Hersha Hotels and Resorts Announces Dividend Classification for 2023
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Insights
Analyzing the recent tax classification announcement by Hersha Hospitality Trust, it's evident that the distributions for various classes of shares have significant tax implications for investors. The classification of distributions between ordinary income, capital gains and returns of capital affects the tax liability and the adjusted basis of the shareholders' investments. A return of capital reduces the shareholder's adjusted basis in the shares, which could result in a higher capital gain upon the sale of the shares. The absence of ordinary income suggests a favorable tax treatment for shareholders since capital gains are typically taxed at a lower rate than ordinary income.
Furthermore, the redemption of shares at a set price, along with the accrued and unpaid dividends, provides a clear exit strategy for investors holding preferred shares. The tax information indicates that the company managed its capital structure in a way that could be tax-efficient for its investors, which is often an indicator of a management team that is considerate of shareholder value. However, the impact on individual shareholders will vary based on their tax situations and they should consult tax advisors for personalized advice.
From a financial perspective, the redemption of all outstanding shares of Priority Class A Common Shares and Series C, D and E Preferred Shares by Hersha Hospitality Trust represents a significant capital transaction. The large cash liquidation distribution of $10.00 per common share and $25.00 per preferred share indicates a substantial return of capital to shareholders. This payout could be a sign of the company's strong liquidity position and could also be part of a strategic move to restructure the company's equity following the merger with 1776 Portfolio REIT Merger Sub.
The redemption of shares may also reflect on the company's stock market performance. Investors often view share buybacks and redemptions as positive signals, suggesting that the company believes its shares are undervalued or that it is looking to consolidate ownership. This could potentially lead to a positive impact on the stock price in the short term. However, it is also important to consider the long-term effects on the company's capital structure and whether the reduction in equity will affect its leverage ratios or ability to raise capital in the future.
Looking at the broader hospitality industry, Hersha's financial maneuvering through share redemptions must be contextualized within the current economic climate. The hospitality sector is highly sensitive to economic cycles and Hersha's actions could be a strategic response to market conditions. The redemption could be interpreted as a move to streamline operations post-merger, which might be aiming at achieving greater efficiencies and a more focused investment approach.
Additionally, the sector has been facing various challenges, such as fluctuating travel demand and competition from alternative lodging options like Airbnb. Hersha's financial decisions could be aimed at strengthening its position in coastal gateway and resort markets, which are competitive but also offer high-value opportunities. By returning capital to shareholders and adjusting its capital structure, Hersha may be signaling confidence in its business model and future growth prospects, which could be an important consideration for stakeholders and potential investors assessing the company's market position.
PHILADELPHIA, Dec. 26, 2023 (GLOBE NEWSWIRE) -- Hersha Hotels and Resorts (“Hersha” or “the Company”), owner of luxury and lifestyle hotels in coastal gateway and resort markets, today announced the tax classification of Hersha Hospitality Trust’s (“HHT”) Priority Class A Common Share (“Common Shares”), Series C Cumulative Redeemable Preferred Share (“Series C Preferred Shares”), Series D Cumulative Redeemable Preferred Share (“Series D Preferred Shares”) and Series E Cumulative Redeemable Preferred Share (“Series E Preferred Shares”) distributions for 2023 for Federal income tax reporting purposes. The tax information provided below relates to HHT prior to the November 28, 2023 merger between HHT and 1776 Portfolio REIT Merger Sub, LLC (“REIT Merger Sub”) pursuant to that certain Agreement and Plan of Merger, dated as of August 27, 2023, by and among HHT, REIT Merger Sub and the other parties thereto, and it should not be construed as tax advice and is not a substitute for careful tax planning and analysis. Shareholders should consult their tax advisors as to the tax treatment of the distributions.
