Hersha Hospitality Trust (NYSE:HT) (the “Company”), owner of upscale hotels in urban gateway markets, today announced the Company has entered into a definitive agreement to sell 16 hotels to an affiliate of Blackstone Real Estate Advisors (“Blackstone”) for gross proceeds of $217 million, or approximately $125,000 per key. This transaction marks the Company’s exit from Long Island and suburban Philadelphia, as well as the sale of the Company’s remaining consolidated properties in 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,” explains Mr. Jay H. Shah, the Company’s Chief Executive Officer. “The sale of these assets will result in material improvement to our RevPAR quality and EBITDA growth potential, and demonstrates our ability to achieve diverse strategic objectives across the Company. We are pleased to have timed our two portfolio sale processes to capitalize on private equity interest in stabilized, select service assets in suburban markets. Including the anticipated sale of these 16 non-core hotels, we have sold 46 non-strategic hotels generating approximately $460 million in gross proceeds since 2008. In addition to further reducing leverage, we expect to redeploy the cash proceeds from this sale into higher growth opportunities in Miami and the West Coast.”
The Company values the anticipated sale of these hotels at a trailing twelve months capitalization rate of approximately 8% and a hotel EBITDA multiple of 11x. In conjunction with the anticipated sale, the Company expects to repay approximately $79 million of outstanding debt, which will result in the Company receiving cash proceeds of $138 million before customary closing costs and transaction expenses. The Company anticipates recording a book gain of approximately $30 million on the sale of these assets.
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