Hersha Hospitality Trust Announces Third Quarter 2021 Results

- Third Quarter 2021 Net Loss of $0.51 Per Share -
- Property Level Cash Flow Growth of 39% Compared to Second Quarter 2021 -
- Comparable Portfolio GOP Margins Exceed Third Quarter 2019 –
- Third Quarter 2021 Adjusted Funds from Operations of $0.11 Per Share -

PHILADELPHIA, Oct. 26, 2021 (GLOBE NEWSWIRE) -- Hersha Hospitality Trust (NYSE: HT) (“Hersha,” “Company,” “we” or “our”), owner of high-quality hotels in urban gateway markets and regional resort destinations, today announced results for the third quarter ended September 30, 2021.

Third Quarter 2021 Financial Results

Net loss applicable to common shareholders was approximately ($19.8 million), or ($0.51) per diluted common share, in the third quarter 2021, compared to net loss applicable to common shareholders of approximately ($49.2 million), or ($1.27) per diluted common share, in the third quarter 2020. Third quarter 2021 results continue to be impacted by the ongoing COVID-19 pandemic, but materially improved compared to third quarter 2020 results.

Adjusted Funds from Operations (“AFFO”) in the third quarter 2021 was $5.0 million, compared to ($26.2 million) in the third quarter 2020. AFFO per diluted common share and OP Unit in the third quarter 2021 was $0.11 versus third quarter 2020 AFFO per diluted common share and OP Unit of ($0.60). An explanation of certain non-GAAP financial measures used in this press release, including, among others, AFFO, as well as reconciliations of those non-GAAP financial measures to GAAP net income, is included at the end of this press release.

Mr. Jay H. Shah, Hersha’s Chief Executive Officer, stated, “Portfolio results last quarter were highlighted by peak summer demand in July which led to 65% occupancy and average daily room rates in line with July 2019 — both exceeding our internal forecasts. Better than expected topline performance combined with aggressive asset management and cost controls led to $10 million of property-level cash flow in July, the highest since the onset of the pandemic. Occupancies moderated during the second half of August and the first half of September, then improved, and rates held steady. Our ADR in the third quarter was relatively flat to ADR in the third quarter prior to the pandemic. Results in August and September met our expectations leading to positive third quarter corporate-level cash flow of $4.5 million, ahead of our initial quarterly forecasts and a significant improvement to our second quarter corporate-level cash burn of ($3.7 million).”  

Mr. Shah continued, “For the first time since the onset of the pandemic we saw a material increase in demand across our urban gateway markets. From May to September, average daily rates on both weekdays and weekends in our urban portfolio grew 34% with weekday occupancy increasing 720 basis points over the same period. So far in October, we have seen growth in both occupancies and rates in our urban markets during the week and on weekends. Recent performance in our urban portfolio shows that leisure travelers remain active post-Labor Day and continue to be less price sensitive, and despite the headlines, business travel has been incrementally building over the last several weeks. Across the portfolio we are welcoming new business travelers to our properties while traditional sectors such as consulting, financial services, defense, and pharmaceuticals continue to remain active. Conversations with our corporate accounts indicate the return to office and business travel is slated to continue into year-end with expected acceleration in the first quarter of 2022.”

Mr. Shah concluded, “Last month, we successfully refinanced the mortgage loan at our St. Gregory Hotel in Washington, DC, eliminating all debt maturities until third quarter 2022. We remain laser focused on portfolio operations, and again last quarter, our performance highlights our distinct operating leverage. We believe our assets are well positioned to generate outsized profitability as we continue to capture increased demand from incremental business travel, more price elastic leisure travelers, large group conferences, and now the return of international traffic, while driving market-leading cash flow across the portfolio.”

Third Quarter 2021 Operating Results

Strong topline results combined with our proprietary asset management strategy resulted in continued margin growth for the portfolio. Third quarter GOP margin for the comparable portfolio was 45%, which exceeded both second quarter 2021 and third quarter 2019 comparable portfolio GOP margin. Meanwhile, comparable hotel EBITDA margin of 30% was 360 basis points higher than the second quarter 2021 and just 230 basis points lower than third quarter 2019.

The Company’s 33 comparable hotel portfolio generated 60.3% occupancy, an Average Daily Rate (“ADR”) of $230.92, and RevPAR of $139.19 during the third quarter 2021. The Parrot Key Hotel & Resort generated the highest growth from an ADR and RevPAR perspective across our portfolio compared to the third quarter 2019. The resort ended the period with 79.5% ADR growth on 70.9% occupancy which resulted in 72.8% RevPAR growth during what is historically the softest quarter from a demand perspective in South Florida. On Miami Beach, occupancy and ADR growth led to 32.1% RevPAR growth at the Cadillac Hotel & Beach Club. Outperformance from these assets led to our South Florida portfolio generating 36.1% RevPAR growth last quarter compared to the third quarter 2019.