| CLASS A COMMON SHARES | |||||||||||||||||||||||||||||||||||
| Record Dates | Paid Dates | Total Cash Distribution Per Share | Taxable Ordinary Income | Total Capital Gain Distribution | Unrecaptured Sec. 1250 Gain | Cash Liquidation Distribution | Nontaxable Distribution (Return of Capital)* | Section 199A Dividends | Section 897 Ordinary Dividends | Section 897 Capital Gain | Section 1061 One-Year Capital Gain** | Section 1061 Three-Year Capital Gain** | |||||||||||||||||||||||
| 3/31/2023 | 4/17/2023 | $ | 0.050000 | $ | - | $ | 0.050000 | $ | 0.050000 | $ | - | $ | - | $ | - | $ | - | $ | 0.050000 | $ | - | $ | 0.050000 | ||||||||||||
| 6/30/2023 | 7/17/2023 | $ | 0.050000 | $ | - | $ | 0.050000 | $ | 0.050000 | $ | - | $ | - | $ | - | $ | - | $ | 0.050000 | $ | - | $ | 0.050000 | ||||||||||||
| 9/29/2023 | 10/16/2023 | $ | 0.050000 | $ | - | $ | 0.050000 | $ | 0.050000 | $ | - | $ | - | $ | - | $ | - | $ | 0.050000 | $ | - | $ | 0.050000 | ||||||||||||
| 11/28/2023 | 11/28/2023 | $ | 10.000000 | $ | - | $ | - | $ | - | $ | 10.000000 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| TOTAL | $ | 10.150000 | $ | - | $ | 0.150000 | $ | 0.150000 | $ | 10.000000 | $ | - | $ | - | $ | - | $ | 0.150000 | $ | - | $ | 0.150000 | |||||||||||||
| The CUSIP number for Hersha Hospitality Trust's Common Shares is 427825500. | |||||||||||||||||||||||||||||||||||
| On November 28, 2023, Hersha Hospitality Trust redeemed all of its issued and outstanding shares of Priority Class A Common Shares. The Priority Class A Common Shares were redeemed at a per share redemption price of | |||||||||||||||||||||||||||||||||||
| SERIES C PREFERRED SHARES | |||||||||||||||||||||||||||||||||||
| Record Dates | Paid Dates | Total Cash Distribution Per Share | Taxable Ordinary Income | Total Capital Gain Distribution | Unrecaptured Sec. 1250 Gain | Nontaxable Distribution (Return of Capital)* | Nontaxable Distribution (Return of Capital)* | Section 199A Dividends | Section 897 Ordinary Dividends | Section 897 Capital Gain | Section 1061 One-Year Capital Gain** | Section 1061 Three-Year Capital Gain** | |||||||||||||||||||||||
| 4/1/2023 | 4/17/2023 | $ | 0.429700 | $ | - | $ | 0.429700 | $ | 0.429700 | $ | - | $ | - | $ | - | $ | - | $ | 0.429700 | $ | - | $ | 0.429700 | ||||||||||||
| 7/1/2023 | 7/17/2023 | $ | 0.429700 | $ | - | $ | 0.429700 | $ | 0.429700 | $ | - | $ | - | $ | - | $ | - | $ | 0.429700 | $ | - | $ | 0.429700 | ||||||||||||
| 10/1/2023 | 10/16/2023 | $ | 0.429700 | $ | - | $ | 0.429700 | $ | 0.429700 | $ | - | $ | - | $ | - | $ | - | $ | 0.429700 | $ | - | $ | 0.429700 | ||||||||||||
| 11/28/2023 | 11/28/2023 | $ | 0.210076 | $ | - | $ | 0.210076 | $ | 0.210076 | $ | - | $ | - | $ | - | $ | - | $ | 0.210076 | $ | - | $ | 0.210076 | ||||||||||||
| 11/28/2023 | 11/28/2023 | $ | 25.000000 | $ | - | $ | - | $ | - | $ | 25.000000 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| TOTAL | $ | 26.499176 | $ | - | $ | 1.499176 | $ | 1.499176 | $ | 25.000000 | $ | - | $ | - | $ | - | $ | 1.499176 | $ | - | $ | 1.499176 | |||||||||||||
| The CUSIP number for Hersha Hospitality Trust's Series C Preferred Shares is 427825401 | |||||||||||||||||||||||||||||||||||
| On November 28, 2023, Hersha Hospitality Trust redeemed all of its issued and outstanding shares of Series C Cumulative Redeemable Preferred Stock. The Series C Preferred Shares were redeemed at a per share redemption price of | |||||||||||||||||||||||||||||||||||
| SERIES D PREFERRED SHARES | |||||||||||||||||||||||||||||||||||
| Record Dates | Paid Dates | Total Cash Distribution Per Share | Taxable Ordinary Income | Total Capital Gain Distribution | Unrecaptured Sec. 1250 Gain | Nontaxable Distribution (Return of Capital)* | Nontaxable Distribution (Return of Capital)* | Section 199A Dividends | Section 897 Ordinary Dividends | Section 897 Capital Gain | Section 1061 One-Year Capital Gain** | Section 1061 Three-Year Capital Gain** | |||||||||||||||||||||||
| 4/1/2023 | 4/17/2023 | $ | 0.406250 | $ | - | $ | 0.406250 | $ | 0.406250 | $ | - | $ | - | $ | - | $ | - | $ | 0.406250 | $ | - | $ | 0.406250 | ||||||||||||
| 7/1/2023 | 7/17/2023 | $ | 0.406250 | $ | - | $ | 0.406250 | $ | 0.406250 | $ | - | $ | - | $ | - | $ | - | $ | 0.406250 | $ | - | $ | 0.406250 | ||||||||||||
