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PHILADELPHIA-Hersha Hospitality Trust has stepped deeper into New York and Connecticut with a series of investments totaling $76.4 million. It acquired two completed hotels at an aggregate cost of $50.1 million, which includes the acquisition of a Starbucks lease at one location, and invested another $26.3 million in development financing for two additional properties.

The locally based hospitality REIT acquired the newly opened Hotel 373 at 373 Fifth Ave. and 35th St. in Manhattan for $28 million. As part of the transaction, it paid an additional $6 million to buy the triple-net lease of Starbucks Coffee Co.’s store on the hotel’s ground floor. The hotel price tag includes the assumption of $22 million in debt and one million limited partnership units of Hersha Hospitality Limited Partnership. Hersha Hospitality Management LP will manage the asset.

The company paid $16.1 million for the recently redeveloped 134-room Holiday Inn-Norwich CT. This acquisition includes the assumption of $8.2 million in debt and an undisclosed number of Hersha Hospitality Limited Partnership units. The hotel, which reopened this year following a $4.5-million repositioning, is located near Pfizer Inc.’s global R&D headquarters, a US Coast Guard Academy and the Foxwoods and Mohegan Sun casinos. It includes 10,900 sf of meeting space and a restaurant.

In addition, Hersha paid $11.3 million for two land parcels in Brooklyn, NY, which will be used for the development of an all-suite hotel. It also provided a $15-million mezzanine loan for development of a select service hotel in lower Manhattan. Both of these transactions fall under the company’s development financing program, which provides Hersha with the first right of offer on the completed projects. The land buy and loan were funded through repayment of previous Hersha development loans.

The sellers’ acceptance of limited partnerships units in payment for the completed hotels “demonstrates a strong vote of confidence in our strategy,” says Jay Shah, CEO, in a statement. He also says, “the mezzanine loan and the purchase of the land parcels demonstrate how we are able to quickly replace the cash flows from the pay down of our development loans, thereby reducing the dilution from paydowns of the development loans. The payoffs have also eliminated the need to take on additional leverage or issue additional equity for these purchases.”

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