KEY WEST, FL—Philadelphia-based Hersha Hospitality Trust reports it has entered into a definitive agreement to acquire the Parrot Key Hotel & Resort here for a purchase price of $100-million.
The 148-room resort is housed in 11 buildings on five oceanfront acres. Hersha reports that the hotel will continue to be operated and managed by Northwood Hospitality.
“The acquisition of Parrot Key further demonstrates our commitment to recycle capital from the sale of stabilized assets into higher growth opportunities,” states Hersha CEO Jay H. Shah. “Parrot Key and the Key West market possess very attractive investment characteristics. The hotel is a high quality oceanfront asset, independently managed and well positioned in the market to leverage high rated transient demand. The controlled guestroom inventory and consistent year-round demand make Key West very desirable from an investment perspective.”
He adds that the pending purchase increases the hotelier's presence in South Florida. In three years, the company has increased the combined EBITDA contribution from South Florida and the West Coast to approximately 26% of its total portfolio EBITDA.
The hotel operated at an average daily rate of $230.52 and had an occupancy of 92.3% in 2013. Hersha anticipates the purchase price for Parrot Key reflects a trailing and forward 12-month economic capitalization rate, as of April 2014, of approximately 7.2% and 7.5%, respectively, and a 9.0% capitalization rate on stabilized earnings. For the preceding 12 months as of March 31, 2014, the hotel generated $7.5 million in EBITDA or approximately $50,000 per room.
The acquisition of Parrot Key will be funded with cash on hand and with a portion of the company's $250 million senior unsecured term loan.
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