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Hersha Hospitality Announces Third Quarter Results

Certain amounts related to depreciation and amortization and depreciation and amortization from discontinued operations in the prior year FFO reconciliation have been recast to conform to the current year presentation. 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:

               
HERSHA HOSPITALITY TRUST
Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)
(in thousands, except shares and per share data)
 
Three Months Ended Nine Months Ended

September 30, 2012

September 30, 2011

September 30, 2012

September 30, 2011

 
Net income (loss) applicable to common shares $ 2,673 $ (25,004 ) $ 5,092 $ (32,954 )
Loss allocated to noncontrolling interest (279 ) (1,000 ) (223 ) (1,619 )
Loss (income) from unconsolidated joint ventures 1,431 1,570 1,971 (8 )
Loss (gain) on disposition of hotel properties 183 (843 ) (11,269 ) (843 )
Loss from impairment of depreciable assets - 30,248 - 30,248
Depreciation and amortization 14,719 12,839 42,304 37,587
Depreciation and amortization from discontinued operations - 1,186 26 4,896
FFO allocated to noncontrolling interests in consolidated joint ventures   -     -     -     239  

Funds from consolidated hotel operations applicable to common shares and Partnership units

18,727 18,996 37,901 37,546
 
(Loss) income from unconsolidated joint venture investments (1,431 ) (1,570 ) (1,971 ) 8
 
Loss (gain) from remeasurement of investment in unconsolidated joint ventures 1,668 - 1,892 (2,757 )

Impairment of investment in unconsolidated joint ventures

- 1,677 - 1,677

Depreciation and amortization of purchase price in excess of historical cost

161 538 738 1,629

Interest in depreciation and amortization of unconsolidated joint ventures

  1,506     2,437     4,210     4,425  

Funds from unconsolidated joint venture operations applicable to common shares and Partnership units

1,904

3,082

4,869

4,982

       

Funds from Operations applicable to common shares and Partnership units

20,631 22,078 42,770 42,528
 
Add:
FFO allocated to noncontrolling interests in consolidated joint ventures - - - (239 )
Non-cash stock compensation expense 1,923 1,495 6,322 4,765
Acquisition and terminated transaction costs 85 147 1,167 2,263
Amortization of deferred financing costs 824 877 2,325 2,507
Amortization of discounts and premiums (215 ) 52 (218 ) 156
Deferred financing costs written off in debt extinguishment 3 21 249 55
Straight-line amortization of ground lease expense   2     60     38     184  
 
Adjusted Funds from Operations $ 23,253   $ 24,730   $ 52,653   $ 52,219  
 

AFFO per Diluted Weighted Average Common Shares and Units Outstanding

$ 0.11   $ 0.14   $ 0.27   $ 0.29  
 
Diluted Weighted Average Common Shares and Units Outstanding 206,565,787 179,512,493 194,666,980 180,746,755
 

Adjusted EBITDA

Adjusted Earnings Before Interest, Taxes, and Depreciation and Amortization (EBITDA) is a non-GAAP financial measure within the meaning of the Securities and Exchange Commission rules. Our interpretation of Adjusted EBITDA is that EBITDA derived from our investment in unconsolidated joint ventures should be added back to net income (loss) as part of reconciling net income (loss) to Adjusted EBITDA. Our Adjusted EBITDA computation may not be comparable to EBITDA or Adjusted EBITDA reported by other companies that interpret the definition of EBITDA differently than we do. Management believes Adjusted EBITDA to be a meaningful measure of a REIT's performance because it is widely followed by industry analysts, lenders and investors and that it should be considered along with, but not as an alternative to, net income, cash flow, FFO and AFFO, as a measure of the company's operating performance.

               
HERSHA HOSPITALITY TRUST
Adjusted EBITDA
(in thousands)
Three Months Ended Nine Months Ended
September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
 
Net income (loss) applicable to common shares $ 2,673 $ (25,004 ) $ 5,092 $ (32,954 )
Loss (income) from unconsolidated joint ventures 1,431 1,570 1,971 (8 )
Loss (gain) on disposition of hotel properties 183 (843 ) (11,269 ) (843 )
Non-operating interest income (28 ) (40 ) (56 ) (128 )
Loss allocated to noncontrolling interest (279 ) (1,000 ) (223 ) (1,619 )
Loss from impairment of assets - 30,248 - 30,248
Distributions to Preferred Shareholders 3,500 3,500 10,500 6,999
Interest expense from continuing operations 11,149 10,145 33,073 29,516
Interest expense from discontinued operations - 1,518 1,201 4,358
Deferred financing costs written off in debt extinguishment 3 21 249 55
Depreciation and amortization from continuing operations 14,719 12,839 42,304 37,587
Depreciation and amortization from discontinued operations - 1,186 26 4,896
Acquisition and terminated transaction costs 85 147 1,167 2,263
Non-cash stock compensation expense 1,923 1,495 6,322 4,765
Straight-line amortization of ground lease expense   2     60     38     184  
 
Adjusted EBITDA from consolidated hotel operations   35,361     35,842     90,395     85,319  
 
(Loss) income from unconsolidated joint venture investments (1,431 ) (1,570 ) (1,971 ) 8
Loss (gain) on remeasurement of investment in unconsolidated joint ventures 1,668 - 1,892 (2,757 )
Impairment of investment in unconsolidated joint ventures - 1,677 - 1,677

Depreciation and amortization of purchase price in excess of historical cost

161 538 738 1,629

Adjustment for interest in interest expense, depreciation and amortization of unconsolidated joint ventures

  3,493     5,403     13,127     13,053  
 
Adjusted EBITDA from unconsolidated joint venture operations   3,891     6,048     13,786     13,610  
 
Adjusted EBITDA $ 39,252   $ 41,890   $ 104,181   $ 98,929  
 

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 and should not be relied on as a measure of performance for our portfolio of hotels taken as a whole.

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