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
APRIL 23, 2003 (APRIL 21, 2003)
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
HERSHA HOSPITALITY TRUST
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Maryland 001-14765 251811499
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(State or Other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
148 Sheraton Drive, Box A
New Cumberland, Pennsylvania 17070
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(Address and zip code of principal executive offices)
(717) 770-2405
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Registrant's telephone number, including area code
ITEM 5. OTHER EVENTS.
On April 21, 2003, CNL Hospitality Properties, L.P. ("CNL LP") purchased from
Hersha Hospitality Limited Partnership ("HHLP"), the operating partnership of
Hersha Hospitality Trust ("HT"), $10 million of convertible preferred units of
limited partnership interest in HHLP ("Series A Preferred Units"). CNL LP agreed
to purchase up to an additional $15 million of Series A Preferred Units during
the next 12 months. At the same time, HHLP and CNL LP agreed to form a joint
venture investment partnership to acquire hotel real estate assets utilizing up
to an additional $40 million of joint venture funding from CNL LP. Additional
investments by CNL LP in HHLP or the joint venture are subject to the
satisfaction of conditions described in the definitive documents relating to the
transaction, copies of which are filed as exhibits to this Form 8-K.
SUMMARY OF THE PRIVATE PLACEMENT
The Securities Purchase Agreement pursuant to which CNL LP purchased the initial
Series A Preferred Units provides that $5 million of additional Series A
Preferred Units will be issued to CNL LP on the 30th day after the initial
closing, and that up to an additional $10 million of units may be issued to CNL
LP at various times over the next 12 months as determined by the parties,
subject to the satisfaction of conditions to closing set forth in the Securities
Purchase Agreement.
The Series A Preferred Units will rank senior to all existing units of
partnership interest in HHLP and have a liquidation preference of $100 per unit
plus accrued and unpaid distributions. Distributions on the Series A Preferred
Units accrue at a rate of 10.5% per annum of the original issue price. The
Series A Preferred Units are redeemable at the option of HT at a redemption
price equal to the original issue price, plus all accrued but unpaid
distributions, plus a premium starting at 10.5% of the original issue price and
declining to zero on a straight line basis at the tenth anniversary of the
original issuance.
The Series A Convertible Preferred Units are exchangeable at any time, at the
option of the holder, for Series A Preferred Shares of Beneficial Interest in HT
on a one for one basis, or for Common Partnership Units of HHLP or Class A
Common Shares of Beneficial Interest in HT at an exchange price of $6.7555 per
share, which is the volume weighted average closing price of HT's Class A Common
Shares on the American Stock Exchange for the twenty days immediately preceding
the initial closing. Any Series A Preferred Shares issued upon exchange of the
Series A Preferred Units will have terms substantially similar to the Series A
Preferred Units and will be convertible into Class A Common Shares at a
conversion price $6.7555 per share.
In connection with the issuance of the Series A Preferred Units, HT has granted
CNL LP a limited waiver from the share ownership limit in HT's Amended and
Restated Declaration of Trust, allowing CNL LP to own 100% of the outstanding
Series A Preferred Shares and up to 60% of the outstanding Class A Common Shares
on a fully diluted basis, subject to CNL LP's compliance with certain
representations and warranties. In addition, HT and CNL LP have entered into a
Standstill Agreement pursuant to which CNL LP has agreed, among other things,
not to acquire any additional securities of HT, participate in any solicitation
of proxies, call shareholder meetings, or seek representation on the HT Board of
Trustees. The Standstill Agreement further provides that CNL LP will be
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entitled to vote only the HT securities it owns which represent 40% or less of
the total outstanding voting securities of HT at the time of such vote or
consent. Any additional voting securities owned by CNL LP will be voted pro rata
according to the votes of the shareholders unaffiliated with CNL LP. The
Standstill Agreement expires on its sixth anniversary, or earlier if, among
other things, HHLP or HT fail to pay the required distributions or dividends on
the Series A Preferred Units or Series A Preferred Shares, or HT fails to
maintain its status as a REIT.
Upon the occurrence of certain events, CNL LP will be entitled to elect one of
the members of HT's Board of Trustees, and upon HHLP's or HT's failure to pay
the distributions and dividends on the Series A Preferred Units and Series A
Preferred Shares, CNL LP would be entitled to elect up to 40% of the members of
the HT Board of Trustees. The holders of the Series A Preferred Units and Series
A Preferred Shares will also have rights to approve certain significant
transactions by HT.
HT has also entered into a registration rights agreement pursuant to which it
may be required to register with the Securities and Exchange Commission the
Series A Preferred Shares and Class A Common Shares owned by CNL LP and its
affiliates.
