– Implements Aggressive Cost Containment Strategies –
– Amends Bank Credit Facility to Access Additional $100 Million –
– Obtains Full Financial Covenant Waiver through March 31, 2021 –
PHILADELPHIA, May 07, 2020 — Hersha Hospitality Trust (NYSE: HT) (“Hersha,” “Company,” “we” or “our”), owner of high-quality upscale and lifestyle hotels in urban gateway markets and resort destinations, today announced results for the first quarter ended March 31, 2020.
First Quarter 2020 Financial Results
Net loss applicable to common shareholders was approximately ($29.1 million), or ($0.76) per diluted common share, in the first quarter 2020, compared to net loss applicable to common shareholders of approximately ($13.0 million), or ($0.34) per diluted common share, in the first quarter 2019. In spite of a strong start, the decrease in first quarter 2020 net income and net income per diluted common share is largely due to the unprecedented impact on the travel industry from the COVID-19 pandemic.
AFFO in the first quarter 2020 decreased by $8.7 million, or 138.1%, to ($2.4 million), compared to $6.3 million in the first quarter 2019. AFFO per diluted common share and OP Unit in the first quarter 2020 was ($0.06). 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, “Since our last earnings report just over two months ago, the COVID-19 pandemic has delivered catastrophic impact on the lodging industry. The first two months of 2020 exceeded our high expectations for our portfolio, generating strong incremental EBITDA from the holistic renovations we undertook over the last few years, led by our two largest EBITDA-producing assets in South Florida. January and February gave us a glimpse of the profitability of our newly-aligned comparable portfolio, which grew RevPAR by 3.9% during that period. However, in March, the novel Coronavirus outbreak led to a near immediate shutdown in travel, resulting in an unimaginable impact to the lodging sector. The deep and pervasive effects led us to immediately pivot to a near-term operating strategy of curbing expenses and boosting our liquidity. In close alignment with our independent third-party management partners we implemented significant on property cost cuts in real time. We also made extensive corporate cost cuts expected to yield approximately 25% in savings in SG&A expenses on an annualized basis for 2020. At the hotel-level, the suspension of operations at 21 of our 48 hotels has resulted in an 80% reduction of on-property labor costs. Employing a select-service model at the majority of our assets, allows us to efficiently operate our hotels with a skeleton crew, leading to a significant reduction in expenses while also generating revenue through unique channels with medical personnel, government agencies, emergency first responders, and law enforcement.”
Mr. Shah continued, “We reached an agreement with our bank group to amend our existing Bank Credit Facility to access an additional $100 million on our $250 million Senior Revolving Credit Facility. Our amendment also includes a financial covenant holiday through March 31, 2021 yielding operational and financial flexibility for the portfolio through June 30, 2021. This liquidity, in addition to the revocation and suspension of our common and preferred dividends, and our expense mitigation strategies we have implemented, has significantly boosted our liquidity profile. Despite uncertainty for the lodging industry, we are confident in our ability to navigate through this crisis to the other side with a more efficiently-operated portfolio in the most valuable, sought after real estate markets in the country and we remain ready to welcome guests when demand for travel re-emerges across the coming months.”
First Quarter 2020 Operating Results
The Company’s portfolio markets were significantly hampered by shelter-in-place orders and travel bans enacted during March and led to double-digit RevPAR loss across its clusters, excluding South Florida.
Revenue per available room (“RevPAR”) at the Company’s 38 comparable hotels decreased 22.4% to $127.25 in the first quarter 2020. The Company’s average daily rate (“ADR”) for the comparable hotel portfolio decreased 0.8% to $206.38, while occupancy fell 1,714 basis points to 61.7%. Occupancy-driven RevPAR loss for the quarter resulted in EBITDA margin loss of 840 basis points to 17.2%.
On a regional basis, the South Florida portfolio was our best performing market during the first quarter with RevPAR loss of 1.2%, highlighted by the Cadillac Hotel & Beach Club, which generated 11.7% RevPAR growth for the quarter. The hotel was able to capture significant rate growth during January and February before the impact on travel from the COVID-19 pandemic exacerbated in March, which resulted in 17.5% ADR growth to $327.64 during the first quarter.
Financing
The Company successfully amended its existing Bank Credit Facility and Borrowing Base of Assets to access an additional $100 million on the Company’s $250 million Senior Revolving Line of Credit without any changes to the interest rate on the Facility. The amendment also resulted in the Company obtaining waivers on all financial covenants through March 31, 2021, yielding additional operational and financial flexibility. The Company’s next financial covenant test will take place on June 30, 2021.
The Company completed the first quarter 2020 with approximately $23.9 million of cash and cash equivalents. As of March 31, 2020, 87.0% 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 3.87% and a weighted average life-to-maturity of approximately 3.5 years.
Dividends
As a part of plans to preserve cash, the Company suspended dividend distribution on its common shares, 6.875% Series C Cumulative Redeemable Preferred Shares, 6.50% Series D Cumulative Redeemable Preferred Shares and 6.50% Series E Cumulative Redeemable Preferred Shares. Unpaid dividends on Hersha’s preferred shares shall accrue without interest.
The Company will continue to review taxable income on a regular basis and take measures, if necessary, to ensure that it continues to meet the minimum distribution requirements to maintain its status as a real estate investment trust.
Full-Year 2020 Outlook
Due to the uncertainty surrounding the lodging industry stemming from the COVID-19 pandemic, the Company has suspended its full-year 2020 guidance.
First Quarter 2020 Conference Call
The Company will host a conference call to discuss these results at 9:00 AM Eastern Time on Thursday, May 7, 2020. 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 website at www.hersha.com. The conference call can be accessed by dialing 1-888-317-6003 or 1-412-317-6061 for international participants and entering the passcode 1956895 approximately 10 minutes in advance of the call. A replay of the call will be available from 11:00 AM Eastern Time on Thursday, May 7, 2020, through 11:59 PM Eastern Time on Saturday, June 6, 2020. 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 10140184. A replay of the webcast will be available on the Company’s website for a limited time.
