RevPAR Rises Nearly 19% in Hersha Portfolio in Q1

During first quarter, the full portfolio achieved 61.2% occupancy, an increase of 10.2% compared with the same quarter of 2004. Average daily rates rose to $94.47, a 7.8% increase. Combined, the results created system-wide RevPAR of $57.99, an increase of 18.8% over the previous year's first quarter. Same store results for the first quarter this year showed a 12.2%-increase in RevPAR to $54.72, based on an occupancy increase that rose 8.1% to reach 60.5%, and a 3.8%-rise in ADR to $90.42.

Because Hersha properties are located in the Northeast, performance is seasonal, Shah said, "and first quarter is traditionally our weakest quarter. Due to the relatively young age of our properties, we believe there remains considerable upside for our portfolio with our hotels located in markets with high barriers to new competition and carrying premium brands, both of which allow us to maximize room rate opportunities."

Hersha will continue to focus on "clusters" in the Northeast, but Shah said, "We're also targeting more stabilized assets that will require less ramp-up time." The median age of properties in the portfolio is now 2.5 years, and he said that, in addition to new assets, Hersha will look to acquire properties four to five years old, a practice that began with its acquisition of the five-property McIntosh portfolio in the metro area earlier this month.

Another strategy Hersha will continue to pursue is part of a JV program in which it extends construction and mezzanine financing and preferred equity to partners. For example, it provided a $9-million first-mortgage construction loan to PRA, a locally based developer and JV partner that is developing the 136-room Homewood Suites by Hilton in Glastonbury, CT. Such transactions give Hersha an exclusive first right of refusal to acquire the properties that don't come to market, while guarding it against construction risk.

In addition, such loans "carry rates of return that are attractive to Hersha," Shah said. It currently has five other loans, aggregating $35.5 million, invested in hotel development projects in hard-to-source locations. "All are located in strong Northeastern markets with multiple demand generators and high barriers to new competition," he added.

Hersha expects net income for 2005 to be in the range of $6.2 million to $6.6 million, according to Ashish Parikh, CFO. Adjusted funds from operations this year are expected to be between $17.7 million and $18.1 million, he said.