ht-20150930 10-Q Q3

 

 

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 September 30, 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 October 28,  2015, the number of Class A common shares of beneficial interest outstanding was 46,041,084  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 September 30, 2015 [Unaudited] and December 31, 2014

3

 

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2015 and 2014 [Unaudited]

4

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014 [Unaudited]

6

 

Consolidated Statements of Equity for the Nine Months Ended September 30, 2015 and 2014 [Unaudited]

7

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 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.

34

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

50

Item 4.

Controls and Procedures.

51

 

 

 

PART II.  OTHER INFORMATION

 

Item 1.

Legal Proceedings.

52

Item 1A.

Risk Factors.

52

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

52

Item 3.

Defaults Upon Senior Securities.

52

Item 4.

Mine Safety Disclosures.

52

Item 5.

Other Information.

52

Item 6.

Exhibits.

53

 

 

 

 

Signatures

54

 

 

 

 

 

 

 

 

 

 

2


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2015 (UNAUDITED) AND DECEMBER 31, 2014

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

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2015

 

December 31, 2014

Assets:

 

 

 

 

 

 

Investment in Hotel Properties, Net of Accumulated Depreciation, Including Consolidation of Variable Interest Entity Assets of $83,159 and $84,247

 

$

1,790,077 

 

$

1,745,483 

Investment in Unconsolidated Joint Ventures

 

 

10,934 

 

 

11,150 

Cash and Cash Equivalents

 

 

29,304 

 

 

21,675 

Escrow Deposits

 

 

18,812 

 

 

16,941 

Hotel Accounts Receivable, Net of Allowance for Doubtful Accounts of $92 and $39

 

 

11,601 

 

 

9,363 

Deferred Financing Costs, Net of Accumulated Amortization of $7,370 and $6,938

 

 

9,607 

 

 

8,605 

Due from Related Parties

 

 

6,456 

 

 

6,580 

Intangible Assets, Net of Accumulated Amortization of $3,828 and $3,514

 

 

13,513 

 

 

7,316 

Other Assets

 

 

31,734 

 

 

28,426 

Total Assets

 

$

1,922,038 

 

$

1,855,539 

 

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

 

 

Line of Credit

 

$

 -

 

$

 -

Unsecured Term Loan

 

 

495,000 

 

 

250,000 

Unsecured Notes Payable

 

 

51,548 

 

 

51,548 

Mortgages Payable, including Net Unamortized Premium and Consolidation of Variable Interest Entity Debt of $52,923 and $54,132

 

 

543,559 

 

 

617,375 

Accounts Payable, Accrued Expenses and Other Liabilities

 

 

54,919 

 

 

54,116 

Dividends and Distributions Payable

 

 

17,026 

 

 

17,909 

Due to Related Parties

 

 

6,594 

 

 

7,203 

Total Liabilities

 

$

1,168,646 

 

$

998,151 

 

 

 

 

 

 

 

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 September 30, 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 September 30, 2015 and December 31, 2014, 46,338,046 and 49,708,771 Shares Issued and Outstanding at September 30, 2015 and December 31, 2014, respectively

 

 

463 

 

 

497 

Common Shares:  Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding at September 30, 2015 and December 31, 2014

 

 

 -

 

 

 -

Accumulated Other Comprehensive Loss

 

 

(1,048)

 

 

(358)

Additional Paid-in Capital

 

 

1,124,995 

 

 

1,194,547 

Distributions in Excess of Net Income

 

 

(400,947)

 

 

(365,381)

Total Shareholders' Equity

 

 

723,539 

 

 

829,381 

 

 

 

 

 

 

 

Noncontrolling Interests (Note 1):

 

 

 

 

 

 

Noncontrolling Interests - Common Units and LTIP Units

 

 

31,449 

 

 

29,082 

Noncontrolling Interests - Consolidated Variable Interest Entity

 

 

(1,596)

 

 

(1,075)

Total Noncontrolling Interests

 

 

29,853 

 

 

28,007 

 

 

 

 

 

 

 

Total Equity

 

 

753,392 

 

 

857,388 

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

1,922,038 

 

$

1,855,539 

 

 

