Hersha Completes NY Hotel Buyout - Analyst Blog
June 25 2012 - 6:15AM
Zacks
Hersha Hospitality Trust
(HT), a self-advised real estate
investment trust, recently announced that it has purchased the
remaining 50% ownership stake in the ‘Holiday Inn Express
29th Street’ hotel in New York for $10.0 million.
The purchase price totaled $87.5 million, including the company’s
initial investment at the start of operations in February 2007.
The acquisition price signifies an
initial capitalization rate of around 8.4% on the company’s
estimated net operating income for the twelve months ending
December 2012 and an expected stabilized capitalization rate of
10.5%.
Midtown South-based, Holiday Inn
Express 29th Street, consists of 228 rooms, a
business center and other modern amenities. Located centrally
between 8th Avenue and 7th Avenue,
the property is well linked with the largest intercity train
stations and major commuter rail hubs of Manhattan- Madison Square
Garden and Penn Station.
Since 2007, the property had been
considered as an unconsolidated joint venture investment but from
now it will be treated as consolidated asset. The acquisition
transaction follows the company’s previous acquisition of 50%
ownership share for $7.5 million way back in February 2007. The
property bears an outstanding first mortgage loan balance of $54.6
million at interest rate of 6.5% having a maturation date of
November 2016. Alongside, it also bears a mezzanine loan of $15.0
million, which matures by the end of the second quarter of
2012.
The portfolio repositioning program
is aimed towards core urban gateway markets with higher growth
opportunities that in turn would result in higher RevPAR (revenue
per available room), improved Hotel EBITDA (earnings before
interest, tax, depreciation, and amortization) margins, lower debt
and a higher net asset value for the entire portfolio.
Management remains upbeat about the
acquisition as it fulfills the company’s strategic goals. They
expect the hotel to be a quality addition to its existing
high-quality properties in New York and strengthen the RevPAR to
reach prior peak levels. Hersha Hospitality currently owns around
15 properties in New York.
New Cumberland, Pennsylvania-based
Hersha Hospitality focuses on upscale, mid-priced and extended stay
hotels in major metropolitan markets in the U.S. The company
currently owns 64 hotels totaling 9,221 rooms, primarily along the
Northeast Corridor from Boston, Massachusetts to Washington DC. The
company also owns hotels in Los Angeles, Northern California and
Arizona.
The company, which competes with
the likes of Ashford Hospitality Trust Inc.
(AHT) and Host Hotels &
Resorts Inc. (HST), presently has a
long-term ‘Neutral’ recommendation and a Zacks #3 Rank that
translates into a short-term ‘Hold’ rating.
ASHFORD HOSPTLY (AHT): Free Stock Analysis Report
HOST HOTEL&RSRT (HST): Free Stock Analysis Report
HERSHA HOSPTLY (HT): Free Stock Analysis Report
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