ht-20150331 10-Q Q1

 

 

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, 2015

 

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 April 27, 2015, the number of Class A common shares of beneficial interest outstanding was 196,316,523  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, 2015 [Unaudited] and December 31, 2014

3

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014 [Unaudited]

4

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014 [Unaudited]

6

 

Consolidated Statements of Equity for the Three Months Ended March 31, 2015 and 2014 [Unaudited]

7

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014 [Unaudited]

9

 

Notes to the Consolidated Financial Statements

11

Item 2.

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

32

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

44

Item 4.

Controls and Procedures.

45

 

 

 

PART II.  OTHER INFORMATION

 

Item 1.

Legal Proceedings.

46

Item 1A.

Risk Factors.

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

46

Item 3.

Defaults Upon Senior Securities.

46

Item 4.

Mine Safety Disclosures.

46

Item 5.

Other Information.

46

Item 6.

Exhibits.

47

 

 

 

 

Signatures

48

 

 

 

 

 

 

 

 

 

 

2


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2015 (UNAUDITED) AND DECEMBER 31, 2014

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

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

December 31, 2014

Assets:

 

 

 

 

 

 

Investment in Hotel Properties, Net of Accumulated Depreciation, Including Consolidation of Variable Interest Entity Assets of $83,871 and $84,247

 

$

1,732,736 

 

$

1,745,483 

Investment in Unconsolidated Joint Ventures

 

 

10,742 

 

 

11,150 

Cash and Cash Equivalents

 

 

31,428 

 

 

21,675 

Escrow Deposits

 

 

17,912 

 

 

16,941 

Hotel Accounts Receivable, Net of Allowance for Doubtful Accounts of $81 and $39

 

 

10,129 

 

 

9,363 

Deferred Financing Costs, Net of Accumulated Amortization of $7,352 and $6,938

 

 

7,981 

 

 

8,605 

Due from Related Parties

 

 

6,415 

 

 

6,580 

Intangible Assets, Net of Accumulated Amortization of $3,622 and $3,514

 

 

7,212 

 

 

7,316 

Other Assets

 

 

29,745 

 

 

28,426 

Total Assets

 

$

1,854,300 

 

$

1,855,539 

 

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

 

 

Line of Credit

 

$

34,500 

 

$

 -

Unsecured Term Loan

 

 

250,000 

 

 

250,000 

Unsecured Notes Payable

 

 

51,548 

 

 

51,548 

Mortgages Payable, including Net Unamortized Premium and Consolidation of Variable Interest Entity Debt of $53,721 and $54,132

 

 

613,840 

 

 

617,375 

Accounts Payable, Accrued Expenses and Other Liabilities

 

 

52,312 

 

 

54,115 

Dividends and Distributions Payable

 

 

17,810 

 

 

17,909 

Due to Related Parties

 

 

9,875 

 

 

7,203 

Total Liabilities

 

$

1,029,885 

 

$

998,150 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

Preferred Shares:  $.01 Par Value, 29,000,000 Shares Authorized, 4,600,000 Series B and 3,000,000 Series C Shares Issued and Outstanding at March 31, 2015 and December 31, 2014, 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, 2015 and December 31, 2014, 196,907,816 and 198,835,083 Shares Issued and Outstanding at March 31, 2015 and December 31, 2014, respectively

 

 

1,969 

 

 

1,989 

Common Shares:  Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding at March 31, 2015 and December 31, 2014

 

 

 -

 

 

 -

Accumulated Other Comprehensive Loss

 

 

(914)

 

 

(358)

Additional Paid-in Capital

 

 

1,183,098 

 

 

1,193,056 

Distributions in Excess of Net Income

 

 

(389,040)

 

 

(365,381)

Total Shareholders' Equity

 

 

795,189 

 

 

829,382 

 

 

 

 

 

 

 

Noncontrolling Interests (Note 1):

 

 

 

 

 

 

Noncontrolling Interests - Common Units

 

 

30,465 

 

 

29,082 

Noncontrolling Interests - Consolidated Variable Interest Entity

 

 

(1,239)

 

 

(1,075)

Total Noncontrolling Interests

 

 

29,226 

 

 

28,007 

 

 

 

 

 

 

 

Total Equity

 

 

824,415 

 

 

857,389 

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

1,854,300 

 

$

1,855,539 

 

 

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


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 [UNAUDITED]

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

2014

 

Revenue:

 

 

 

 

 

 

 

Hotel Operating Revenues

 

$

95,688 

 

$

79,917 

 

Other Revenues

 

 

