalized or applied in determining the fair value of the above acquired assets.  During the three months ended March 31, 2014, we paid $119 in acquisition costs related to the above acquired asset.

 

 

Included in the consolidated statements of operations for the three months ended March 31, 2014 are total revenues of $712 and a  total net income of $29 for the hotel we acquired during the three months ended March 31, 2014 and consolidated since the date of acquisition.

 

 

13


 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 [UNAUDITED]

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

 

NOTE 2 – INVESTMENT IN HOTEL PROPERTIES (CONTINUED)

 

Pro Forma Results (Unaudited)

 

The following condensed pro forma financial data for the three months ended March 31, 2014 and 2013, are presented as if the Hotel Oceana had been acquired as of January 1, 2013 and the four hotels acquired by the Company in 2013 (other than the Hyatt Union Square, which did not have operating history prior to acquisition) had been acquired as of January 1, 2012.  The condensed pro forma financial data is not necessarily indicative of what actual results of operations of the Company would have been for the periods presented assuming the acquisitions had been consummated on January 1, 2013 and January 1, 2012 at the beginning of the year presented, nor do they purport to represent the results of operations for future periods.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

Pro Forma Total Revenues

 

 

$

81,148 

 

$

75,678 

 

 

 

 

 

 

 

 

Pro Forma Loss from Continuing Operations

 

 

$

(5,550)

 

$

(5,171)

Loss from Discontinued Operations

 

 

 

(1,333)

 

 

(1,115)

Pro Forma Net Loss

 

 

 

(6,883)

 

 

(6,286)

Loss Allocated to Noncontrolling Interest

 

 

 

(495)

 

 

(721)

Preferred Distributions

 

 

 

(3,589)

 

 

(3,844)

Extinguishment of Issuance Costs Upon Redemption of Series A Preferred Shares

 

 

 

 -

 

 

(2,250)

Pro Forma Net Loss Applicable to Common Shareholders

 

 

$

(10,967)

 

$

(13,101)

 

 

 

 

 

 

 

 

Pro Forma Loss Applicable to Common Shareholders per Common Share

 

 

 

 

 

 

 

Basic

 

 

$

(0.05)

 

$

(0.07)

Diluted

 

 

$

(0.05)

 

$

(0.07)

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding