NEW YORK CITY — Hersha Hospitality Trust (NYSE: HT) has signed definitive agreements to sell ownership interests in seven of its limited-service hotels in Manhattan for a total purchase price of $571.4 million. The Philadelphia-based hotel REIT sold its interests to joint venture partner Cindat Capital Management Ltd.
Totaling 1,087 rooms, the hotels include Holiday Inn Express Times Square, Candlewood Suites Times Square, Hampton Inn Times Square, Hampton Inn Chelsea, Hampton Inn Herald Square, Holiday Inn Wall Street and Holiday Inn Express Wall Street.
“Manhattan’s preeminence as a financial, cultural and technological hub, combined with the security and scarcity of its real estate, provides significant yield for a strategic, long-term partner such as Cindat,” says Neil Shah, president and chief operating officer of Hersha Hospitality. “We intend to utilize a portion of the sale proceeds to make hotel investments in Washington, D.C., and California, continue our share repurchase program and repay debt.”
The proposed joint venture is structured with Cindat as the preferred joint venture partner holding a 70 percent ownership stake, while Hersha retains a 30 percent equity interest. Cushman & Wakefield represented Hersha in the transaction.
Hersha will continue to fully own 10 hotels in New York City totaling 1,386 rooms, including the Hyatt Union Square, three Hilton Garden Inns, two Hampton Inns, two independent boutique hotels, a Holiday Inn Express and a Sheraton.
In addition to the joint venture interest sale, Hersha announced the acquisition of the 86-room Ritz-Carlton Georgetown for $50 million. The REIT also signed a purchase and sale agreement to acquire the 238-room Hilton Garden Inn M Street for $106.5 million. Both hotels are located in Washington, D.C.
“The hotels require no disruptive renovations, and will allow the company to fully leverage the expected strength in Washington, D.C., in the coming years from the change in the [U.S. presidency] in 2017, the health of and growth in D.C.’s private sector economy, improved convention infrastructure and a strong convention calendar,” says Shah. “The acquisition of both hotels, which brings our urban D.C. hotel cluster to five hotels, adds depth to our unique portfolio, and combined with our acquisition of the St. Gregory in June, further strengthens the company’s presence in Washington’s urban core.”
Hersha Hospitality Trust owns and operates upscale hotels in urban gateway markets. The company’s 55 hotels totaling 8,654 rooms are located in New York, Boston, Philadelphia, Washington, D.C., Miami and select markets on the West Coast. Hersha’s stock price closed on Wednesday, Feb. 3 at $16.95 per share, down from $26.68 per share at this time last year.
Cindat Capital Management Ltd. is a platform established to guide, advise and safeguard Chinese institutional and private capital in their overseas real estate investments. Its shareholders include China Cinda Asset Management Co. Ltd., AT Investment Management Ltd. and CGO Capital Management Co. Ltd.
— John Nelson