Hersha Hospitality Trust, which owns 48 upscale and lifestyle hotels totaling 7,644 guestrooms, announced additional actions taken to mitigate COVID-19’s impact on the company and its operations. These above-property and on-property measures include but are not limited to:
- Amending the 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.
- Successfully amending its bank credit facility to obtain waivers on all financial covenants through March 31, 2021, yielding additional operational and financial flexibility.
- No changes to the interest rate on the amended credit facility.
- Corporate-level cost-containment resulting in more than 25 percent savings in selling, general and administrative expenses.
- Working closely with hotel operating partners to significantly reduce operating expenses over the immediate period through on-site expense cuts.
- Implementing asset-management initiatives at all properties to eliminate contract services, vendor and outsource contracts, utility usage and purchasing expenses resulting in near-term and long-term cash savings.
- Where feasible, seeking alternative sources of hotel revenue through government agencies, law enforcement and military personnel, emergency first responders and medical personnel, and universities.
- Exploring the potential to recoup losses through insurance claims.
- Submitting loan applications for each portfolio hotel for grants and low-cost unsecured financing from the Paycheck Protection Program under the recently passed Coronavirus Aid, Relief, and Economic Security Act.
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“We appreciate the continued support from our bank group during a time with no adequate comparison. 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,” said Jay H. Shah, Hersha’s CEO. “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 approximating 80 percent.
“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,” Shah said. “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.”