Dealmaker: Hersha Hospitality Trust Sells Two Washington, D.C.-Area Hotels for $62M

Hersha Hospitality Trust, Philadelphia, sold its 203-room Courtyard by Marriott in Alexandria, Va. and the 120-room Residence Inn in Greenbelt, Md. for $62 million. 

Hersha CEO Jay Shah said the real estate investment trust sold the 13-year-old assets as part of its “capital recycling” strategy and noted that the move will allow Hersha to concentrate its footprint in higher barrier-to-entry urban gateway and destination markets. “We expect to redeploy sales proceeds in strategic growth markets to offset taxable gains given our low basis in the hotels that we sold,” he said. 

The two suburban Washington, D.C. hotels netted the REIT $60.1 million, Shah said. The sale represented a 7.4 percent capitalization rate based on the hotels’ 2016 net operating income and a 12.1x hotel earnings multiple. 

Hersha also redeemed its interest in its Mystic Partners joint-venture, acquiring all ownership interest in the 285-room Mystic Marriott Hotel & Spa in Mystic, Conn., and redeeming the company’s minority ownership interests in the Marriott and Hilton in Hartford, Conn. 

Hersha transferred its interests in the Hartford Marriott and the Hartford Hilton hotels to its former joint-venture partner for $8.5 million, which represented the REIT’s entire equity investment in these assets. It simultaneously assumed full ownership of the Mystic Marriott Hotel & Spa without any additional cash payment to the joint-venture partner.

“The liquidation of the Mystic Partners joint-venture adds the high-quality Mystic Marriott to our consolidated hotel portfolio, further simplifying our balance sheet and eliminating our exposure to full-service assets in Hartford,” Shah said. He noted that Hersha assumed operational management of the Mystic Marriott in late 2015. “Moving forward, we expect to implement additional revenue and asset management strategies to drive profitability and further enhance the [Mystic Marriott Hotel & Spa’s] value.”