PHILADELPHIA-Hersha Hospitality Trust has priced a public offering of 6.52 million shares of common stock at $9 a share, which would provide net proceeds of about $55.2 million after expenses. This represents an increase of 520,000 shares over the plan, announced earlier this month , to offer six million shares. At that time, the stock was trading on the Amex at $9.35 a share. At the close of trading on April 26, the stock was $9.15 a share. The sale is scheduled to close on April 28.
The locally based hospitality REIT has granted the underwriters a 30-day option to purchase up to an additional 978,000 shares to cover over-allotments. This raises the full option from the previously announced 900,000 shares.
In an April 25 supplemental SEC filing, Hersha says that if the full over-allotment option is exercised, the total underwriting discounts and commissions of the sale will be just over $3.7 million. In that case, total proceeds before expenses will be nearly $63.8 million, and the company anticipates total net proceeds, after expenses, of approximately $63.5 million.
Hersha will use the proceeds to repay outstanding indebtedness on its $60-million revolving credit line. As of Dec. 31, 2005, the debt was approximately $39.4 million. The outstanding balance currently accrues interest at an annual rate of the Wall Street Journal prime rate minus 0.5% a year and must be repaid by Dec. 31, 2008. The remainder of the proceeds from the offering will be used to fund future acquisitions, including newly developed hotels for which Hersha has the right of first refusal or option to buy, and for development loans and general corporate purposes.
UBS Investment Bank and Merrill Lynch & Co. are joint book-running managers. Raymond James and Wachovia Securities are co-lead managers of the offering.
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