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Section 1: 10-Q (10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

COMMISSION FILE NUMBER: 001-14765
HERSHA HOSPITALITY TRUST
(Exact Name of Registrant as Specified in Its Charter)
Maryland 25-1811499
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
44 Hersha DriveHarrisburgPA 17102
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (717) 236-4400

Former name, former address and former fiscal year, if changed since last report: Not applicable

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Shares of Beneficial Interest, par value $.01 per shareHTNew York Stock Exchange
6.875% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, par $.01 per shareHT-PCNew York Stock Exchange
6.500% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par $.01 per shareHT-PDNew York Stock Exchange
6.500% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest, par $.01 per shareHT-PENew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
 



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filerAccelerated filer
Non-accelerated filerSmall reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No 

As of May 7, 2020, the number of Class A common shares of beneficial interest outstanding was 38,714,406  and there were no Class B common shares of beneficial interest outstanding.



 Hersha Hospitality Trust
Table of Contents
PART I.  FINANCIAL INFORMATIONPage
Item 1.Financial Statements. 






Item 2.
Item 3.
Item 4.
  
PART II.  OTHER INFORMATION 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 


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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2020 (UNAUDITED) AND DECEMBER 31, 2019
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]



March 31, 2020December 31, 2019
Assets:  
Investment in Hotel Properties, Net of Accumulated Depreciation$1,924,257  $1,975,973  
Investment in Unconsolidated Joint Ventures8,028  8,446  
Cash and Cash Equivalents23,936  27,012  
Escrow Deposits8,641  9,973  
Hotel Accounts Receivable3,963  9,213  
Due from Related Parties1,797  6,113  
Intangible Assets, Net of Accumulated Amortization of $6,693 and $6,545
1,989  2,137  
Right of Use Assets45,075  45,384  
Other Assets39,482  38,177  
Hotel Assets Held for Sale41,193    
Total Assets$2,098,361  $2,122,428  
  
Liabilities and Equity:  
Line of Credit$70,000  $48,000  
Unsecured Term Loans, Net of Unamortized Deferred Financing Costs (Note 5)697,390  697,183  
Unsecured Notes Payable, Net of Unamortized Deferred Financing Costs (Note 5)50,750  50,736  
Mortgages Payable, Net of Unamortized Premium and Unamortized Deferred Financing Costs331,982  332,280  
Lease Liabilities54,386  54,548  
Accounts Payable, Accrued Expenses and Other Liabilities74,699  47,626  
Dividends and Distributions Payable  17,058  
Total Liabilities$1,279,207  $1,247,431  
Redeemable Noncontrolling Interests - Consolidated Joint Venture (Note 1)$3,196  $3,196  
  
Equity:  
Shareholders' Equity:  
Preferred Shares:  $.01 Par Value, 29,000,000 Shares Authorized, 3,000,000 Series C, 7,701,700 Series D and 4,001,514 Series E Shares Issued and Outstanding at March 31, 2020 and December 31, 2019, with Liquidation Preferences of $25.00 Per Share (Note 1)
$147  $147  
Common Shares:  Class A, $.01 Par Value, 104,000,000 Shares Authorized at March 31, 2020 and December 31, 2019; 38,673,242 and 38,652,650 Shares Issued and Outstanding at March 31, 2020 and December 31, 2019, respectively
387  387  
Common Shares:  Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding at March 31, 2020 and December 31, 2019
    
Accumulated Other Comprehensive (Loss) Income(26,411) 1,010  
Additional Paid-in Capital1,145,450  1,144,808  
Distributions in Excess of Net Income(362,777) (338,695) 
Total Shareholders' Equity756,796  807,657  
  
Noncontrolling Interests (Note 1)59,162  64,144  
  
Total Equity815,958  871,801  
  
Total Liabilities and Equity$2,098,361  $2,122,428  
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.
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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

