Hersha To Sell 18 Non-Core Hotel Assets for $155M

(Mark your calendars: RealShare Hotels 2011, Sept. 15th in New York City)

GREENWICH, CT-An affiliate of Starwood Capital Group, Starwood Global Opportunity Fund VIII, has entered into agreements to purchase a portfolio of 18 hotel properties from Hersha Hospitality Trust. The purchase price is approximately $155 million, including the assumption of outstanding mortgage debt that totaled $92 million as of June 30, 2011.

The Starwood Capital Group affiliate will pay $79.8 million of that mortgage debt, a figure that reflects the amortization of the principal.

The move, which would result in the sale of 1,924 rooms, is part of Hersha’s ongoing plan to sell off non-core assets and move into gateway markets, CFO Ashish Parikh tells GlobeSt.com.

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“Over the last five years we have made a strategic shift to go more into urban gateway markets,” Parikh says. “As we continue to progress and acquire in those markets, there are certain portions of the portfolio that we will look to dispose of. In general, most of them are assets that we may have held for five to 10 years that just aren’t in markets that are going to have the same growth potential as the urban gateway markets.”

Parikh says that Hersha anticipates selling up to six assets a year over the next few years, while focusing on acquisitions in those gateway markets in the northeast.

“Most of our focus right now is in the northeast corridor so we have a big presence in New York, Boston, Philadelphia and Washington, DC,” he says. “We’ve also recently entered Los Angeles and we’ll continue to look at northern and southern California and maybe some parts of south Florida, such as Miami or Naples.”

In a release announcing the sale agreement, Hersha says that the completion of the sale would reduce the average age of its hotel portfolio to less than seven years old. The average age of the 18 properties being sold is 12 years old. A successful sale would also improve hotel EBITDA margins for the remaining portfolio--which were 810 basis points higher for Q2 11.

Starwood Capital Group declined to comment to GlobeSt.com about the agreements, or the fund’s plans for the hotels once purchased. The fund entering into the agreements is its eighth and closed in March of 2010 with equity commitments of $1.83 billion, according to the Starwood Capital Group website.

The hotels in question are located in Connecticut, Virginia, Massachusetts, Norh Caroina, Pennsylvania, New Jersey and Maryland.