24 

 

 

33 

 

Total Revenues

 

 

95,712 

 

 

79,950 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

Hotel Operating Expenses

 

 

57,355 

 

 

48,776 

 

Insurance Recoveries

 

 

 -

 

 

(2,045)

 

Hotel Ground Rent

 

 

728 

 

 

410 

 

Real Estate and Personal Property Taxes and Property Insurance

 

 

8,270 

 

 

6,806 

 

General and Administrative (including Share Based Payments of $1,539 and $1,112 for the three months ended March 31, 2015 and 2014, respectively)

 

 

4,347 

 

 

3,902 

 

Acquisition and Terminated Transaction Costs

 

 

118 

 

 

134 

 

Depreciation and Amortization

 

 

18,253 

 

 

16,343 

 

Total Operating Expenses

 

 

89,071 

 

 

74,326 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

6,641 

 

 

5,624 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

48 

 

 

398 

 

Interest Expense

 

 

(10,635)

 

 

(10,048)

 

Other Expense

 

 

(169)

 

 

(198)

 

Loss on Debt Extinguishment

 

 

 -

 

 

(644)

 

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

 

 

(4,115)

 

 

(4,868)

 

 

 

 

 

 

 

 

 

Loss from Unconsolidated Joint Venture Investments

 

 

(274)

 

 

(420)

 

 

 

 

 

 

 

 

 

Loss Before Income Taxes

 

 

(4,389)

 

 

(5,288)

 

 

 

 

 

 

 

 

 

Income Tax Benefit

 

 

 -

 

 

108 

 

 

 

 

 

 

 

 

 

Loss from Continuing Operations

 

 

(4,389)

 

 

(5,180)

 

 

 

 

 

 

 

 

 

Discontinued Operations  (Note 11):

 

 

 

 

 

 

 

Gain on Disposition of Discontinued Assets

 

 

 -

 

 

138 

 

Impairment of Discontinued Assets

 

 

 -

 

 

(1,800)

 

Income from Discontinued Operations, Net of Income Taxes

 

 

 -

 

 

329 

 

Loss from Discontinued Operations

 

 

 -

 

 

(1,333)

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(4,389)

 

 

(6,513)

 

 

 

 

 

 

 

 

 

Loss Allocated to Noncontrolling Interests

 

 

443 

 

 

507 

 

Preferred Distributions

 

 

(3,589)

 

 

(3,589)

 

 

 

 

 

 

 

 

 

Net Loss Applicable to Common Shareholders

 

$

(7,535)

 

$

(9,595)

 

 

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

 

4


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 [UNAUDITED]

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

2015

 

2014

 

 

Earnings Per Share:

 

 

 

 

 

 

 

 

BASIC

 

 

 

 

 

 

 

 

Loss from Continuing Operations Applicable to Common Shareholders

 

$

(0.04)

 

$

(0.04)

 

 

Loss from Discontinued Operations Applicable to Common Shareholders

 

 

0.00 

 

 

(0.01)

 

 

Net Loss Applicable to Common Shareholders

 

$

(0.04)

 

$

(0.05)

 

 

 

 

 

 

 

 

 

 

 

DILUTED

 

 

 

 

 

 

 

 

Loss from Continuing Operations Applicable to Common Shareholders

 

$

(0.04)

 

$

(0.04)

 

 

Loss from Discontinued Operations Applicable to Common Shareholders

 

 

0.00 

 

 

(0.01)

 

 

Net Loss Applicable to Common Shareholders

 

$

(0.04)

 

$

(0.05)

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

198,331,158 

 

 

200,743,751 

 

 

Diluted*

 

 

198,331,158 

 

 

200,743,751 

 

 

 

*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,

 

   

 

2015

 

2014

 

   

 

 

 

 

 

 

 

Common Units and Vested LTIP Units

 

 

7,346,261 

 

 

6,914,716 

 

Unvested Stock Awards and LTIP Units Outstanding

 

 

808,516 

 

 

650,379 

 

Contingently Issuable Share Awards

 

 

1,122,907 

 

 

650,809 

 

Total Potentially Dilutive Securities Excluded from the Denominator

 

 

9,277,684 

 

 

8,215,904 

 

 

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

 

 

 

5


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2015

 

2014

Net Loss

 

$

(4,389)

 

$

(6,513)

Other Comprehensive Loss

 

 

 

 

 

 

Change in Fair Value of Derivative Instruments

 

 

(217)

 

 

256 

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

 

 

(339)

 

 

(356)

 

 

 

 

 

 

 