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

3

 


 

Table of Contents

 

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 [UNAUDITED]

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Hotel Operating Revenues

 

$

124,488 

 

$

112,927 

 

$

347,176 

 

$

304,331 

 

Other Revenues

 

 

27 

 

 

50 

 

 

81 

 

 

149 

 

Total Revenues

 

 

124,515 

 

 

112,977 

 

 

347,257 

 

 

304,480 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Hotel Operating Expenses

 

 

66,373 

 

 

60,648 

 

 

187,862 

 

 

166,372 

 

Insurance Recoveries

 

 

 -

 

 

 -

 

 

 -

 

 

(4,602)

 

Hotel Ground Rent

 

 

768 

 

 

710 

 

 

2,223 

 

 

1,715 

 

Real Estate and Personal Property Taxes and Property Insurance

 

 

9,099 

 

 

8,034 

 

 

25,591 

 

 

22,020 

 

General and Administrative (including Share Based Payments of $1,411 and $1,595 and $4,605 and $4,156 for the three and nine months ended September 30, 2015 and 2014, respectively)

 

 

4,796 

 

 

5,670 

 

 

14,566 

 

 

14,310 

 

Acquisition and Terminated Transaction Costs

 

 

146 

 

 

338 

 

 

454 

 

 

2,144 

 

Depreciation and Amortization

 

 

18,814 

 

 

18,565 

 

 

55,395 

 

 

52,365 

 

Contingent Consideration Related to Acquisition of Hotel Property

 

 

 -

 

 

1,000 

 

 

 -

 

 

1,000 

 

Total Operating Expenses

 

 

99,996 

 

 

94,965 

 

 

286,091 

 

 

255,324 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

24,519 

 

 

18,012 

 

 

61,166 

 

 

49,156 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

45 

 

 

71 

 

 

144 

 

 

746 

 

Interest Expense

 

 

(11,067)

 

 

(11,456)

 

 

(32,390)

 

 

(32,249)

 

Other Expense

 

 

(9)

 

 

(346)

 

 

(334)

 

 

(476)

 

Gain on Disposition of Hotel Properties

 

 

 -

 

 

 -

 

 

 -

 

 

7,184 

 

Gain on Hotel Acquisitions, net

 

 

 -

 

 

 -

 

 

 -

 

 

13,594 

 

Development Loan Recovery

 

 

 -

 

 

 -

 

 

 -

 

 

22,494 

 

Loss on Debt Extinguishment

 

 

(324)

 

 

 -

 

 

(546)

 

 

(644)

 

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

 

 

13,164 

 

 

6,281 

 

 

28,040 

 

 

59,805 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Unconsolidated Joint Venture Investments

 

 

608 

 

 

607 

 

 

860 

 

 

606 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Before Income Taxes

 

 

13,772 

 

 

6,888 

 

 

28,900 

 

 

60,411 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Benefit

 

 

631 

 

 

699 

 

 

740 

 

 

806 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

 

14,403 

 

 

7,587 

 

 

29,640 

 

 

61,217 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued Operations  (Note 11):

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on Disposition of Discontinued Assets

 

 

 -

 

 

 -

 

 

 -

 

 

(45)

 

Impairment of Discontinued Assets

 

 

 -

 

 

 -

 

 

 -

 

 

(1,800)

 

Income from Discontinued Operations, Net of Income Taxes

 

 

 -

 

 

 -

 

 

 -

 

 

288 

 

Loss from Discontinued Operations

 

 

 -

 

 

 -

 

 

 -

 

 

(1,557)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

 

14,403 

 

 

7,587 

 

 

29,640 

 

 

59,660 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Income) Loss Allocated to Noncontrolling Interests

 

 

(244)

 

 

49 

 

 

(206)

 

 

(1,100)

 

Preferred Distributions

 

 

(3,589)

 

 

(3,589)

 

 

(10,767)

 

 

(10,767)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income Applicable to Common Shareholders

 

$

10,570 

 

$

4,047 

 

$

18,667 

 

$

47,793 

 

 

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 AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 [UNAUDITED]

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Applicable to Common Shareholders

 

$

0.22 

 

