Hersha Hospitality Trust to Sell Seven Assets for $505M
The transaction aligns with the firm’s strategy to focus on resort, luxury, lifestyle and destination-orientated assets, as well as its New York portfolio.
HARRISBURG, PA – Hospitality REIT Hersha Hospitality Trust entered into an agreement to sell seven of its non-core, Urban Select Service hotel properties, outside of New York, for $505 million.
The transaction, which will equate to $360,000 per key, aligns with the firm’s long-term strategy to focus on resort, luxury, lifestyle and destination-orientated assets, as well as its New York portfolio.
Hersha CEO Jay H. Shah states, “We’re pleased to have reached an agreement that supports our long-term strategic objectives and delivers immediate shareholder value. With the sale of these non-core properties, we are able to continue our transformation by deepening our focus on our luxury & lifestyle and New York portfolios – both demonstrating resiliency coming out of the pandemic.”
Shah adds, “Our resort markets and lifestyle properties continue to outperform – as reflected in our first quarter financial results announced yesterday – and our purpose-built New York City cluster, coupled with our unique operating model, positions us for strong performances across the recovery.”
The seven properties include Courtyard Brookline; Hampton Inn – Philidelphia; Hilton Garden Inn M Street; Hampton Inn – Washington D.C.; Courtyard Sunnyvale; Courtyard Los Angeles Westside; and TownePlace Suite Sunnyvale.
Hersha plans to utilize the sale’s proceeds to provide immediate liquidity for a net debt reduction of $460 million to $480 million.
In addition to $390 million to $410 million of corporate debt, Hersha expects to reduce mortgage debt associated with the portfolio by $75 million, resulting in a pro forma consolidated leverage ratio of 4.9x-5.1x. The firm also intends to recast its existing credit facility to eliminate all corporate-level debt maturities through 2024.
Once the transaction is complete, subject to customary closing conditions, Hersha will own a total of 26 hotels in six US destination markets. The transaction is expected to close in Q3 2022.
On a pro forma basis, based on 2019 actual performance, the firm’s remaining portfolio’s total RevPAR would have increased from $206 to $219, its total ADR would have increased from $247 to $262, and EBITDA per key would have increased from $32,000 to $33,000.