Hersha Hospitality Acquires Holiday Inn Express in Midtown Manhattan
PHILADELPHIA—Hersha Hospitality Trust announced that it has purchased the remaining 50 percent interest it did not previously own in the 228-room Holiday Inn Express 29th Street in New York, NY. Including its initial investment at the commencement of operations in February 2007, the total acquisition price is $87.5 million, or $383,772 per key. Since the Company’s initial acquisition, the asset had been accounted for as an unconsolidated joint venture investment but will now become a consolidated asset for 2012. READER COMMENTS
“The purchase of the Holiday Inn Express 29th Street helps accomplish two important strategic objectives for Hersha,” commented Jay H. Shah, chief executive officer, in an announcement. “First, it adds another high quality, well-located hotel to our Manhattan portfolio that further strengthens our presence as the market fundamentals in the midtown region return to prior peak RevPAR levels. Second, with this acquisition we have streamlined our balance sheet and further reduced our exposure to unconsolidated joint ventures. This has been a multi-year process, and I am pleased with the composition of our portfolio as we continue to focus on maximizing the growth opportunity in our wholly-owned hotels.”
Hersha’s purchase of the remaining ownership in the joint venture for $10.0 million follows its February 2007 purchase of a 50 percent ownership stake for $7.5 million. The property has an outstanding first mortgage loan balance of $54.6 million which bears interest at a rate of 6.50 percent and matures in November 2016, and a $15.0 million mezzanine loan which the Company intends to pay off by the end of the second quarter.
The Holiday Inn Express 29th Street is located in Midtown South, two blocks from Madison Square Garden and Penn Station. The 12-story, fee-simple property contains 228 rooms, an 80-seat breakfast area, a business center, and a fitness center. The total purchase price represents an initial capitalization rate of 8.4 percent based upon net operating income for the twelve months ended December 2012 and an expected stabilized capitalization rate of 10.5 percent.
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