Hersha Hospitality to Acquire Capitol Hill Suites in Washington, DC
January 20 2011 - 8:00AM
Business Wire
Hersha Hospitality Trust (NYSE: HT), owner of select
service and upscale hotels in major metropolitan markets, announced
that it has signed a definitive agreement to purchase the 152 room
Capitol Hill Suites, Washington, D.C. for approximately $47.5
million, or $312 thousand per key excluding closing costs.
The Capitol Hill Suites is centrally located in the Capitol Hill
district, a block away from the United States Capitol Complex, the
House of Representative office complex, the United States Supreme
Court and the Library of Congress. The hotel is a short walk to the
National Mall and the Smithsonian Museums. The Capitol Hill
historic district has undergone dynamic revival becoming a highly
sought after Washington, D.C. neighborhood with numerous
restaurants, retail locations and cultural and community
organizations based there.
Jay H. Shah, Chief Executive Officer, stated, “We are pleased to
continue our growth in the highly desirable Washington, D.C.
market. As a large beneficiary of increased investments in federal
and private sector capital outlays, the D.C. region has strong
economic and employment fundamentals. The strong real estate
fundamentals are equally attractive, with high barriers to entry
and negligible planned construction forecasted for several years,
combined with growing demand. We are particularly encouraged by the
Capitol Hill submarket and our specific location as it benefits
from a wide variety of corporate and leisure demand generators
related to the nation’s legislative and judicial institutions that
are within blocks of the hotel. As we expand our presence in the
region, we expect to achieve operational synergies while also
benefiting from the ongoing recovery. We continue to effectively
execute on our long term strategy of increasing our presence in the
highest growth markets in the nation, which combined with our high
quality select service portfolio, will allow Hersha to continue to
outperform through the recovery.”
The Capitol Hill Suites is an all-suite boutique hotel, with
rooms among the largest in the city. It attracts both extended stay
guests and transient guests seeking more space in a desirable
location. The hotel completed an extensive $8.0 million renovation
in 2008, consequently, it is anticipated that minimal capital
expenditures over the near term will be required.
The purchase price represents a forward capitalization rate of
approximately 7.3% on the hotel’s projected 2011 net operating
income, stabilizing at approximately 10%. The acquisition is
anticipated to be funded by assuming $32.5 million of existing debt
with a 5.81% interest rate and cash on hand.
The Company anticipates the closing of this acquisition will
occur by the end of the first quarter of 2011. The proposed
acquisition is subject to a variety of closing conditions and as a
result, there can be no assurance that the Company will be able to
consummate the acquisition on the schedule or on the terms
described.
Additionally, the Company has purchased and closed on a 191 room
hotel at Delaware Park in New Castle, Delaware for $15 million, or
$78 thousand per key excluding closing costs. The Company took
advantage of ongoing market dislocation in the development
community to pursue the opportunistic acquisition of this hotel
which has never been opened. It is expected to open by the third
quarter of 2011 and will be franchised with a leading upper upscale
brand. The hotel is in as-new condition, and including the costs to
upfit and furnish, the all-in cost to Hersha is targeted to be less
than $20 million. The hotel is in a highly visible location on
Route 95, five miles south of downtown Wilmington and near the
Delaware Park Casino and Racetrack, the New Castle Corporate
Airport, a 400 acre commercial park, the Christiana Mall which is
the largest regional mall in Delaware, and the University of
Delaware. The hotel includes 8,000 square feet of market-leading
social and business meeting space overlooking the Delaware
Wetlands.
About Hersha Hospitality
Hersha Hospitality Trust is a self-advised real estate
investment trust, which owns interests in 77 hotels, totaling
10,262 rooms, primarily along the Northeast Corridor from Boston to
Washington D.C. Hersha also owns hotels in Northern California and
Scottsdale, Arizona. Hersha focuses on upscale, mid-scale and
extended stay hotels in major metropolitan markets.
Forward Looking Statement
Certain statements in this press release, including the
statement related to the newly acquired hotel’s potential for
growth in cash flows, are forward-looking statements within the
meaning of the federal securities laws, 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
“Risk Factors” included in our Annual Report on Form 10-K for the
year ended December 31, 2009 filed with the U.S. Securities and
Exchange Commission.
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