The mortgages bear an interest rate of approximately 5.6% a year. The balance is from Hersha's cash on hand, including proceeds from its October sale of four Atlanta hotels for $18.1 million. According to a Hersha statement, the total purchase price equates to an 8.5% cap rate, based on estimated net operating income for 2007, and a price-to-Ebitda multiple of 10.5 times, based on estimated 2007 Ebitda.
Hersha plans to invest $2.5 million in capital improvements to the portfolio, which contains an aggregate of 1,005 suites. Four of the assets are within Hersha's core Northeast and mid-Atlantic regions, while three expand the locally based REIT's portfolio to Arizona and California. LodgeWorks will continue to manage the assets.
They are: a 159-unit asset in White Plains; a 128-unit property in Bridgewater, NJ; 140 units in Gaithersburg, MD; 144 units in Charlotte, NC; 164 units in Scottsdale, AZ; 142 units in Pleasant Hill/Walnut Creek, CA; and 128 units in Pleasanton, CA. Neil Shah, president and COO of Hersha, says their average age is five to six years.
Hersha has experienced rapid expansion over the past few years. With these seven additions, it now owns interests in 66 hotels. All are nationally franchised. In a statement, Jay Shah, CEO, says he expects the portfolio "to provide strong growth in their high barrier-to-entry markets," and predicts that the properties "will weather economic cycles better than most other lodging portfolios."
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