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Hersha Hospitality Trust Message Board

  • wizestman wizestman Nov 21, 2010 5:38 PM Flag

    Why does HT need any debt financing?

    I am quite perplexed as to why HT needs any debt financing. Debt financing is great in order to provide tax deductions when the firm pays corporate taxes. Since HT is a REIT, the interest expense is not tax deductible. Now, stockholder dividend yield is on the order of 3.5%. If HT can get debt financing at a rate cheaper than this, then it makes sense for HT to borrow money. On the other hand, if the interest rate on the borrowed debt is higher that 3.3%, it does not make sense at all!!!

    I also have not seen any clear explanation of what HT is going to do with the money from the recent share issuance. If they are going to acquire new hotels, I would be very very wary given the uncertainty in travel and hotel expenditure given the current state of the economy.

    The financing being raised by this company is very worrisome... what are they doing with the money and will it lead to superior returns for stockholders? This is the ultimate test....

    The Shahs have not explained clearly... please rise to the occasion!!!!

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