Comprehensive Loss

 

 

(4,945)

 

 

(6,613)

Less:  Comprehensive Loss Attributable to Noncontrolling Interests

 

 

443 

 

 

507 

Less:  Preferred Distributions

 

 

(3,589)

 

 

(3,589)

Comprehensive Loss Attributable to Common Shareholders

 

$

(8,091)

 

$

(9,695)

 

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

 

 

6


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 [UNAUDITED]

[IN THOUSANDS, EXCEPT SHARES]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 ($)

 

Common Units

Common Units ($)

Consolidated Variable Interest Entity ($)

Total Noncontrolling Interests ($)

Total Equity ($)

Balance at December 31, 2014

198,835,083 
1,989 

 -

7,600,000 
76 
1,193,056 
(358)
(365,381)
829,382 

 

8,797,736 
29,082 
(1,075)
28,007 
857,389 

Repurchase of Common Shares

(1,977,762)
(20)

 -

 -

 -

(10,267)

 -

(2,340)
(12,627)

 

 -

 -

 -

 -

(12,627)

Dividends and Distributions declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares ($0.07 per share)

 -

 -

 -

 -

 -

 -

 -

(13,784)
(13,784)

 

 -

 -

 -

 -

(13,784)

Preferred Shares

 -

 -

 -

 -

 -

 -

 -

(3,589)
(3,589)

 

 -

 -

 -

 -

(3,589)

Common Units ($0.07 per share)

 -

 -

 -

 -

 -

 -

 -

 -

 -

 

 -

(480)

 -

(480)
(480)

LTIP Units ($0.07 per share)

 -

 -

 -

 -

 -

 -

 -

 -

 -

 

 -

(172)

 -

(172)
(172)

Dividend Reinvestment Plan

2,371 

 -

 -

 -

 -

15 

 -

 -

15 

 

 -

 -

 -

 -

15 

Share Based Compensation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grants

48,124 

 -

 -

 -

 -

 -

 -

 -

 -

 

 -

 -

 -

 -

 -

Amortization

 -

 -

 -

 -

 -

294 

 -

 -

294 

 

 -

2,314 

 -

2,314 
2,608 

Change in Fair Value of Derivative Instruments

 -

 -

 -

 -

 -

 -

(556)

 -

(556)

 

 -

 -

 -

 -

(556)

Net Loss

 -

 -

 -

 -

 -

 -

 -

(3,946)
(3,946)

 

 -

(279)
(164)
(443)
(4,389)

Balance at March 31, 2015

196,907,816 
1,969 

 -

7,600,000 
76 
1,183,098 
(914)
(389,040)
795,189 

 

8,797,736 
30,465 
(1,239)
29,226 
824,415 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

7


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 [UNAUDITED]

[IN THOUSANDS, EXCEPT SHARES]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 ($)

 

Common Units

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 Shares

(2,626,854)
(26)

 

 

 

(13,637)

 

(1,621)
(15,284)

 

 

 

 

 

(15,284)

Dividends and Distributions declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares ($0.06 per share)

 -

 -

 -

 -

 -

 -

 -

(12,079)
(12,079)

 

 -

 -

 -

 -

(12,079)

Preferred Shares

 -

 -

 -

 -

 -

 -

 -

(3,589)
(3,589)

 

 -

 -

 -

 -

(3,589)

Common Units ($0.06 per share)

 -

 -

 

 -

 

 -

 -

 -

 -

 

 -

(415)

 -

(415)
(415)

Dividend Reinvestment Plan

2,154 

 -

 -

 -

 -

11 

 -

 -

11 

 

 -

 -

 -

 -

11 

Share 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.

 

 

 

8


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

2014

 

Operating Activities:

 

 

 

 

 

 

 

Net Loss

 

$

(4,389)

 

$

(6,513)

 

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

 

 

 

 

 

 

 

Gain on Hotel Acquisitions, Net

 

 

 -

 

 

(138)

 

Impairment of Hotel Assets

 

 

 -

 

 

1,800 

 

Deferred Taxes

 

 

 -

 

 

(108)

 

Depreciation

 

 

18,147 

 

 

16,244 

 

Amortization

 

 

494 

 

 

622 

 

Loss on Debt Extinguishment

 

 

 -

 

 

552 

 

Equity in Loss of Unconsolidated Joint Ventures

 

 

274 

 

 

420 

 

Distributions from Unconsolidated Joint Ventures

 

 

 

 

 -

 

Loss Recognized on Change in Fair Value of Derivative Instrument

 

 

54 

 

