Hersha Hospitality Announces Agreement To Acquire Hilton Garden Inn In Midtown Manhattan
Hersha Hospitality Trust (NYSE: HT) (the “Company”), owner of upscale
and select service hotels in major metropolitan markets, announced that
the Company has entered into a purchase and sale agreement to acquire
Hersha Hospitality Trust (NYSE: HT) (the “Company”), owner of upscale and select service hotels in major metropolitan markets, announced that the Company has entered into a purchase and sale agreement to acquire the 205 room Hilton Garden Inn in New York City located at 52 nd Street near Third Avenue for total consideration of $74.0 million, or approximately $361,000 per key. The transaction is expected to close shortly after the developer completes the hotel’s construction, anticipated in the fourth quarter of 2013. “We have been able to source another extremely attractive off-market asset to add to our Manhattan portfolio. Not only will it be a high quality, well-located hotel, but we will be acquiring it at a basis that is approximately 25% below the average price per room for recent comparable transactions,” commented Jay H. Shah, Chief Executive Officer. “Appealing to both corporate and leisure travelers, the HGI Midtown East is ideally situated within a 19.8 million square foot office market and is proximate to a number of notable landmarks including the United Nations, Grand Central Station and Rockefeller Center. This asset will be only the second hotel to open in this submarket in the last 15 years speaking volumes of its high barriers to entry.” The Company has provided $17.0 million to the seller as a non-refundable deposit earning a current cash coupon of 10% per annum. At the completion of construction, the Company will assume or extinguish $42 million of first mortgage debt and make an additional cash payment of $15.0 million. While this purchase and sale agreement secures the Company’s right to acquire the completed hotel, the Company is not assuming any construction risk, including the risk of schedule and cost overruns. Upon acquisition, the hotel will be managed by HHM. Based on the Company’s current underwriting assumptions and estimates, the total consideration to be paid for the hotel is expected to represent a first year economic capitalization rate of approximately 7.0% and a hotel EBITDA multiple of 13.2x. The Company estimates, based on its current underwriting assumptions and estimates, that on a stabilized basis the hotel is being purchased at a stabilized capitalization rate of approximately 10.9% and a hotel EBITDA multiple of 8.4x.