Three Months Ended March 31,
20202019
Revenue:  
Hotel Operating Revenues:
Room$71,083  $91,485  
Food & Beverage10,075  14,228  
Other Operating Revenues8,780  8,930  
Other Revenues199  150  
Total Revenues90,137  114,793  
Operating Expenses:  
Hotel Operating Expenses:
Room19,092  22,090  
Food & Beverage10,621  12,832  
Other Operating Expenses35,806  40,189  
Hotel Ground Rent1,063  1,110  
Real Estate and Personal Property Taxes and Property Insurance9,942  9,397  
General and Administrative (including Share Based Payments of $2,456 and $1,958 for the three months ended March 31, 2020 and 2019, respectively)
5,834  5,600  
Depreciation and Amortization24,188  24,128  
Total Operating Expenses106,546  115,346  
  
Operating Loss(16,409) (553) 
Interest Income36  83  
Interest Expense(13,007) (12,898) 
Other (Expense) Income(72) 41  
Loss Before Results from Unconsolidated Joint Venture Investments and Income Taxes(29,452) (13,327) 
  
(Loss) Income from Unconsolidated Joint Ventures(1,018) 181  
  
Loss Before Income Taxes(30,470) (13,146) 
  
Income Tax Benefit 4,498  5,264  
  
Net Loss(25,972) (7,882) 
Loss Allocated to Noncontrolling Interests - Common Units2,897  1,063  
Income Allocated to Noncontrolling Interests - Consolidated Joint Venture  (140) 
Preferred Distributions(6,044) (6,044) 
Net Loss Applicable to Common Shareholders$(29,119) $(13,003) 
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.


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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]
Three Months Ended March 31,
20202019
Earnings Per Share:  
BASIC  
Loss from Continuing Operations Applicable to Common Shareholders$(0.76) $(0.34) 
  
DILUTED  
Loss from Continuing Operations Applicable to Common Shareholders$(0.76) $(0.34) 
  
Weighted Average Common Shares Outstanding:  
Basic38,564,099  39,115,390  
Diluted*38,564,099  39,115,390  
*Income (Loss) allocated to noncontrolling interest in Hersha Hospitality Limited Partnership (the “Operating Partnership” or “HHLP”) has been excluded from the numerator and the Class A common shares issuable upon any redemption of the Operating Partnership’s common units of limited partnership interest (“Common Units”) and the Operating Partnership’s vested LTIP units (“Vested LTIP Units”) have been omitted from the denominator for the purpose of computing diluted earnings per share because the effect of including these shares and units in the numerator and denominator would have no impact. In addition, potentially dilutive common shares, if any, have been excluded from the denominator if they are anti-dilutive to income (loss) applicable to common shareholders.
The following table summarizes potentially dilutive securities that have been excluded from the denominator for the purpose of computing diluted earnings per share:
 Three Months Ended March 31,
 20202019
Common Units and Vested LTIP Units3,838,745  3,308,612  
Unvested Stock Awards and LTIP Units Outstanding180,704  124,312  
Contingently Issuable Share Awards916,938  644,619  
Total Potentially Dilutive Securities Excluded from the Denominator4,936,387  4,077,543  
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.
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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 [UNAUDITED]
[IN THOUSANDS]

Three Months Ended March 31,
20202019
Net Loss$(25,972) $(7,882) 
Other Comprehensive Loss  
Change in Fair Value of Derivative Instruments(31,126) (1,717) 
Less:  Reclassification Adjustment for Change in Fair Value of Derivative Instruments Included in Net Income977  (1,204) 
Total Other Comprehensive Loss $(30,149) $(2,921) 
  
Comprehensive Loss(56,121) (10,803) 
Less:  Comprehensive Loss Attributable to Noncontrolling Interests - Common Units5,625  1,291  
Less:  Comprehensive Income Attributable to Noncontrolling Interests - Consolidated Joint Venture  (140) 
Less:  Preferred Distributions(6,044) (6,044) 
Comprehensive Loss Attributable to Common Shareholders$(56,540) $(15,696) 
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARES]

