UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of The Securities Exchange Act of
1934
Date
of Report (Date of earliest event reported): May 13, 2005
HERSHA
HOSPITALITY TRUST
(Exact
name of registrant as specified in its charter)
Maryland |
|
001-14765 |
|
251811499 |
(State
or other jurisdiction of incorporation) |
|
(Commission
File Number) |
|
(IRS
Employer Identification No.) |
510
Walnut Street, 9th
Floor
Philadelphia,
Pennsylvania 19106
(Address
and zip code of
principal
executive offices)
Registrant’s
telephone number, including area code: (215)
238-1046
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instructions A.2. below):
o |
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425) |
o |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12) |
o |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
o |
Pre-commencement
communications pursuant to Rule 13e4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
Item
1.01 |
Entry
into a Material Definitive
Agreement. |
On
May 13, 2005, Metro Two Hotel, LLC, a Florida limited liability company (“Metro
Two”), which is 100% owned by Hersha Hospitality Limited Partnership (“HHLP”),
the operating partnership subsidiary of Hersha Hospitality Trust (“HT”) entered
into an agreement to sell the land, improvements and certain personal property
(the “Holiday Inn Property”) of the Holiday Inn Express Hotel situated at 3805
Hunters Point Avenue, Long Island City, New York.
Also
on May 13, 2005, in a separate transaction, 5544 JFK III Associates, a
Pennsylvania limited partnership (“JFK”), which is 99% owned by HHLP and 1%
owned by Hersha Hospitality LLC, as general partner, which is 100% owned by
HHLP, entered into an agreement to sell the land, improvements and certain
personal property (the “Doubletree Property”) of the Doubletree Club Hotel in
the City of Jamaica, New York.
During
2004, HT’s Board of Trustees authorized management of HT to sell the
Holiday
Inn Property and the Doubletree Property,
which were under non-binding letters of intent as of December 31, 2004. In
accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets,” both of these hotels were classified as “held for sale” on
HT’s consolidated balance sheet as of December 31, 2004 in HT’s Annual Report on
Form 10-K for the year ended December 31, 2004 and HT’s consolidated balance
sheet as of March 31, 2005 in HT’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2005. In addition, the operating results for these hotels were
reclassified to discontinued operations in the statements of operations for the
years ended December 31, 2004, 2003 and 2002 in HT’s Annual Report on Form 10-K
for the year ended December 31, 2004 and in the statements of operations for the
quarters ended March 31, 2005 and 2004 in HT’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2005.
Agreement
to Sell Holiday Inn Express, Long Island City, New York
Metro
Two entered into an Agreement of Purchase and Sale (the “Holiday Inn Agreement”)
with CNR Queens Hospitality, LLC, a New York limited liability company (“CNR”),
in connection with the sale of the Holiday Inn Property. The Holiday Inn
Agreement provides that CNR will purchase the Holiday Inn Property for a
purchase price of approximately $9,000,000. HHLP has agreed to indemnify CNR for
certain liabilities for a period of twelve months after the closing. The sale of
the Holiday Inn Property to CNR closed on May 13, 2005. A copy of the Holiday
Inn Agreement is attached hereto as Exhibit 10.1.
Agreement
to Sell Doubletree Club Hotel, Jamaica, New York
JFK
entered into a Purchase and Sale Agreement (the “Doubletree Agreement”) with
Metro Sai Hospitality L.L.C., a New York limited liability company (“Metro
Sai”), in connection with the sale of the Doubletree Property. The Doubletree
Agreement provides that Metro Sai will purchase the Doubletree Property for a
purchase price of approximately $11,500,000. The sale of the Doubletree Property
to Metro Sai closed on May 13, 2005. A copy of the Doubletree Agreement is
attached hereto as Exhibit 10.2.
Item
2.01 |
Completion
of Acquisition or Disposition of
Assets. |
On
May 13, 2005, the sales of the Holiday Inn Property and the Doubletree Property
were completed. The description of each transaction included under Item 1.01
above is incorporated under this Item 2.01.
Item
9.01 |
Financial
Statements and Exhibits. |
|
(b) |
Pro
Forma Financial Information |
Pro
Forma Consolidated Financial Statements
The
following unaudited pro forma consolidated balance sheet as of March 31, 2005
give effect to the sale of the Holiday Inn Property and the Doubletree Property
as described above for the periods stated. The pro forma consolidated financial
statements have been prepared by management of HT based upon the historical
financial statements of HT and the adjustments and assumptions in the
accompanying notes to the pro forma consolidated financial statements. The pro
forma consolidated balance sheet sets forth the effect of HT’s sale of the
Holiday Inn Property and Doubletree Property as if the entire purchase had been
consummated on March 31, 2005.
