Dealmaker: Hersha Sells JV Interest in Manhattan Hotels for $571M

Hersha Hospitality Trust, Philadelphia, formed a joint venture with Cindat Capital Management Limited, Beijing, China, for seven Manhattan hotels for $571.4 million, or $526,000 per key.

Hersha formerly owned all seven limited-service hotel properties. Cindat will become the preferred joint venture partner holding a 70 percent ownership stake in the 1,087-room portfolio while Hersha will retain a 30 percent equity interest. Cushman & Wakefield advised Hersha on the sale.

The assets Hersha contributed to the joint venture include the Holiday Inn Express Times Square, Candlewood Suites Times Square, Hampton Inn Times Square, Hampton Inn Chelsea, Hampton Inn Herald Square, Holiday Inn Wall Street and Holiday Inn Express Wall Street.

Hersha will use some of the proceeds to acquire two northwest Washington, D.C. hotels, the 86-room Ritz-Carlton Georgetown for $50 million and the 238-room Hilton Garden Inn M Street for $106.5 million as part of a Section 1031 like-kind exchange. The real estate investment trust will also reduce its debt and repurchase some common shares.

“We are excited to acquire both hotels at an attractive basis, and expect they will generate strong returns,” said Hersha President and COO Neil Shah. The firm expects the Ritz-Carlton Georgetown to stabilize at an unlevered yield of 8.0 percent to 8.5 percent based on improving Washington, D.C. market fundamentals.

Shah said the Washington acquisitions bring Hersha’s Washington, D.C. hotel cluster to five properties, “and combined with our acquisition of the St. Gregory in June further strengthens the company’s presence in Washington’s urban core.” The REIT purchased the 155-room St. Gregory Hotel & Suites in the city’s DuPont Circle neighborhood last summer for $57 million.