Our Annapolis Waterfront Hotel in Maryland generated the highest occupancy of our portfolio at 86.3%, and combined with 24.7% ADR growth, led to 24.2% RevPAR growth during the third quarter. Out on the West Coast, the Sanctuary Beach Resort continued to outperform, ending the period with a 30.3% RevPAR improvement versus the third quarter of 2019 driven by 53.9% ADR growth to $669.40. Down the coast in Santa Barbara, the Hotel Milo ended the third quarter with 74.6% occupancy and an ADR of $446.32, 49.2% higher than the third quarter of 2019.

Our New York City portfolio generated 66.7% occupancy during the third quarter, highlighted by our select-service offerings in the JFK sub-market, the Nu Hotel in Brooklyn, and the Hampton Inn Seaport. Average daily rates for the New York portfolio increased incrementally through the balance of the quarter from $176 in July to $207 in September, representing 18% growth.

Cash Flow and Breakeven Levels

Strong operating trends in July coupled with our aggressive on-property cost controls resulted in $10.0 million of property level cash flow, the highest monthly cash generation at our hotels since the onset of the pandemic. Our third quarter property level EBITDA totaled $25.4 million, a 39% increase compared to the second quarter, and resulted in total corporate level cash flow of $4.5 million. Current and forecasted operating results indicate that we are on pace to consistently generate positive hotel level EBITDA at levels necessary for us to be cash flow positive on a corporate wide basis for the fourth quarter.

Preferred Dividend Distribution

Hersha’s Board of Trustees declared a cash dividend of $0.4297 per Series C Preferred Share and a cash dividend of $0.40625 per Series D Preferred Share and Series E Preferred Share for the third quarter ending September 30, 2021. The preferred share dividends were paid on October 15, 2021 to holders of record as of October 1, 2021.

Financing

In September 2021, Hersha refinanced the $23 million mortgage loan on the St. Gregory Hotel, eliminating all near-term debt maturities. The interest only loan was completed at PRIME + 1.00% and matures in October 2023.

The Company completed the third quarter 2021 with approximately $83.7 million of cash & cash equivalents and deposits. As of October 1, 2021, the Company had approximately $46 million of capacity on its $250 million Senior Revolving Line of Credit. As of September 30, 2021, the Company’s consolidated debt had a weighted average interest rate of 4.41% and a weighted average life-to-maturity of 2.9 years.

Full-Year 2021 Outlook

Due to the uncertainty surrounding the lodging industry stemming from the COVID-19 pandemic, the Company will forego providing full-year 2021 guidance at this time.

Third Quarter 2021 Conference Call

The Company will host a conference call to discuss third quarter 2021 results at 9:00 AM Eastern Time on Wednesday, October 27, 2021. Hosting the call will be Mr. Jay H. Shah, Chief Executive Officer, Mr. Neil H. Shah, President and Chief Operating Officer, and Mr. Ashish Parikh, Chief Financial Officer.

A live audio webcast of the conference call will be available on the Company’s investor relations website. The conference call can be accessed by dialing 1-888-317-6003 or 1-412-317-6061 for international participants and entering the passcode 0414884 approximately 10 minutes in advance of the call. A replay of the call will be available from 11:00 AM Eastern Time on Wednesday, October 27, 2021 through 11:59 PM Eastern Time on Friday, November 26, 2021. The replay can be accessed by dialing 1-877-344-7529 or 1-412-317-0088 for international participants. The passcode for the replay is 10159610. A replay of the webcast will be available on the Company’s website for a limited time.

About Hersha Hospitality Trust

Hersha Hospitality Trust (HT) is a self-advised real estate investment trust in the hospitality sector, which owns and operates high-quality hotels in urban gateway markets and regional resort destinations. The Company's 36 hotels totaling 5,802 rooms are located in New York, Washington, DC, Boston, Philadelphia, South Florida and select markets on the West Coast. The Company's common shares are traded on The New York Stock Exchange under the ticker “HT.”

Non-GAAP Financial Measures and Key Performance Metrics

Common key performance metrics utilized by the lodging industry are occupancy, average daily rate ("ADR"), and revenue per available room ("RevPAR"). Occupancy is calculated as the percentage total rooms sold compared to rooms available to be sold, while ADR measures the average rate earned per occupied room, calculate as total room revenue divided by total rooms sold. RevPAR is a derivative of these two metrics which shows the total room revenue earned per room available to be sold. Management uses these metrics in comparison to other hotels in our self-defined competitive peer set within proximity to each of our hotel properties.

An explanation of Funds from Operations (“FFO”), AFFO, Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), EBITDAre, Adjusted EBITDA and Hotel EBITDA, as well as reconciliations of such non-GAAP financial measures to the most directly comparable U.S. GAAP measures, is included at the end of this release.

Cautionary Statements Regarding Forward Looking Statements

Certain matters within this press release are discussed using “forward-looking statements,” including those with regard to the potential future impact of COVID-19, within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. One of the most significant factors is the ongoing impact of the current outbreak of COVID-19 on the United States, regional and global economies, the broader financial markets, the Company’s customers and employees, governmental responses thereto and the operation changes the Company has and may implement in response thereto. The current outbreak of COVID-19 has also impacted, and is likely to continue to impact, directly or indirectly, many of the other important factors below. These forward-looking statements may include statements related to, among other things: assumptions regarding the impact to international and domestic business and leisure travel pertaining to any pandemic or outbreak of disease, including COVID-19, the uncertainty and economic impact of pandemics, epidemics or other public health emergencies or fear of such events, such as the recent outbreak of COVID-19, the impact of and changes to various government programs, including in response to COVID-19, the efficacy of any treatment for COVID-19, the Company’s access to capital on the terms and timing the Company expects, the restoration of public confidence in domestic and international travel, permanent structural changes in demand for conference centers by business and leisure clientele, the economic growth, labor markets, real estate values, lodging fundamentals, corporate travel, and the economic vibrancy of our target markets, the Company’s ability to grow operating cash flow, the Company’s ability to match or outperform its competitors’ performance, the ability of the Company’s hotels to achieve stabilized or projected revenue, cap rates or EBITDA multiples consistent with our expectations, the stability of the lodging industry and the markets in which the Company’s hotel properties are located, the Company’s ability to generate internal and external growth, and the Company’s ability to increase margins, including hotel EBITDA margins. Certain statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements within the meaning of the federal securities laws and as such are based upon the Company’s current beliefs as to the outcome and timing of future events. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” and words of similar import. Such forward-looking statements relate to future events, the Company’s plans, strategies, prospects and future financial performance, and involve known and unknown risks that are difficult to predict, uncertainties and other factors which may cause the Company’s actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the Company’s current beliefs, expectations and assumptions regarding the future of its business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control. The Company’s actual results and financial condition may differ materially from those indicated in the forward-looking statements contained in this press release. Therefore, you should not rely on any of these forward-looking statements. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-looking statements, please review the information under the heading “Risk Factors” included in the Company’s most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q filed by the Company with the Securities and Exchange Commission (“SEC”) and other documents filed by the Company with the SEC from time to time. All information provided in this press release, unless otherwise stated, is as of October 26, 2021, and the Company undertakes no duty to update this information unless required by law.  

Non-GAAP Measures

FFO and AFFO

The National Association of Real Estate Investment Trusts (“NAREIT”) developed Funds from Operations (“FFO”) as a non-GAAP financial measure of performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. We calculate FFO applicable to common shares and Common Units in accordance with the December 2018 Financial Standards White Paper of NAREIT, which we refer to as the White Paper. The White Paper defines FFO as net income (loss) (computed in accordance with GAAP) excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by an entity. Our interpretation of the NAREIT definition is that non-controlling interest in net income (loss) should be added back to (deducted from) net income (loss) as part of reconciling net income (loss) to FFO. Our FFO computation may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we do.

The GAAP measure that we believe to be most directly comparable to FFO, net income (loss) applicable to common shareholders, includes loss from the impairment of certain depreciable assets, our investment in unconsolidated joint ventures and land, depreciation and amortization expenses, gains or losses on property sales, non-controlling interest and preferred dividends. In computing FFO, we eliminate these items because, in our view, they are not indicative of the results from our property operations. We determined that the loss from the impairment of certain depreciable assets, including investments in unconsolidated joint ventures and land, was driven by a measurable decrease in the fair value of certain hotel properties and other assets as determined by our analysis of those assets in accordance with applicable GAAP. As such, these impairments have been eliminated from net income (loss) to determine FFO.