Shareholders' EquityNoncontrolling InterestsRedeemable Noncontrolling Interests
Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive Income ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)Consolidated Joint Venture ($)
Balance at December 31, 201938,652,650  387    14,703,214  147  1,144,808  1,010  (338,695) 807,657  4,279,946  64,144  871,801  3,196  
Dividends and Distributions declared:             
Preferred Shares—  —  —  —  —  —  —  (1,007) (1,007) —  —  (1,007) —  
Dividend Reinvestment Plan1,094  —  —  —  —  14  —  —  14  —  —  14  —  
Share Based Compensation:             
Grants19,498  —  —  —  —  —  —  —  —  —  —  —  —  
Amortization—  —  —  —  —  628  —  —  628  643  1,271  —  
Change in Fair Value of Derivative Instruments—  —  —  —  —  —  (27,421) —  (27,421) —  (2,728) (30,149) —  
Net Loss—  —  —  —  —  —  —  (23,075) (23,075) —  (2,897) (25,972) —  
Balance at March 31, 202038,673,242  387    14,703,214  147  1,145,450  (26,411) (362,777) 756,796  4,279,946  59,162  815,958  3,196  
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.











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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARES]
Shareholders' EquityNoncontrolling InterestsRedeemable Noncontrolling Interests
Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive Income ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)Consolidated Joint Venture ($)
Balance at December 31, 201839,458,626  395    14,703,214  147  1,155,776  4,227  (267,740) 892,805  3,749,665  62,010  954,815  2,708  
Repurchase of Common Shares(273,538) (3) —  —  —  (4,693) —  —  (4,696) —  —  (4,696) —  
Dividends and Distributions declared:            
Common Shares ($0.28 per share)
—  —  —  —  —  —  —  (10,979) (10,979) —  —  (10,979) —  
Preferred Shares—  —  —  —  —  —  —  (6,044) (6,044) —  —  (6,044) —  
Common Units ($0.28 per share)
—  —  —  —  —  —  —  —  —  —  (578) (578) —  
LTIP Units ($0.28 per share)
—  —  —  —  —  —  —  —  —  —  (743) (743) —  
Dividend Reinvestment Plan1,265  —  —  —  —  21  —  —  21  —  —  21  —  
Share Based Compensation:            
Grants26,916  —  —  —  —  —  —  —  —  530,281  —  —  —  
Amortization—  —  —  —  —  690  —  —  690  —  5,410  6,100  —  
Equity Contribution to Consolidated Joint Venture—  —  —  —  —  —  —  —  —  —  —  —  300  
Change in Fair Value of Derivative Instruments—  —  —  —  —  —  (2,693) —  (2,693) —  (228) (2,921) —  
Adjustment to Record Noncontrolling Interest at Redemption Value—  —  —  —  —  (140) —  —  (140) —  —  (140) 140  
Net Income (Loss)—  —  —  —  —  —  —  (6,519) (6,519) (1,063) (7,582) (300) 
Balance at March 31, 201939,213,269  392    14,703,214  147  1,151,654  1,534  (291,282) 862,445  4,279,946  64,808  927,253  2,848  
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 [UNAUDITED]
[IN THOUSANDS]

Three Months Ended March 31,
20202019
Operating Activities:  
Net Loss$(25,972) $(7,882) 
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:  
Deferred Taxes(4,539) (5,258) 
Depreciation24,071  23,951  
Amortization566  590  
Equity in Loss (Income) of Unconsolidated Joint Ventures1,018  (181) 
Distributions from Unconsolidated Joint Ventures  853  
Loss Recognized on Change in Fair Value of Derivative Instrument977  72  
Share Based Compensation Expense2,456  1,958  
Change in Assets and Liabilities:  
(Increase) Decrease in:  
Hotel Accounts Receivable5,250  (1,930) 
Other Assets81  (170) 
Due from Related Parties4,316  (2,657) 
(Decrease) Increase in:  
Accounts Payable, Accrued Expenses and Other Liabilities(4,621) (3,344) 
Net Cash Provided by Operating Activities$3,603  $6,002  
  
Investing Activities:  
Capital Expenditures(10,979) (8,710) 
Cash Paid for Hotel Development Projects28  (77) 
Contributions to Unconsolidated Joint Ventures(600)   
Distributions from Unconsolidated Joint Ventures<