 

12 

 

Share Based Compensation Expense

 

 

1,539 

 

 

1,112 

 

Change in Assets and Liabilities:

 

 

 

 

 

 

 

(Increase) Decrease in:

 

 

 

 

 

 

 

Hotel Accounts Receivable

 

 

(766)

 

 

(1,846)

 

Escrows

 

 

(2,701)

 

 

(2,103)

 

Other Assets

 

 

(1,221)

 

 

3,299 

 

Due from Related Parties

 

 

165 

 

 

5,779 

 

Increase (Decrease) in:

 

 

 

 

 

 

 

Due to Related Parties

 

 

2,672 

 

 

2,210 

 

Accounts Payable, Accrued Expenses and Other Liabilities

 

 

149 

 

 

(2,400)

 

Net Cash Provided by Operating Activities

 

$

14,422 

 

$

18,942 

 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

Purchase of Hotel Property Assets

 

$

 -

 

$

(16,500)

 

Deposits on Hotel Acquisitions, Net

 

 

(500)

 

 

(1,000)

 

Capital Expenditures

 

 

(5,383)

 

 

(11,092)

 

Cash Paid for Hotel Development Projects

 

 

(992)

 

 

(2,396)

 

Proceeds from Disposition of Hotel Properties

 

 

 -

 

 

13,397 

 

Net Changes in Capital Expenditure Escrows

 

 

1,730 

 

 

3,025 

 

Proceeds from Insurance Claims

 

 

 -

 

 

1,033 

 

Distributions from Unconsolidated Joint Venture

 

 

130 

 

 

 -

 

Net Cash Used in Investing Activities

 

$

(5,015)

 

$

(13,533)

 

 

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

 

 

9


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

2014

 

Financing Activities:

 

 

 

 

 

 

 

Proceeds from Borrowings Under Line of Credit, Net

 

$

34,500 

 

$

23,000 

 

Principal Repayment of Mortgages and Notes Payable

 

 

(28,319)

 

 

(16,129)

 

Proceeds from Mortgages and Notes Payable

 

 

25,000 

 

 

9,500 

 

Cash Paid for Deferred Financing Costs

 

 

(95)

 

 

(2,239)

 

Repurchase of Common Shares

 

 

(12,627)

 

 

(15,284)

 

Dividends Paid on Common Shares

 

 

(13,903)

 

 

(12,154)

 

Dividends Paid on Preferred Shares

 

 

(3,589)

 

 

(3,589)

 

Distributions Paid on Common Partnership Units

 

 

(621)

 

 

(415)

 

Net Cash Provided by (Used in) Financing Activities

 

$

346 

 

$

(17,310)

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

$

9,753 

 

$

(11,901)

 

Cash and Cash Equivalents - Beginning of Period

 

 

21,675 

 

 

36,213 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents - End of Period

 

$

31,428 

 

$

24,312 

 

 

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

 

 

 

 

10


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 [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, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 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, 2014, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, 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-administered 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, 2015, we owned an approximate 95.5% 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 common units of limited partnership interest in HHLP (“Common Units”) as equity. The noncontrolling interest of Common Units totaled $30,465 as of March 31, 2015 and $29,082 as of December 31, 2014.  As of March 31, 2015, there were 9,313,063 Common Units outstanding with a fair market value of $60,256, 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 Common Units, as well as the net income or loss related to the noncontrolling interests of our 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 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, 2015 and December 31, 2014 are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Per Share  

 

 

Shares Outstanding

 

 

 

 

 

 

 

Three Months Ended March 31,

Series

 

March 31, 2015

 

December 31, 2014

 

 

Aggregate Liquidation Preference

 

Distribution Rate

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 

 

 

0.4297 

Total

 

7,600,000 

 

7,600,000 

 

 

 

 

 

 

 

 

 

 

 

 

11


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 [UNAUDITED]

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

 

NOTE 1 – BASIS OF PRESENTATION (CONTINUED)

 

In February 2015, our Board of Trustees authorized us to repurchase from time to time up to an aggregate of $100,000 of our outstanding common shares. The current share repurchase program will expire on December 31, 2015. For the three months ended March 31, 2015 the Company repurchased 1,977,762 common shares for an aggregate purchase price of $12,627. Upon repurchase by the Company, these common shares ceased to be outstanding and became authorized but unissued common shares.

 

In April 2015, subsequent to the end of the first quarter, we repurchased 593,890 common shares for an aggregate purchase price of $3,808. Upon repurchase by the Company, these common shares ceased to be outstanding and became authorized but unissued common shares.

