Hersha Hospitality Trust 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. The company also obtained waivers on all financial covenants through March 31, 2021 yielding additional operational and financial flexibility. There were no changes to the interest rate on the amended credit facility.
Citigroup Global Markets and Wells Fargo Securities are joint lead arrangers and joint bookrunners on the bank credit facility. Citibank is the administrative agent and Wells Fargo Bank is the syndication agent. Moelis & Company acted as an advisor to the company on the bank credit facility restructure and amendment.
“We appreciate the continued support from our bank group during a time with no adequate comparison,” Jay H. Shah, CEO of Hersha Hospitality Trust, said. “The funds from our line of credit will provide the necessary support to meet the ongoing operational needs of our hotels into next year under a severely disrupted scenario. Additionally, the 12-month covenant holiday allows for the operational and financial flexibility that is critical during this uncertain time and reflects an acknowledgement of the inherent value of our high-quality hotel portfolio. In further efforts to enhance our liquidity profile, we are working on mutually agreed upon extensions with the buyers of the previously announced sales agreements. We have hard deposits on these transactions and anticipate these sales to close by the end of the third quarter.”
Hersha Hospitality Trust has suspended operations at 19 of the company’s 48 hotels. The 29 hotels that remain open are now operating with minimal staff onsite, resulting in a reduction of on-property labor of approximately 80%.
“Since our last business update just a few weeks ago, we took a holistic look at each hotel in the portfolio, their pressure-tested expense run rate and near-term opportunities for revenue generation,” Shah said. “Following our property-by-property analysis, we determined it was in the company’s best interest to shrink or suspend operations at most of our hotels. Through our unique relationship with our management companies, we are able to operate the remaining hotels efficiently with a skeleton staff, vastly reducing operating expenses while also capturing unique revenue opportunities in support of the emergency efforts of medical institutions and responding agencies in an otherwise low demand period. Our responsive on-property teams have quickly altered operations based on each hotel’s individual needs, which has led to real-time cost savings. Approximately 60% of our portfolio mix is comprised of select-service assets, which will be able to reopen more quickly and efficiently. We will continue to closely monitor this situation to ensure that we are best positioned to close or reopen hotels in real-time with shifting demand trends. Although this international crisis is unique in its depth and pervasiveness and we expect a challenging path forward, our team has navigated across three previous cycles and we will continue to take the measures necessary to contain costs and maintain liquidity as we face down the COVID-19 threat and the ensuing economic contraction already underway.”
Hersha Hospitality Trust is a real estate investment trust in the hospitality sector. The company owns and operates 48 hotels totaling 7,644 rooms.