PHILADELPHIA — Hersha Hospitality Trust (NYSE: HT), a hospitality REIT and owner of upscale hotels in urban gateway markets, has entered into a definitive agreement to sell 16 hotels to an affiliate of Blackstone Real Estate Advisors for $217 million, or approximately $125,000 per room. Hersha’s disposition of assets marks the company’s exit from Long Island, suburban Philadelphia, Connecticut and Rhode Island.
“The anticipated sale of these non-core portfolio hotels completes our transformation into a pure play, urban transient portfolio with exposure to some of the highest demand gateway markets in the United States,” says Jay Shah, CEO of Hersha.
The 16 hotels include:
- the 133-room Holiday Inn Express in Hauppauge, N.Y.
- the 161-room Hampton Inn in Brookhaven, N.Y.
- the 98-room Hampton Inn in West Haven, Conn.
- the 101-room Hampton Inn in Smithfield, R.I.
- the 118-room Courtyard by Marriot in Langhorne, Pa.
- the 100-room Residence Inn in Langhorne, Pa.
- the 88-room Holiday Inn Express in Langhorne, Pa.
- the 155-room Holiday Inn Express & Suites in King of Prussia, Pa.
- the 130-room Courtyard by Marriot in Ewing, N.J.
- the 128-room Hyatt House in Bridgewater, N.J.
- the 78-room Courtyard by Marriot in Wilmington, Del.
- the 71-room Inn at Wilmington in Wilmington, Del.
- the 107-room TownePlace in Harrisburg, Pa.
- the 78-room Holiday Inn Express in Hershey, Pa.
- the 78-room Residence Inn in Carlisle, Pa.
- the 110-room Hampton Inn & Suites in Hershey, Pa.
In conjunction with the proposed sale, which Hersha calculates at a trailing 12-month capitalization rate of approximately 8 percent, the company expects to repay approximately $79 million of outstanding debt. The anticipated sale will result in the Philadelphia-based REIT receiving cash proceeds of $138 million before customary closing costs and transaction expenses. Hersha expects to gain approximately $30 million on the sale.
“The sale of these assets will result in material improvement to our RevPAR [revenue per available room] quality and EBITDA [earnings before interest, taxes, depreciation and amortization] growth potential, and demonstrates our ability to achieve diverse strategic objectives across the company,” says Shah.
Including the 16 hotels in the transaction, Hersha has sold 46 non-strategic hotels generating approximately $460 million in gross proceeds since 2008. The company expects to redeploy the cash proceeds from this sale into higher growth opportunities in Miami and the West Coast, according to Shah.
The transaction is expected to close by the end of the first quarter of 2014.
Hersha Hospitality Trust owns 48 hotels totaling 7,755 rooms. The assets are located in New York, Boston, Philadelphia, Washington, D.C., Miami and select markets on the West Coast.
Hersha’s stock price closed Tuesday, Sept. 24 at $5.71 per share, up from trading at $5.07 per share this time last year.
— John Nelson