$

0.08 

 

$

0.38 

 

$

0.98 

 

 

Loss from Discontinued Operations Applicable to Common Shareholders

 

 

0.00 

 

 

0.00 

 

 

0.00 

 

 

(0.03)

 

 

Net Income Applicable to Common Shareholders

 

$

0.22 

 

$

0.08 

 

$

0.38 

 

$

0.95 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DILUTED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Applicable to Common Shareholders

 

$

0.22 

 

$

0.08 

 

$

0.37 

 

$

0.97 

 

 

Loss from Discontinued Operations Applicable to Common Shareholders

 

 

0.00 

 

 

0.00 

 

 

0.00 

 

 

(0.03)

 

 

Net Income Applicable to Common Shareholders

 

$

0.22 

 

$

0.08 

 

$

0.37 

 

$

0.94 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

47,417,452 

 

 

49,649,379 

 

 

48,502,387 

 

 

49,817,680 

 

 

Diluted*

 

 

47,909,549 

 

 

50,155,497 

 

 

49,035,700 

 

 

50,276,464 

 

 

 

*Income (loss) allocated to noncontrolling interest in Hersha Hospitality Limited Partnership (the “Operating Partnership” or “HHLP”) has been excluded from the numerator and the Operating Partnership’s common units of limited partnership interest (“Common Units”) and the Operating Partnership’s vested LTIP units (“Vested LTIP Units”) have been omitted from the denominator for the purpose of computing diluted earnings per share because 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 September 30,

 

Nine Months Ended September 30,

   

 

2015

 

2014

 

2015

 

2014

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Units and Vested LTIP Units

 

 

1,947,536 

 

 

1,728,679 

 

 

1,893,943 

 

 

1,728,679 

 

Total Potentially Dilutive Securities Excluded from the Denominator

 

 

1,947,536 

 

 

1,728,679 

 

 

1,893,943 

 

 

1,728,679 

 

 

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 INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2015

 

 

2014

 

2015

 

2014

Net Income

$

14,403 

 

$

7,587 

 

$

29,640 

 

$

59,660 

Other Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

Change in Fair Value of Derivative Instruments

 

506 

 

 

1,173 

 

 

596 

 

 

1,427 

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

 

(575)

 

 

(368)

 

 

(1,286)

 

 

(1,141)

 

$

(69)

 

$

805 

 

$

(690)

 

$

286 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Income

 

14,334 

 

 

8,392 

 

 

28,950 

 

 

59,946 

Less:  Comprehensive (Income) Loss Attributable to Noncontrolling Interests

 

(244)

 

 

49 

 

 

(206)

 

 

(1,100)

Less:  Preferred Distributions

 

(3,589)

 

 

(3,589)

 

 

(10,767)

 

 

(10,767)

Comprehensive Income Attributable to Common Shareholders

$

10,501 

 

$

4,852 

 

$

17,977 

 

$

48,079 

 

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 NINE MONTHS ENDED SEPTEMBER 30, 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 and LTIP Units

Common Units and LTIP Units ($)

Consolidated Variable Interest Entity ($)

Total Noncontrolling Interests ($)

Total Equity ($)

Balance at December 31, 2014

49,708,771 
497 

 -

7,600,000 
76 
1,194,547 
(358)
(365,381)
829,381 

 

2,199,434 
29,082 
(1,075)
28,007 
857,388 

Unit Conversion

8,975 

 -

 -

 -

 -

132 

 -

 -

132 

 

(8,975)
(132)

 -

(132)

 -

Repurchase of Common Shares

(3,420,938)
(34)

 -

 -

 -

(71,223)

 -

(14,060)
(85,317)

 

 -

 -

 -

 -

(85,317)

Dividends and Distributions declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares ($0.84 per share)

 -

 -

 -

 -

 -

 -

 -

(40,173)
(40,173)

 

 -

 -

 -

 -

(40,173)

Preferred Shares

 -

 -

 -

 -

 -

 -

 -

(10,767)
(10,767)

 

 -

 -

 -

 -

(10,767)

Common Units ($0.84 per share)

 -

 -

 -

 -

 -

 -

 -

 -

 -

 