During
2004, HT’s Board of Trustees authorized management of HT to sell the
Holiday
Inn Property and the Doubletree Property, which
were under non-binding letters of intent as of December 31, 2004. In accordance
with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets,” both of these hotels were classified as “held for sale” on HT’s
consolidated balance sheet as of December 31, 2004 in HT’s Annual Report on Form
10-K for the year ended December 31, 2004 and HT’s consolidated balance sheet as
of March 31, 2005 in HT’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2005. In addition, the operating results for these hotels were
reclassified to discontinued operations in the statements of operations for the
years ended December 31, 2004, 2003 and 2002 in HT’s Annual Report on Form 10-K
for the year ended December 31, 2004 and in the statements of operations for the
quarters ended March 31, 2005 and 2004 in HT’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2005.
Because
the effects of the sale of the Holiday Inn Property and Doubletree Property were
already reflected in all items comprising income from continuing operations in
HT’s consolidated statements of income for the year ended December 31, 2004 and
three months ended March 31, 2005, separate pro forma consolidated income
statements are not provided herein.
These pro
forma consolidated financial statements may not be indicative of the results
that actually would have occurred if the transactions had occurred on the dates
indicated or which may be obtained in the future. The pro forma consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes of HT included in its annual report on Form 10-K
for the year ended December 31, 2004, as amended, and the interim financial
statements and notes of HT included in its quarterly report on Form 10-Q for the
quarter ended March 31, 2005.
HERSHA
HOSPITALITY TRUST AND SUBSIDIARIES
PRO
FORMA CONSOLIDATED BALANCE SHEET
March
31, 2005
(Unaudited)
[in
thousands, except share amounts]
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma |
|
|
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
|
Historical |
|
(a-g) |
|
|
Pro
Forma |
|
Assets: |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
6,097 |
|
$ |
5,594 |
|
(a) |
$ |
11,691 |
|
Investment
in Hotel Properties, net |
|
|
|
|
|
|
|
|
|
|
|
of
Accumulated Depreciation |
|
|
171,990
|
|
|
|
|
|
|
171,990
|
|
Assets
Held for Sale |
|
|
18,806
|
|
|
(18,806 |
) |
(b) |
|
-
|
|
Notes
Receivable - Related Party |
|
|
14,084
|
|
|
|
|
|
|
14,084
|
|
Notes
Receivable |
|
|
56
|
|
|
1,700
|
|
(c) |
|
1,756
|
|
Escrow
Deposits |
|
|
2,368
|
|
|
|
|
|
|
2,368
|
|
Accounts
Receivable |
|
|
2,184
|
|
|
|
|
|
|
2,184
|
|
Deferred
Costs, net of Accumulated Amortization of $1,173 |
|
|
1,835
|
|
|
|
|
|
|
1,835
|
|
Due
from Related Party |
|
|
27,849
|
|
|
|
|
|
|
27,849
|
|
Investment
in Joint Ventures |
|
|
8,725
|
|
|
|
|
|
|
8,725
|
|
Other
Assets |
|
|
2,273
|
|
|
(16 |
) |
(d) |
|
2,257
|
|
Total
Assets |
|
$ |
256,267 |
|
$ |
(11,528 |
) |
|
$ |
244,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
Mortgages
Payable |
|
$ |
97,395 |
|
$ |
- |
|
|
$ |
97,395 |
|
Debt
Related to Assets Held for Sale |
|
|
12,952
|
|
|
(12,952 |
) |
(e) |
|
-
|
|
Line
of Credit |
|
|
400
|
|
|
|
|
|
|
400
|
|
Capital
Lease Payable |
|
|
429
|
|
|
|
|
|
|
429
|
|
Advance
Deposits |
|
|
223
|
|
|
|
|
|
|
223
|
|
Dividends
and Distributions Payable |
|
|
4,164
|
|
|
|
|
|
|
4,164
|
|
Due
to Related Party |
|
|
866
|
|
|
|
|
|
|
866
|
|
Interest
Rate Derivative |
|
|
104
|
|
|
|
|
|
|
104
|
|
Accounts
Payable and Accrued Expenses |
|
|
6,221
|
|
|
(42 |
) |
(f) |
|
6,179
|
|
Total
Liabilities |
|
|
122,754
|
|
|
(12,994 |
) |
|
|
109,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES |
|
|
-
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest: |
|
|
|
|
|
|
|
|
|
|
|
Joint
Venture Interest in Logan Hospitality |
|
|
2,043
|
|
|
|
|
|
|
2,043
|
|
Common
Units |
|
|
16,131
|
|
|
|
|
|
|
16,131
|
|
Series
A Preferred Units |
|
|
-
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Minority Interest |
|
|
18,174
|
|
|
|
|
|
|
18,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Shares - Series A, $.01 Par Value, 350,000 Shares Authorized, None Issued
and Outstanding |
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares - Priority Class A, $.01 Par Value, 50,000,000 Shares Authorized,
20,292,631 Shares Issued and Outstanding at March 31, 2005 |
|
|
203
|
|
|
-
|
|
|
|
203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares - Class B, $.01 Par Value, 50,000,000 Shares Authorized, None
Issued and Outstanding |
|
|
-
|
|
|
|
|
|
|
-
|
|
Additional
Paid-in Capital |
|
|
135,343
|
|
|
1,466
|
|
(g) |
|
136,809
|
|
Other
Comprehensive Income (Loss) |
|
|
231
|
|
|
|
|
|
|
231
|
|
Distributions
in Excess of Net Earnings |
|
|
(20,438 |
) |
|
|
|
|
|
(20,438 |
) |
Total
Shareholders' Equity |
|
|
115,339
|
|
|
1,466
|
|
|
|
116,805
|
|
Total
Liabilities and Shareholders’ Equity |
|
$ |
256,267 |
|
$ |
(11,528 |
) |
|
$ |
244,739 |
|
Notes
to Consolidated Pro Forma Financial Information
1. On May
13, 2004, Metro Two Hotel, LLC, a Florida limited liability company (“Metro
Two”), which is 100% owned by Hersha Hospitality Limited Partnership (“HHLP”),
the operating partnership subsidiary of Hersha Hospitality Trust (“HT”) sold the
Holiday Inn Express Hotel situated at 3805 Hunters Point Avenue, Long Island
City, New York to CNR Queens Hospitality, LLC, a New York limited liability
company (“CNR”) for $9,000,000.
