Hersha Hospitality Trust Reports Full-Year and Q4 2015 Results: FY RevPAR Grew 6.9% with a Q4 Rise of 4.2%
February 17, 2016 9:25am
PHILADELPHIA- Hersha Hospitality Trust (NYSE: HT) (“Hersha” or the “Company”), owner of upscale hotels in urban gateway markets, today announced results for the full-year and the fourth quarter ended December 31, 2015.
Full-Year and Fourth Quarter 2015 Financial Results
Adjusted Funds from Operations (“AFFO”) in 2015 increased by $15.3 million, or 14.8%, to $118.1 million, compared to $102.8 million in 2014. The Company’s weighted average diluted common shares and units of limited partnership interest in Hersha Hospitality Limited Partnership (“OP Unit”) outstanding were approximately 50.3 million as of December 31, 2015, compared to approximately 52.0 million as of December 31, 2014. AFFO per diluted common share and OP Unit in 2015 was $2.35, an 18.7% increase from AFFO of $1.98 per diluted common share and OP Unit reported in 2014.
AFFO in the fourth quarter 2015 increased by $4.1 million, or 14.3%, to $32.4 million, compared to $28.3 million in the fourth quarter 2014. AFFO per diluted common share and OP Unit in the fourth quarter 2015 was $0.67, a 24.1% increase from AFFO per diluted common share and OP Unit of $0.54 in the same quarter in 2014. 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, “Hersha’s strong performance and successful strategic execution in 2015 reinforces the Company’s position as a leader in the lodging sector and among REIT peers. During 2015, the Company improved portfolio quality through 3 accretive acquisitions totaling $134.7 million, beat the market in each of our 6 core gateways, including Manhattan, and remained steadfast to the Company’s absolute return philosophy and commitment to total shareholder returns. Our 2015 operating results demonstrate the earnings power of a pure play, geographically diversified, urban transient portfolio concentrated in the highest demand gateway markets. Consolidated RevPAR growth of 6.9% to $165.88 and Hotel EBITDA of $178.6 million in 2015 were continuing indicators of healthy lodging fundamentals against a positive macroeconomic backdrop fueled by consumer spending and a strong labor market. Thoughtful and aggressive revenue management strategies and core competencies of our hotel managers, combined with record-breaking portfolio-wide occupancy of 84.1%, led ADR increases to comprise the majority of our portfolio’s full-year 2015 RevPAR growth. With continuing record occupancies across the country and in our portfolio, Hersha is well-positioned to further increase ADR in 2016, which combined with our industry leading margins, will drive strong profitability growth and free cash flow.”
Mr. Shah continued, “In 2015, we added high-quality, well-located hotels to the Company’s portfolio, fortifying our urban hotel cluster in Washington, DC through the purchase of the St. Gregory Hotel in June. We also acquired the newly renovated, 86-room Ritz-Carlton Georgetown in late December for $50.0 million, and went under contract to purchase the brand new Hilton Garden Inn M Street. In Northern California, we established a foothold in Silicon Valley with the purchase of the Marriott TownePlace Suites Sunnyvale in August, and recently closed on the beachfront Sanctuary Beach Resort on the southern end of Monterey Bay. Additionally, we actively bought back our stock in 2015, repurchasing 10.7% of the Company’s outstanding shares for $127.9 million. We anticipate further opportunistic share buybacks to take advantage of the capital market dislocation, and view share buybacks as an attractive use of available capital. As a result, we may seek to increase our 2016 share repurchase authorization based on market conditions and subject to approval by the Company’s Board.”
Fourth Quarter 2015 Operating Results
During fourth quarter 2015, revenue per available room (“RevPAR”) at the Company's 48 comparable hotels increased 4.2% to $167.30. The Company’s average daily rate (“ADR”) for the comparable hotel portfolio increased 3.3% to $204.08, while occupancy increased 73 basis points to 82.0%. Hotel EBITDA margins for the comparable hotel portfolio increased 30 basis points to 38.2%. Consolidated portfolio Hotel EBITDA increased 9.3%, or $4.0 million, to $46.9 million as operators benefitted from pricing power given strong occupancies across the Company’s six markets.
The Company’s best performing market during the fourth quarter was Philadelphia, which reported 16.6% RevPAR growth. The Company’s West Coast, South Florida and Washington, DC CBD portfolios reported 12.5%, 8.6% and 8.0% RevPAR growth, respectively.
New York City and Manhattan
The New York City hotel portfolio, which includes the five boroughs, consisted of 17 hotels as of December 31, 2015. For fourth quarter 2015, the Company’s comparable New York City hotel portfolio (17 hotels) reported occupancy growth of 17 basis points to a very strong 93.9%. Nevertheless, the delivery of new supply in New York City throughout the year negatively impacted rate growth, which declined 20 basis points to $242.15. As a result, RevPAR was flat at $227.37.