 -

(1,436)

 -

(1,436)
(1,436)

LTIP Units ($0.84 per share)

 -

 -

 -

 -

 -

 -

 -

 -

 -

 

 -

(522)

 -

(522)
(522)

Dividend Reinvestment Plan

1,370 

 -

 -

 -

 -

35 

 -

 -

35 

 

 -

 -

 -

 -

35 

Share Based Compensation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grants

39,868 

 -

 -

 -

 -

457 

 -

 -

457 

 

128,842 

 -

 -

 -

457 

Amortization

 -

 -

 -

 -

 -

1,047 

 -

 -

1,047 

 

 -

3,730 

 -

3,730 
4,777 

Change in Fair Value of Derivative Instruments

 -

 -

 -

 -

 -

 -

(690)

 -

(690)

 

 -

 -

 -

 -

(690)

Net Income

 -

 -

 -

 -

 -

 -

 -

29,434 
29,434 

 

 -

727 
(521)
206 
29,640 

Balance at September 30, 2015

46,338,046 
463 

 -

7,600,000 
76 
1,124,995 
(1,048)
(400,947)
723,539 

 

2,319,301 
31,449 
(1,596)
29,853 
753,392 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 NINE MONTHS ENDED SEPTEMBER 30, 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 and LTIP Units

Common Units and LTIP Units ($)

Consolidated Variable Interest Entity ($)

Total Noncontrolling Interests ($)

Total Equity ($)

Balance at December 31, 2013

50,689,855 
2,028 

 -

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

 

1,728,679 
29,523 
(342)
29,181 
867,139 

Repurchase of Common Shares

(656,714)
(26)

 

 

 

(13,637)

 

(1,621)
(15,284)

 

 -

 -

 -

 -

(15,284)

Dividends and Distributions declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares ($0.76 per share)

 -

 -

 -

 -

 -

 -

 -

(38,171)
(38,171)

 

 -

 -

 -

 -

(38,171)

Preferred Shares

 -

 -

 -

 -

 -

 -

 -

(10,767)
(10,767)

 

 -

 -

 -

 -

(10,767)

Common Units ($0.76 per share)

 -

 -

 

 -

 

 -

 -

 -

 -

 

 -

(1,309)

 -

(1,309)
(1,309)

Dividend Reinvestment Plan

1,531 

 -

 -

 -

 -

34 

 -

 -

34 

 

 -

 -

 -

 -

34 

Share Based Compensation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grants

147,810 

 -

 -

 -

403 

 -

 -

409 

 

 -

 -

 -

 -

409 

Amortization

 -

 -

 -

 -

 -

4,326 

 -

 -

4,326 

 

 -

 -

 -

 -

4,326 

Change in Fair Value of Derivative Instruments

 -

 -

 -

 -

 -

 -

286 

 -

286 

 

 -

 -

 -

 -

286 

Net Income

 -

 -

 -

 -

 -

 -

 -

58,560 
58,560 

 

 -

1,657 
(557)
1,100 
59,660 

Balance at September 30, 2014

50,182,482 
2,008 

 -

7,600,000 
76 
1,191,924 
(90)
(356,567)
837,351 

 

1,728,679 
29,871 
(899)
28,972 
866,323 

 

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 NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

Operating Activities:

 

 

 

 

 

 

 

Net Income

 

$

29,640 

 

$

59,660 

 

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

 

 

 

 

 

 

 

Gain on Acquisition of Hotel Assets, Net

 

 

 

 

 

 

 

Gain on Hotel Acquisitions, Net

 

 

 -

 

 

(13,594)

 

Contingent Consideration

 

 

 -

 

 

1,000 

 

Development Loan Recovery

 

 

 -

 

 

(22,494)

 

Gain on Disposition of Hotel Properties

 

 

 -

 

 

(7,139)

 

Impairment of Hotel Assets

 

 

 -

 

 

1,800 

 

Deferred Taxes

 

 

(740)

 

 

(806)

 

Depreciation

 

 

55,087 

 

 

52,056 

 

Amortization

 

 

1,175 

 

 

1,468 

 

Loss on Debt Extinguishment

 

 