For complete information relating to the transactions described above, please
refer to the documents attached as exhibits to this Form 8-K, which qualify the
foregoing summary in its entirety.
SUMMARY OF THE JOINT VENTURE
HT and CNL LP also have formed a joint venture limited partnership, with HT as
the general partner and CNL LP as the sole limited partner. The joint venture
agreement provides that CNL LP will invest up to $40 million and HT will invest
up to $20 million in the joint venture to acquire hotel real estate assets
approved by an investment committee comprised of an equal number of
representatives from HT and CNL LP. The investments in the joint venture will be
subject to satisfaction of the conditions to closing set forth in the joint
venture agreement
Net cash flow from operations of the joint venture will be distributed: first,
to CNL LP to provide a 10.5% per annum return on its unreturned capital
contributions; second, to HHLP to provide an annual administrative fee of .35%
of the cost of the joint venture's assets; third, to HHLP to provide a 13% per
annum return on its unreturned capital contributions; and thereafter to CNL LP
and HHLP in proportion to their capital contributions to the joint venture.
Proceeds from a sale of a joint venture property or other capital event for the
joint venture will be distributed: first, to CNL LP to return its capital
contributions; second, to HHLP to return its capital contributions; third, to
CNL LP to provide a 10.5% annual return on its unreturned capital contributions;
fourth, to HT to provide a 13% annual return on its unreturned capital
contributions; and thereafter to CNL LP and HHLP according to their respective
capital contributions.
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CNL LP's limited partnership interest in the joint venture generally will be
exchangeable, at CNL LP's option, for Common Partnership Units of HHLP or Class
A Common Shares of HT, based on an exchange price of $6.7555 per share.
For complete information relating to the joint venture, please refer to the
documents attached as exhibits to this Form 8-K, particularly the Limited
Partnership Agreement of HT/CNL Metro Hotels, LP, dated as of April 21, 2003,
which qualify the foregoing summary in its entirety.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
3.1 Articles Supplementary of Hersha Hospitality Trust which classify
and designate 350,000 preferred shares of beneficial interest as
Series A Preferred Shares of beneficial interest, par value $.01
per share
4.1 Excepted Holder Agreement, dated April 21, 2003, by and among CNL
Hospitality Properties, Inc., CNL Hospitality Partners, L.P.,
Hersha Hospitality Trust and Hersha Hospitality Limited
Partnership
10.1 Securities Purchase Agreement, dated as of April 21, 2003, among
CNL Hospitality Partners, L.P., Hersha Hospitality Trust and
Hersha Hospitality Limited Partners
10.2 Second Amendment to the Amended and Restated Agreement of Limited
Partnership of Hersha Hospitality Limited Partnership, dated as
of April 21, 2003
10.3 Standstill Agreement, dated as of April 21, 2003, by and among
Hersha Hospitality Trust, Hersha Hospitality Limited Partnership,
CNL Hospitality Partners, L.P. and CNL Financial Group, Inc.
10.4 Registration Rights Agreement, dated April 21, 2003, between CNL
Hospitality Partners, L.P. and Hersha Hospitality Trust
10.5 Limited Partnership Agreement of HT/CNL Metro Hotels, LP, dated
as of April 21, 2003
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on behalf by the undersigned
thereunto duly authorized.
HERSHA HOSPITALITY TRUST
(REGISTRANT)
Date: April 23, 2003 By: /s/ Ashish Parikh
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Name: Ashish Parikh
Title: Chief Financial Officer
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EXHIBIT INDEX
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Exhibit No. Description
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3.1 Articles Supplementary of Hersha Hospitality Trust which classify
and designate 350,000 preferred shares of beneficial interest as
Series A Preferred Shares of beneficial interest, par value $.01
per share
4.1 Excepted Holder Agreement, dated April 21, 2003, by and among CNL
Hospitality Properties, Inc., CNL Hospitality Partners, L.P.,
Hersha Hospitality Trust and Hersha Hospitality Limited
Partnership
10.1 Securities Purchase Agreement, dated as of April 21, 2003, among
CNL Hospitality Partners, L.P., Hersha Hospitality Trust and
Hersha Hospitality Limited Partners
10.2 Second Amendment to the Amended and Restated Agreement of Limited
Partnership of Hersha Hospitality Limited Partnership, dated as
of April 21, 2003
10.3 Standstill Agreement, dated as of April 21, 2003, by and among
Hersha Hospitality Trust, Hersha Hospitality Limited Partnership,
CNL Hospitality Partners, L.P. and CNL Financial Group, Inc.
10.4 Registration Rights Agreement, dated April 21, 2003, between CNL
Hospitality Partners, L.P. and Hersha Hospitality Trust
10.5 Limited Partnership Agreement of HT/CNL Metro Hotels, LP, dated
as of April 21, 2003