The Manhattan hotel portfolio consisted of 14 hotels as of December 31, 2015. During fourth quarter 2015, the Company’s comparable Manhattan hotel portfolio (14 hotels) also reported robust portfolio-wide occupancy of 95.2%, 880 basis points above the greater Manhattan market. However, the delivery of new supply during the quarter inhibited rate growth, driving the portfolio’s 30 basis point ADR decline to $254.73, leading to a 30 basis point decrease in RevPAR to $242.55. In the fourth quarter, the Company outperformed the Manhattan market by 270 basis points, the 8th consecutive quarter of market outperformance. The decline in ADR and property tax increases at newly opened Manhattan hotels, negatively impacted Hotel EBITDA margins, leading to a 110 basis point decline to 44.2%.
As of December 31, 2015, the Company maintained significant financial flexibility with approximately $28.0 million of cash and cash equivalents, and $218.7 million available on the Company’s senior unsecured credit facility. As of December 31, 2015, 53.0% of the Company’s consolidated debt was fixed rate debt or hedged through interest rate swaps and caps. The Company’s total consolidated debt had a weighted average interest rate of approximately 3.68% and a weighted average life-to-maturity of approximately 4.0 years.
During fourth quarter 2015, the Company acquired the 86-room Ritz-Carlton Georgetown in Washington, DC for $50.0 million, or $581,000 per room. The Company expects the Ritz-Carlton Georgetown to stabilize at an unlevered yield of 8.0% - 8.5% based on improving Washington, DC market fundamentals, and the Company’s broad capabilities. The acquisition of the Ritz-Carlton Georgetown was funded with cash on hand and with proceeds from the Company’s senior unsecured credit facility.
On February 4, 2016, the Company announced it signed definitive agreements with Cindat Capital Management Limited (“Cindat”) to form a joint venture for 7 of the Company’s limited service hotels in Manhattan totaling 1,087 rooms for a total purchase price, including expected closing costs, of $571.4 million, or $526,000 per key. The proposed joint venture is structured with Cindat as the preferred joint venture partner holding a 70.0% ownership stake, while Hersha retains a 30.0% equity interest. The joint-venture transaction is expected to close no later than March 31, 2016, and is subject to customary closing conditions.
On February 4, 2016, the Company also announced it signed a purchase and sale agreement to acquire the 238-room Hilton Garden Inn M Street for $106.5 million. The purchase price reflects an expected forward 12-month economic capitalization rate and Hotel EBITDA multiple of 7.3% and 13.1x, respectively. The proposed purchase of the Hilton Garden Inn M Street is expected to close in the first quarter 2016 and is subject to customary closing conditions, including the completion of due diligence.
In late January 2016, the Company closed on the previously announced acquisition of the 60-room Sanctuary Beach Resort in Monterey, CA for $39.5 million following the assumption of the property’s $14.7 million loan.
Share Repurchase Activity
In 2015, the Company repurchased approximately 5.3 million common shares for an aggregate repurchase price of $127.9 million, representing approximately 10.7% of common shares outstanding as of December 31, 2014. The Company has approximately $72.0 million remaining on its $100 Million Share Repurchase Program.
In fourth quarter 2015, the Company repurchased approximately 1.9 million shares for $45.1 million.
Hersha paid a dividend of $0.50 per Series B Preferred Share and $0.4297 per Series C Preferred Share for the fourth quarter ended December 31, 2015. The preferred share dividends were paid January 15, 2016 to holders of record as of January 1, 2016.
The Board of Trustees also declared quarterly cash dividends of $0.28 per common share and per Limited Partnership unit for the fourth quarter ended December 31, 2015. The common share dividend and limited partnership unit distribution were paid January 15, 2016 to holders of record as of January 4, 2016.
Net income applicable to common shareholders was $27.4 million, or $0.56 per diluted common share, for the full-year ended December 31, 2015 compared to net income applicable to common shareholders of $52.9 million, or $1.04 per diluted common share in 2014. The decrease in net income reported for the full‐year was primarily attributable to non‐recurring gains on hotel dispositions, acquisitions and development loan recoveries recorded in 2014, which offset same store growth, contributions from stabilizing assets, and income generated from acquisitions completed in 2015.
In the fourth quarter 2015, net income applicable to common shareholders was $8.8 million, or $0.19 per diluted common share, compared to net income applicable to common shareholders of $5.1 million, or $0.10 per diluted common share in fourth quarter 2014.
Tables associated with this release are accessible via the PDF or by visiting:
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q4 2015 results
Hersha Hospitality Trust (HT) is a self-advised real estate investment trust in the hospitality sector, which owns and operates high quality upscale hotels in urban gateway markets. The Company's 55 hotels totaling 8,654 rooms are located in New York, Boston, Philadelphia, Washington, DC, Miami and select markets on the West Coast. The Company's shares are traded on The New York Stock Exchange under the ticker “HT”.
Contact: Ashish Parikh, CFO
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