324 

 

 

644 

 

Equity in Loss of Unconsolidated Joint Ventures

 

 

(860)

 

 

(606)

 

Distributions from Unconsolidated Joint Ventures

 

 

958 

 

 

911 

 

Loss Recognized on Change in Fair Value of Derivative Instrument

 

 

83 

 

 

68 

 

Share Based Compensation Expense

 

 

4,605 

 

 

4,156 

 

Change in Assets and Liabilities:

 

 

 

 

 

 

 

(Increase) Decrease in:

 

 

 

 

 

 

 

Hotel Accounts Receivable

 

 

(2,034)

 

 

(1,624)

 

Escrows

 

 

(950)

 

 

(537)

 

Other Assets

 

 

(2,156)

 

 

(844)

 

Due from Related Parties

 

 

124 

 

 

4,321 

 

(Decrease) Increase in:

 

 

 

 

 

 

 

Due to Related Parties

 

 

(609)

 

 

(1,719)

 

Accounts Payable, Accrued Expenses and Other Liabilities

 

 

2,740 

 

 

1,782 

 

Net Cash Provided by Operating Activities

 

$

87,387 

 

$

78,503 

 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

Purchase of Hotel Property Assets

 

$

(61,415)

 

$

(175,309)

 

Deposits on Hotel Acquisitions

 

 

(1,000)

 

 

 -

 

Capital Expenditures

 

 

(18,841)

 

 

(29,297)

 

Cash Paid for Hotel Development Projects

 

 

(420)

 

 

(3,375)

 

Proceeds from Disposition of Hotel Properties

 

 

 -

 

 

30,128 

 

Net Changes in Capital Expenditure Escrows

 

 

549 

 

 

3,282 

 

Proceeds from Insurance Claims

 

 

 -

 

 

1,881 

 

Distributions from Unconsolidated Joint Venture

 

 

127 

 

 

96 

 

Net Cash Used in Investing Activities

 

$

(81,000)

 

$

(172,594)

 

 

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 NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 [UNAUDITED]

[IN THOUSANDS]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

Financing Activities:

 

 

 

 

 

 

 

Proceeds from Borrowings Under Line of Credit, Net

 

$

 -

 

$

27,000 

 

Proceeds from Unsecured Term Loan Borrowing

 

 

245,000 

 

 

100,000 

 

Principal Repayment of Mortgages and Notes Payable

 

 

(182,684)

 

 

(18,775)

 

Proceeds from Mortgages and Notes Payable

 

 

80,750 

 

 

54,500 

 

Cash Paid for Deferred Financing Costs

 

 

(2,344)

 

 

(3,338)

 

Proceeds from Issuance of Preferred Shares, Net

 

 

 -

 

 

(86)

 

Repurchase of Common Shares

 

 

(85,317)

 

 

(15,284)

 

Settlement of Interest Rate Cap

 

 

(430)

 

 

(8)

 

Dividends Paid on Common Shares

 

 

(41,042)

 

 

(36,251)

 

Dividends Paid on Preferred Shares

 

 

(10,767)

 

 

(10,767)

 

Distributions Paid on Common Units

 

 

(1,924)

 

 

(1,245)

 

Net Cash Provided by Financing Activities

 

$

1,242 

 

$

95,746 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

$

7,629 

 

$

1,655 

 

Cash and Cash Equivalents - Beginning of Period

 

 

21,675 

 

 

36,213 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents - End of Period

 

$

29,304 

 

$

37,868 

 

 

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 AND NINE MONTHS ENDED SEPTEMBER 30, 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 and nine months ended September 30, 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 September 30, 2015, we owned an approximate 95.2% 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 and LTIP units of limited partnership interest in HHLP (“Common Units”) as equity. LTIP units are a special class of limited partnership interest in the Operating Partnership that are convertible into Common Units under certain circumstances.  The noncontrolling interest of Common Units totaled $31,449 as of September 30, 2015 and $29,082 as of December 31, 2014.  As of September 30, 2015, there were 2,319,301 Common Units outstanding with a fair market value of $52,555, 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 but 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 September 30, 2015 and December 31, 2014 are summarized as follows: