Hersha Hospitality Trust (NYSE: HT, the ?Company?), owner of upscale hotels in urban gateway markets, today announced results for the second quarter ended June 30, 2013.
Second Quarter 2013 Financial Results
Adjusted Funds from Operations (?AFFO?) in the second quarter increased by $2.0 million to $28.7 million, compared to $26.7 million for the second quarter of 2012. AFFO per diluted common share and unit of limited partnership interest in Hersha Hospitality Limited Partnership (?OP Unit?) was $0.14, in-line with the same quarter in 2012, due to a higher share count in 2013. The Company?s weighted average diluted common shares and OP Units outstanding were approximately 208.1 million in the second quarter 2013, up from approximately 196.3 million in the comparable quarter in 2012.
Net income applicable to common shareholders was $14.3 million for the second quarter ended June 30, 2013, compared to net income applicable to common shareholders of $13.1 million for the comparable quarter in 2012.
?Our portfolio continues to post solid results, with strong occupancy, particularly in New York, and high absolute margins. Year-to-date RevPAR growth of 8.0% within our same store consolidated portfolio remains industry leading. Our year-over-year quarterly RevPAR growth was somewhat muted, however, as the Company faced tough comparables for transient travel in April as a result of the Easter holiday shift, a softer convention calendar in Boston and Philadelphia, as well as the impact from a slowdown in government travel due to sequestration in our Washington, D.C. metro market.? commented Mr. Jay H. Shah, the Company?s Chief Executive Officer.
Mr. Shah continued, ?We continue to believe that we are extremely well-positioned to be outsized beneficiaries of the continuing economic recovery currently underway. We believe that Hersha?s young, urban focused, and newly refreshed portfolio will benefit from increased transient travel which is forecasted to be the U.S. lodging industry?s sustained driver of RevPAR growth in the near-term. The Company will also benefit from its continued expansion in key gateway markets such as Miami and San Diego and the disposition of non-core assets. Moving forward, the Company will continue to focus on disposition opportunities, both to unlock value from capital recycling within our portfolio and to continue to strategically transition Hersha as the leading urban focused hospitality REIT in the sector.?
Second Quarter 2013 Operating Results
For the quarter ended June 30, 2013, revenue per available room (?RevPAR?) at the Company’s consolidated hotels, 57 hotels as of June 30, 2013 compared to 53 hotels as of June 30, 2012, was up 3.6% to $142.13 compared to $137.25 in the prior year period. The Company?s average daily rate (?ADR?) at its consolidated hotels increased by 3.4% to $174.42, while occupancy at its consolidated hotels increased by 11 basis points to 81.5%. Hotel EBITDA at the Company?s consolidated hotels grew approximately 9.9%, or $3.9 million, to $43.3 million for the quarter ended June 30, 2013 compared to the same period in 2012. Hotel EBITDA margins were 40.9% in the second quarter 2013 compared to 41.5% in the same quarter 2012. In addition to a different mix of hotels within the consolidated portfolio, EBITDA margins were impacted by startup and pre-opening expenses associated with the Hyatt Union Square, increased property taxes and insurance costs.
On a same-store basis (51 hotels), RevPAR at the Company?s consolidated hotels for the quarter ended June 30, 2013 was up 3.7% to $142.24 compared to $137.19 in the prior year period. ADR at the Company?s same-store consolidated hotels increased by 2.4% to $173.02, while occupancy at same-store consolidated hotels increased by 103 basis points to 82.2%.
Hotel EBITDA margins at the Company?s same-store consolidated hotels increased by 30 basis points to 42.0% in the second quarter 2013, and were also impacted by increased property taxes and insurance costs, which collectively reduced margins by approximately 55 basis points.
The Company?s top performing markets during the quarter based on RevPAR growth were the California-Arizona, the Connecticut-Rhode Island and the NY-NJ Metro markets with RevPAR growth of 11.4%, 9.8% and 8.7%, respectively.
New York City and Manhattan
The New York City hotel portfolio, which includes the five boroughs, consisted of 16 hotels as of June 30, 2013. For the second quarter 2013, the Company?s same-store New York City hotel portfolio (14 hotels) recorded a 5.8% increase in RevPAR to $208.40 as ADR increased 4.7% to $224.72, while occupancy increased 91 basis points to 92.7%.
The Manhattan hotel portfolio consisted of 13 hotels as of June 30, 2013. For the second quarter of 2013, the Company?s same-store Manhattan hotel portfolio (11 hotels) recorded a 2.9% increase in RevPAR to $219.02, as ADR increased 2.1% to $234.77, and occupancy increased 72 basis points to 93.3%.
Financing
As of June 30, 2013, the Company maintained significant financial flexibility with approximately $29.3 million of cash and cash equivalents and $183.8 million available on its $250 million senior unsecured revolving line of credit As of June 30, 2013, 92.8% of the Company?s consolidated debt is fixed rate debt or effectively fixed through interest rate swaps and caps. The Company?s total consolidated debt has a weighted average interest rate of approximately 4.85% and a weighted average life-to-maturity of approximately 4.0 years.
In April 2013, the Company received the remaining balance of principal and accrued interest on the development loan for the Hyatt 48 Lex in the amount of $2.0 million. With this transaction, the Company no longer possesses any development loan exposure.
In addition, in April 2013, the Company modified its $30 million loan for the Courtyard by Marriott Los Angeles, CA. This modification included the option to advance an additional $5 million in principal, bears interest at a variable rate of one month LIBOR plus 3.00% and now matures in September 2017. Furthermore, during the second quarter, the Company repaid $7.9 million on its outstanding mortgage at the Residence Inn, Tysons Corner, VA.
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