2. Also on
May 13, 2005, in a separate transaction, 5544 JFK III Associates, a Pennsylvania
limited partnership (“JFK”), which is 99% owned by HHLP and 1% owned by Hersha
Hospitality LLC, as general partner, which is 100% owned by HHLP, sold the
Doubletree Club Hotel in the City of Jamaica, New York to Metro Sai Hospitality
L.L.C., a New York limited liability company (“Metro Sai”), in connection with
the sale of the Doubletree Property. The Doubletree Agreement provides that
Metro Sai will purchase the Doubletree Property for a purchase price of
approximately $11,500,000.
3. During
2004, HT’s Board of Trustees authorized management of HT to sell the
Holiday
Inn Property and the Doubletree Property, which
were under non-binding letters of intent as of December 31, 2004. In accordance
with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets,” both of these hotels were classified as “held for sale” on HT’s
consolidated balance sheet as of December 31, 2004 in HT’s Annual Report on Form
10-K for the year ended December 31, 2004 and HT’s consolidated balance sheet as
of March 31, 2005 in HT’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2005. In addition, the operating results for these hotels were
reclassified to discontinued operations in the statements of operations for the
years ended December 31, 2004, 2003 and 2002 in HT’s Annual Report on Form 10-K
for the year ended December 31, 2004 and in the statements of operations for the
quarters ended March 31, 2005 and 2004 in HT’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2005.
4. The pro
forma adjustments to the Consolidated Balance Sheet as of March 31, 2005 set
forth the effects of HT’s sale of the Holiday Inn Property and Doubletree
Property as if they had been consummated on March 31, 2005. The adjustments
include the following:
(a) Adjustment
to reflect an increase in Cash of $5,594 related to the receipt of $8,985
less $5,042 for the repayment of debt from the sale of the Holiday Inn
Property and $1,699 received from the sale of the Doubletree Property. This cash
balance was further reduced by $48 of principal payments made between March 31,
2005 and the closing date.
(b) Adjustment
to reflect decrease in Assets Held for Sale, which consisted of the following at March
31, 2005.
Assets
Held for Sale: |
|
03/31/05 |
|
|
|
|
|
Land |
|
$ |
3,050 |
|
Buildings
and improvements |
|
|
15,116 |
|
Furniture,
fixtures and equipment |
|
|
2,078 |
|
|
|
|
|
|
|
|
|
20,244 |
|
Less
accumulated depreciation |
|
|
1,438 |
|
|
|
|
|
|
|
|
$ |
18,806 |
|
(c) Adjustment
of $1,700 to reflect an increase in Notes Receivable for the seller financing
provided for the sale of the Doubletree Property.
(d) Adjustment
to reflect a decrease in Other Assets related to the assumption of Other Assets
by the buyer of $5 in connection with the sale of the Holiday Inn Property and
$11 in connection with the sale of the Doubletree Property.
(e) Adjustment
to reflect a decrease in Debt Related to Assets Held for Sale of $12,952 related
to the repayment of $5,024 in debt in connection with the sale of the Holiday
Inn Property and the assumption of $7,928 in debt in connection with the sale of
the Doubletree Property.
(f) Adjustment
to reflect a decrease in Accounts Payable related to $42 of accounts payable
assumed by the buyer of the Doubletree Property.
(g) Adjustment
to increase Additional Paid in Capital to reflect the gain on sale of the
Holiday Inn Property and Doubletree Property of $1,466.
5.
There were no adjustments to any items on the Statement of Operations in
calculating the Income from Continuing Operations due to the fact that the sold
properties were reflected in discounted operations. Therefore, a pro forma
Consolidated Statement of Operations has not been presented for the year ended
December 31, 2004 and the three months ended March 31, 2005. The gain on sale of
assets of $1,466 is a material non-recurring item and is not included in Income
from Continued Operations. This gain on sale of assets would have resulted in
Net Income of $2,306 and $472 for the year ended December 31, 2004 and the three
months ended March 31, 2005, respectively.