Business & Finance
Business and Finance
Business and Finance
Thu, June 30, 2011
Wed, June 29, 2011 Hersha Hospitality Announces Agreement to Acquire 175-Room Hyatt Hotel in Union Square, New York City
PHILADELPHIA--([ BUSINESS WIRE ])--Hersha Hospitality Trust (NYSE: HT), owner of upscale and select service hotels in major metropolitan markets, announced that the Company has entered into a purchase and sale agreement to acquire the 175-room Hyatt Union Square hotel in New York City for total consideration of $104.1 million, or approximately $595,000 per key. The transaction is expected to close shortly after the seller completes the hotela™s construction. The consideration to the seller consists of $36 million paid to the seller in cash, the cancellation by the Company of a $10 million development loan made to the seller, accrued interest on the loan and the assumption by the Company of two mortgage loans secured by the hotel in the original aggregate principal amount of $55 million. While this purchase and sale agreement secures the Companya™s right to acquire the completed hotel, the Company is not assuming any construction risk, including the risk of schedule and cost overruns. The hotel is expected to open in 2012.
"The addition of this extremely well located, efficient full service Hyatt hotel greatly enhances our already strong presence in Manhattan"
aThe addition of this extremely well located, efficient full service Hyatt hotel greatly enhances our already strong presence in Manhattan,a commented Jay H. Shah, Chief Executive Officer. aThe Company continues to execute on its long-term plan of establishing itself as one of the premier providers of top quality hotels in high growth urban gateway markets with strong barriers to entry. The Union Square hotel will benefit from some of the most robust lodging demand in the country, and we believe this property is strategically positioned to leverage New Yorka™s strong recovery and the multiple demand generators in Midtown South, Greenwich Village and Downtown. These vibrant market characteristics, combined with the desirability of this new asset, should drive attractive growth in revenue per available room and cash flow as the hotel matures into the recovery. The hotel, at the corner of 4th Avenue and 13th Street, will be the closest major hotel to New York University and will be close to the entertainment, fashion and design districts of Manhattan. The hotel is expected to perform favorably relative to its competitive set, which includes the W Union Square, the Gramercy Park Hotel and the Gansevoort Park.a
The Hyatt Union Square will be a 4-star hotel with a historic facade and 23afoot lobby ceilings that will create a unique space for guests. Amenities will include an upscale restaurant, a destination lobby bar, an exclusive rooftop lounge, private terraces, a state ofathe art fitness facility, and a pool.
The Company sourced this off-market transaction through its development loan program and the acquisition, if completed, will further the Companya™s stated goal of reducing the outstanding principal balance of its development loan portfolio. The Company has stopped recording interest income on the $10 million development loan made to the seller as of the signing of the purchase and sale agreement. As of March 31, 2011, on a pro forma basis and assuming the completion of the Hyatt Union Square acquisition and the previously announced Hampton Inn Pearl Street acquisition, the outstanding principal balance of the Companya™s development loan portfolio will represent approximately one percent of Hershaa™s total assets.
Based on the Companya™s current underwriting assumptions and estimates, the total consideration to be paid for the hotel, including the cancellation of the development loan and the assumption of the mortgage loans, is expected to represent a first year economic capitalization rate of approximately 6.4% and a hotel EBITDA multiple of 14.8x. The Company estimates, based on its current underwriting assumptions and estimates, that on a stabilized basis the hotel is being purchased at a stabilized capitalization rate of approximately 10.1% and a hotel EBITDA multiple of 10.0x.
Upon completion of the acquisition, the hotel will be managed by Hersha Hospitality Management, L.P.
The Companya™s acquisition of the hotel is subject to a variety of conditions, including the substantial completion of the hotel by the seller and completion of the construction within the contractual scope, as well as the satisfaction of other customary closing conditions. As a result, there can be no assurance that the Company will complete the acquisition of the Hyatt Union Square described above on the schedule or on the terms described above or at all.
About Hersha Hospitality Trust
Hersha Hospitality Trust is a self-advised real estate investment trust, which owns interests in 79 hotels, totaling 10,702 rooms, primarily along the Northeast Corridor from Boston, Massachusetts to Washington DC. Hersha also owns hotels in California and Arizona. Hersha focuses on upscale, mid-priced and extended stay hotels in major metropolitan markets.
Forward Looking Statement
Certain matters within this press release are discussed using aforward-looking statementsa within the meaning of the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. For a description of these factors, please review the information under the heading aRisk Factorsa in Hersha Hospitality Trusta™s filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2010.