 

New Accounting Pronouncements

 

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.  The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.  The new standard is effective for the Company on January 1, 2017.  Early adoption is not permitted.  The standard permits the use of either the retrospective or cumulative effect transition method.  The Company is evaluating the effect that ASU No. 2014-09 will have on its consolidated financial statements and related disclosures.  The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

 

On February 18, 2015, the FASB issued ASU No. 2015-02, Consolidation – Amendments to the Consolidation Analysis, which amends the current consolidation guidance affecting both the variable interest entity (VIE) and voting interest entity (VOE) consolidation models.  The standard does not add or remove any of the characteristics in determining if an entity is a VIE or VOE, but rather enhances the way the Company assesses some of these characteristics. The new standard is effective for the Company on January 1, 2016.  The Company does not expect ASU No. 2015-02 to have a significant impact on its consolidated financial statements and related disclosures.

 

On April 17, 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability.  Currently, debt issuance costs are recorded as an asset and amortization of these deferred financing costs is recorded in interest expense.  Under the new standard, debt issuance costs will continued to be amortized over the life of the debt instrument and amortization will continue to be recorded in interest expense.  The new standard is effective for the Company on January 1, 2016 and will be applied on a retrospective basis.  The Company is currently evaluating ASU 2015-03, and anticipates a change in our presentation only since the standard does not alter the accounting for debt issuance costs.

 

 

 

 

 

 

 

 

 

 

 

12


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 [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, 2015 and December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

 

December 31, 2014

 

 

 

 

 

 

 

Land

 

$

439,540 

 

$

439,540 

Buildings and Improvements

 

 

1,427,885 

 

 

1,424,842 

Furniture, Fixtures and Equipment

 

 

205,549 

 

 

203,275 

 

 

 

2,072,974 

 

 

2,067,657 

 

 

 

 

 

 

 

Less Accumulated Depreciation

 

 

(340,238)

 

 

(322,174)

 

 

 

 

 

 

 

Total Investment in Hotel Properties

 

$

1,732,736 

 

$

1,745,483 

 

Acquisitions

 

We had no acquisitions during the three months ended March 31, 2015.

 

Pro Forma Results (Unaudited)

 

The following condensed pro forma financial data for the three months ended March 31, 2014 are presented as if the hotels acquired by the Company in 2014  had been acquired as of January 1, 2013. 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, 2014, nor do they purport to represent the results of operations for future periods.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2014

Pro Forma Total Revenues

 

$

85,884 

 

 

 

 

Pro Forma Loss from Continuing Operations

 

$

(3,187)

Loss from Discontinued Operations

 

 

(1,333)

Pro Forma Net Loss

 

 

(4,520)

Loss Allocated to Noncontrolling Interest

 

 

441 

Preferred Distributions

 

 

(3,589)

Pro Forma Net Loss Applicable to Common Shareholders

 

$

(7,668)

 

 

 

 

Pro Forma Loss Applicable to Common Shareholders per Common Share

 

 

 

Basic

 

$

(0.04)

Diluted

 

$

(0.04)

 

 

 

 

Weighted Average Common Shares Outstanding

 

 

 

Basic

 

 

200,743,751 

Diluted

 

 

200,743,751 

 

 

 

 

 

13


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014 [UNAUDITED]

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

 

NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

 

As of March 31, 2015 and December 31, 2014, our investment in unconsolidated joint ventures consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent

 

Preferred

 

 

March 31,

 

 

December 31,

Joint Venture

 

Hotel Properties

 

Owned

 

Return

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

SB Partners, LLC

 

Holiday Inn Express, South Boston, MA

 

50.0% 

 

N/A

 

$

824 

 

$

913 

Hiren Boston, LLC

 

Courtyard by Marriott, South Boston, MA

 

50.0% 

 

N/A

 

 

4,571 

 

 

4,680 

Mystic Partners, LLC

 

Hilton and Marriott branded hotels in CT

 

8.8%-66.7%

 

8.5% non-cumulative

 

 

5,347 

 

 

5,556 

 

 

 

 

 

 

 

 

$

10,742 

 

$

11,150 

 

Income or loss from our unconsolidated joint ventures is allocated to us and our joint venture partners consistent with the allocation of cash distributions in accordance with the joint venture agreements. Any difference between the carrying amount of these investments and the underlying equity in net assets is amortized over the expected useful lives of the properties and other intangible assets.

 

Loss recognized during the three months ended March 31, 2015 and 2014, for our investments in unconsolidated joint ventures is as follows: