Dealmaker: Hersha Closes Seven-Hotel Joint Venture with Cindat for $571M

Hersha Hospitality Trust, Philadelphia, closed on a joint venture for seven of the company’s limited-service Manhattan hotels with Cindat Capital Management Limited, Beijing, for $571 million, or $526,000 per key.

Cindat, backed by investors including China Cinda Asset Management Co. and Taikang Life Insurance, became the senior preferred joint venture partner holding a 70 percent ownership stake in 1,087 guest rooms while Hersha retained a 30 percent equity interest as well as a $37 million preferred equity interest in the venture at a 9 percent fixed coupon.

Natixis Real Estate Capital LLC, New York, led a syndicate of financial institutions that provided $285 million in senior acquisition financing to the venture. An Oaktree Real Estate Finance affiliate provided $50 million of mezzanine financing.

Hunton & Williams LLP provided legal counsel to Hersha; Sidley Austin LLP served as legal counsel to Cindat. Both law firms collectively advised the newly formed joint venture. Solid Rock Advisors, New York, advised Cindat on the transaction. Hersha President and COO Neil Shah said the seven cash-flowing hotels, including Holiday Inn Express Times Square, Candlewood Suites Times Square and Hampton Inn Times Square, benefit from strong demand for core real estate and lodging assets due to New York’s position as a global financial, cultural and technological hub.

“Demand for high-quality U.S. real estate assets is great from Chinese investors,” said Cindat CEO Greg Peng. “Limited-service hotels in Manhattan, in our opinion, offer steady cash flow with relatively low volatility and hence, good risk-adjusted investment returns.”

The joint venture’s other assets include Hampton Inn Chelsea, Hampton Inn Herald Square, Holiday Inn Wall Street and Holiday Inn Express Water Street.