SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): October 1, 2002
HERSHA HOSPITALITY TRUST
(Exact name of registrant as specified in its charter)
Maryland 005-55249 251811499
(State or other jurisdiction (Commission File No.) I.R.S. Employer
of incorporation) (Identification No.)
148 Sheraton Drive, Box A
New Cumberland, Pennsylvania 17070
(Address of principal executive offices)
(717) 770-2405
(Registrant's telephone number, including area code)
N/A
(former name or former address, if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 1, 2002, Hersha Hospitality Trust (the "Company"), through its
interest in Hersha Hospitality Limited Partnership (the "Partnership"),
completed its acquisition of all the assets of 5544 JFK III Associates, LP, a
Pennsylvania limited partnership (the "Seller"). The Seller does not own any
assets other than a 110-room Doubletree Club hotel located at the John F.
Kennedy International Airport, Jamaica, New York.
The Partnership purchased all of the assets of the Seller for approximately
$11.5 million. The purchase price of this hotel will be adjusted on December 31,
2004 by applying a pricing methodology to such hotel's cash flows in a manner
similar to that of the other hotels purchased by the Partnership. The initial
purchase price for this hotel was based upon management's projections of the
hotel's performance for one year following its purchase. The percentage lease
for this hotel provides for fixed initial rent for the adjustment period that
provides the Company with a 12% annual yield on the initial purchase price, net
of certain expenses. At the end of the adjustment period, December 31, 2004, the
Company will calculate a value for the hotel, based on the actual net income
during the previous twelve months, net of certain expenses, such that it would
have yielded a 12% return. The Company then will apply the percentage rent
formula to the hotel's historical revenues for the previous twelve months on a
pro forma basis. If the pro forma percentage rent formula would not have yielded
a pro forma annual return to the Company of 11.5% to 12.5% based on this
calculated value, this value is adjusted either upward or downward to produce a
pro forma return of either 11.5% or 12.5%, as applicable. If this final purchase
price is higher than the initial purchase price, then the Seller will receive
consideration in an amount equal to the increase in price. If the final purchase
price is lower than the initial purchase price, then the Seller will return to
the Company consideration in an amount equal to the difference. Any purchase
price adjustment must be approved by a majority of the Company's independent
trustees and will be made either in operating partnership units or cash as
determined by the Company's Board of Trustees, including the independent
trustees.
The Partnership acquired all the assets in the Seller and consequently the
Doubletree Club hotel through the assumption of approximately $8.7 million of
mortgage and lease indebtedness, assumption of approximately $1.0 million of
related party payables and a note payable to the Seller for approximately $1.8
million.
The Seller is owned by Hasu P. Shah, the Company's Chairman and Chief
Executive Officer, K. D. Patel, one of the Company's Trustees, Kiran P. Patel,
the Company's Secretary, and certain officers and other affiliates of Hersha
Hospitality Management, L.P. ("HHMLP"), the lessee of several of the
Partnership's other hotel properties that also will lease this hotel from the
Company. HHMLP is owned by the same individuals and affiliated entities of these
individuals that own the Seller. HHMLP has entered into a percentage lease with
respect to this hotel that went into effect as of October 1, 2002. This
percentage lease provides for payment of rent based in part on the room revenues
from the hotel.
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The following table sets forth (i) the Initial Fixed Rent, (ii) Annual Base
Rent and (iii) the annual Percentage Rent formula currently anticipated for this
hotel:
Acquired Initial Base
Hotel Fixed Rent Rent Percentage Rent Formula
---------------- ----------- -------- -----------------------
DoubleTree Club, $ 1,587,000 $747,500 53.3% of room revenue up to
Jamaica, $2,000,000 plus 65% of room
New York revenues in excess of
$2,000,000 but less than
$2,750,000 plus 29.0% of room
revenue in excess of
$2,750,000, plus 8.0% of all
non-room revenue.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements. No financial statements are required to be filed in
connection with this acquisition pursuant to Rule 3-05 of Regulation S-X.
(b) Pro Forma Financial Statements. No pro forma financial statements are
required to be filed in connection with this acquisition pursuant to Rule
11-01 of Regulation S-X.
(c) Exhibits. The following exhibits are required by Item 601 of Regulation S-K
and are listed below:
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Contribution Agreement, dated as of October 1, 2002 between
==== Shree Associates, JSK II Associates, Shreeji Associates,
Kunj Associates, Shanti III Associates, Devi Associates,
Neil H. Shah, David L. Desfor, Madhusudan I. Patni and
Shreenathji Enterprises, Ltd. as Contributors, and Hersha
Hospitality Limited Partnership, a Virginia limited
partnership, as Acquiror
10.2 Form of Percentage Lease
====
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HERSHA HOSPITALITY TRUST
Date: October 15, 2002 By: /s/ Ashish R. Parikh
----------------------
Ashish R. Parikh
Chief Financial Officer
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