| 10/1/2023 | 10/16/2023 | $ | 0.406250 | $ | - | $ | 0.406250 | $ | 0.406250 | $ | - | $ | - | $ | - | $ | - | $ | 0.406250 | $ | - | $ | 0.406250 | ||||||||||||
| 11/28/2023 | 11/28/2023 | $ | 0.198611 | $ | - | $ | 0.198611 | $ | 0.198611 | $ | - | $ | - | $ | - | $ | - | $ | 0.198611 | $ | - | $ | 0.198611 | ||||||||||||
| 11/28/2023 | 11/28/2023 | $ | 25.000000 | $ | - | $ | - | $ | - | $ | 25.000000 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| TOTAL | $ | 26.417361 | $ | - | $ | 1.417361 | $ | 1.417361 | $ | 25.000000 | $ | - | $ | - | $ | - | $ | 1.417361 | $ | - | $ | 1.417361 | |||||||||||||
| The CUSIP number for Hersha Hospitality Trust's Series D Preferred Shares is 427825609 | |||||||||||||||||||||||||||||||||||
| On November 28, 2023, Hersha Hospitality Trust redeemed all of its issued and outstanding shares of Series D Cumulative Redeemable Preferred Stock. The Series D Preferred Shares were redeemed at a per share redemption price of | |||||||||||||||||||||||||||||||||||
| SERIES E PREFERRED SHARES | |||||||||||||||||||||||||||||||||||
| Record Dates | Paid Dates | Total Cash Distribution Per Share | Taxable Ordinary Income | Total Capital Gain Distribution | Unrecaptured Sec. 1250 Gain | Nontaxable Distribution (Return of Capital)* | Nontaxable Distribution (Return of Capital)* | Section 199A Dividends | Section 897 Ordinary Dividends | Section 897 Capital Gain | Section 1061 One-Year Capital Gain** | Section 1061 Three-Year Capital Gain** | |||||||||||||||||||||||
| 4/1/2023 | 4/17/2023 | $ | 0.406250 | $ | - | $ | 0.406250 | $ | 0.406250 | $ | - | $ | - | $ | - | $ | - | $ | 0.406250 | $ | - | $ | 0.406250 | ||||||||||||
| 7/1/2023 | 7/17/2023 | $ | 0.406250 | $ | - | $ | 0.406250 | $ | 0.406250 | $ | - | $ | - | $ | - | $ | - | $ | 0.406250 | $ | - | $ | 0.406250 | ||||||||||||
| 10/1/2023 | 10/16/2023 | $ | 0.406250 | $ | - | $ | 0.406250 | $ | 0.406250 | $ | - | $ | - | $ | - | $ | - | $ | 0.406250 | $ | - | $ | 0.406250 | ||||||||||||
| 11/28/2023 | 11/28/2023 | $ | 0.198611 | $ | - | $ | 0.198611 | $ | 0.198611 | $ | - | $ | - | $ | - | $ | - | $ | 0.198611 | $ | - | $ | 0.198611 | ||||||||||||
| 11/28/2023 | 11/28/2023 | $ | 25.000000 | $ | - | $ | - | $ | - | $ | 25.000000 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| TOTAL | $ | 26.417361 | $ | - | $ | 1.417361 | $ | 1.417361 | $ | 25.000000 | $ | - | $ | - | $ | - | $ | 1.417361 | $ | - | $ | 1.417361 | |||||||||||||
| The CUSIP number for Hersha Hospitality Trust's Series E Preferred Shares is 427825708 | |||||||||||||||||||||||||||||||||||
| On November 28, 2023, Hersha Hospitality Trust redeemed all of its issued and outstanding shares of Series E Cumulative Redeemable Preferred Stock. The Series E Preferred Shares were redeemed at a per share redemption price of | |||||||||||||||||||||||||||||||||||
| * Distributions will reduce a shareholder's adjusted tax basis in its shares. Any amount of the distribution that exceeds a shareholder's adjusted tax basis in its shares will be treated as gain from the sale or exchange of property. | |||||||||||||||||||||||||||||||||||
| ** Additional Information Pursuant to Treasury Regulation §1.1061-6(c): The total Box 2a capital gain distributions are Section 1231 gains and therefore are not taken into account for purposes of section 1061 under Reg. 1.1061-4(b)(7)(i). | |||||||||||||||||||||||||||||||||||
Hersha Hotels and Resorts owns and operates luxury and lifestyle hotels in coastal gateway and resort markets. The Company’s 23 hotels totaling 3,572 rooms are located in New York, Washington, DC, Boston, Philadelphia, South Florida, and California. For more information on the Company, and the Company’s hotel portfolio, please visit the Company's website at www.hersha.com.
Contact: Michael Gillespie, Chief Accounting Officer
Phone: (717) 236-4400
FAQ
What is the tax classification of Hersha Hospitality Trust's Common Shares and Preferred Shares for 2023?
What are the details of the redemption of Hersha Hospitality Trust's Common Shares?
What are the details of the redemption of Hersha Hospitality Trust's Series C Preferred Shares?
What are the details of the redemption of Hersha Hospitality Trust's Series D Preferred Shares?
What are the details of the redemption of Hersha Hospitality Trust's Series E Preferred Shares?
