PHILADELPHIA—Hersha Hospitality Trust, owner of upscale hotels in urban gateway markets, announced the Company has entered into a definitive agreement to sell 16 hotels to an affiliate of Blackstone Real Estate Advisors for gross proceeds of $217 million, or approximately $125,000 per key. This transaction marks the Company’s exit from Long Island and suburban Philadelphia, as well as the sale of the Company’s remaining consolidated properties in Connecticut and Rhode Island.
“The anticipated sale of these non-core portfolio hotels completes our transformation into a pure play, urban transient portfolio with exposure to some of the highest demand gateway markets in the United States,” explains Jay H. Shah, the Company’s chief executive officer. “The sale of these assets will result in material improvement to our RevPAR quality and EBITDA growth potential, and demonstrates our ability to achieve diverse strategic objectives across the Company. We are pleased to have timed our two portfolio sale processes to capitalize on private equity interest in stabilized, select service assets in suburban markets. In addition to further reducing leverage, we expect to redeploy the cash proceeds from this sale into higher growth opportunities in Miami and the West Coast.”
The Company values the anticipated sale of these hotels at a trailing twelve months capitalization rate of approximately 8 percent and a hotel EBITDA multiple of 11x. In conjunction with the anticipated sale, the Company expects to repay approximately $79 million of outstanding debt, which will result in the Company receiving cash proceeds of $138 million before customary closing costs and transaction expenses. The Company anticipates recording a book gain of approximately $30 million on the sale of these assets.
The transaction is expected to close by the end of first quarter 2014, and is subject to customary closing conditions.