Hersha also presents Adjusted Funds from Operations (AFFO), which reflects FFO in accordance with the NAREIT definition further adjusted by:

• deducting or adding back income tax benefit or expense;
• adding back non-cash share-based compensation expense;
• adding back acquisition and terminated transaction expenses;
• adding back contingent considerations;
• adding back amortization of discounts, premiums, and deferred financing costs;
• adding back amortization of amended interest rate swap liability;
• adding back write-offs of deferred financing costs on debt extinguishment, both for consolidated and unconsolidated properties;
• adding back straight-line amortization of ground lease expense and prior period tax assessment expenses; and
• adding back state and local tax expense related to prior period assessment.
  

FFO and AFFO do not represent cash flows from operating activities in accordance with GAAP and should not be considered an alternative to net income as an indication of the Company’s performance or to cash flow as a measure of liquidity or ability to make distributions. We consider FFO and AFFO to be meaningful, additional measures of our operating performance because they exclude the effects of the assumption that the value of real estate assets diminishes predictably over time, and because they are widely used by industry analysts as performance measures. We evaluate our performance by reviewing AFFO, in addition to FFO, because we believe that adjusting FFO to exclude certain recurring and non-recurring items as described above provides useful supplemental information regarding our ongoing operating performance and that the presentation of AFFO, when combined with the primary GAAP presentation of net income (loss), more completely describes our operating performance. We show both FFO from consolidated hotel operations and FFO from unconsolidated joint ventures because we believe it is meaningful for the investor to understand the relative contributions from our consolidated and unconsolidated hotels. The display of both FFO from consolidated hotels and FFO from unconsolidated joint ventures allows for a detailed analysis of the operating performance of our hotel portfolio by management and investors. We present FFO and AFFO applicable to common shares and OP Units because our OP Units are redeemable for common shares. We believe it is meaningful for the investor to understand FFO and AFFO applicable to all common shares and OP Units. In addition, based on guidance provided by NAREIT, we have eliminated loss from the impairment of certain depreciable assets, including investments in unconsolidated joint ventures and land, from net (income) loss to arrive at FFO in each year presented.

The following table reconciles FFO and AFFO for the periods presented to the most directly comparable GAAP measure, net income (loss) applicable to common shares, for the same periods:

EBITDAre and Adjusted EBITDA

Earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”) is a supplemental measure of our operating performance and facilitates comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital-intensive companies. NAREIT adopted EBITDA for real estate (“EBITDAre”) a measure calculated by adding gains from the disposition of hotel operations, in order to promote an industry-wide measure of REIT operating performance. We also adjust EBITDAre for interest in amortization and write-off of deferred financing costs of our unconsolidated joint ventures, deferred financing costs write-offs in debt extinguishment, non-cash share-based compensation expense, acquisition and terminated transaction costs and net operating loss incurred on non-operation properties to calculate Adjusted EBITDA.

Our EBITDAre and Adjusted EBITDA computation may not be comparable to EBITDAre or Adjusted EBITDA reported by other companies that interpret the definition of EBITDA differently than we do. Management believes Adjusted EBITDA and EBITDAre to be meaningful measures of a REIT's performance because they are widely followed by industry analysts, lenders and investors and that they should be considered along with, but not as an alternative to, GAAP net income (loss) as a measure of the Company's operating performance.

Hotel EBITDA

Hotel EBITDA is a commonly used measure of performance in the hotel industry for a specific hotel or group of hotels. We believe Hotel EBITDA provides a more complete understanding of the operating results of the individual hotel or group of hotels. We calculate Hotel EBITDA by utilizing the total revenues generated from hotel operations less all operating expenses, property taxes, insurance and management fees, which calculation excludes Company expenses not specific to a hotel, such as corporate overhead. Because Hotel EBITDA is specific to individual hotels or groups of hotels and not to the Company as a whole, it is not directly comparable to any GAAP measure. In addition, our Hotel EBITDA computation may not be comparable to Hotel EBITDA or other similar metrics reported by other companies that interpret the definition of Hotel EBITDA differently than we do. Management believes Hotel EBITDA to be a meaningful measure of performance of a portfolio of hotels because it is followed by industry analysts, lenders and investors and that it should be considered along with, but not as an alternative to, operating income (loss) as reported in our unaudited summary results as a measure of our hotel portfolio’s operating performance.

Supplemental Schedules

The Company has published supplemental earnings schedules in order to provide additional disclosure and financial information for the benefit of the Company’s stakeholders. These can be found in the Investor Relations section and the “SEC Filings and Presentations” page of the Company’s website, www.hersha.com.

Contact:
Ashish Parikh, Chief Financial Officer
Greg Costa, Director of Investor Relations
Phone: 215-238-1046