)
Hersha Hospitality Trust is culling seven hotels from its portfolio in a move to strengthen its upscale and luxury holdings and pay off a lot of corporate debt.
The hotel REIT, which has an estimated market cap of $390M, is planning to sell a portfolio of select-service properties in four different states for $505M, or $360K per room, according to a press release. Hersha didn't identify the buyer or buyers but described the hotels as noncore urban select-service properties outside of New York.
In turn, Hersha plans to use the proceeds to pay down up to $410M in corporate debt and another $75M in mortgage debt in its remaining hotel portfolio. The Harrisburg, Pennsylvania-based hotelier also will recast its current credit facility, eliminating all corporate-level debt maturities through 2024, according to the press release.
“With the sale of these non-core properties, we are able to continue our transformation by deepening our focus on our luxury & lifestyle and New York portfolios — both demonstrating resiliency coming out of the pandemic,” Hersha CEO Jay Shah said in the release. “Our resort markets and lifestyle properties continue to outperform — as reflected in our first quarter financial results announced yesterday — and our purpose-built New York City cluster, coupled with our unique operating model, positions us for strong performances across the recovery.”
Among the hotels Hersha is selling are the Courtyard Brookline, an eight-story, 188-room hotel in the Boston area it purchased in 2005 for $54.5M; the 228-room Hampton Inn, which it bought in 2010 for $73M and sits next to the Washington, D.C., Convention Center; and the Courtyard Los Angeles Westside, a 260-room hotel Hersha purchased for $47.5M in 2011, a deal that marked the REIT's entry into the Los Angeles hotel market.
Hersha also is selling the 250-room Hampton Inn City Center-Convention Center in Philadelphia, which it bought in 2006, and the 238-room Hilton Garden Inn M Street in Washington, D.C., which it bought in 2016 for nearly $107M. And it is selling two properties located in Sunnyvale, California: the Courtyard by Marriott, a 145-room hotel purchased by Hersha in 2016 for $75M, and the 94-room TownePlace Suites, purchased in 2015.
The current price tag is $200M more than Hersha valued all seven properties at, in total, at the end of 2021, according to its annual report.
Hersha reported a loss of $22.5M in the first quarter of this year compared to nearly $3M in net income in Q1 of 2021, according to its Securities and Exchange Commission filing Thursday. Its current portfolio of 33 hotels had an average of 58% occupancy in the quarter, with an average daily rate of $233.85 and revenue per available room, or RevPAR, of $135.67, according to its filing.
“In addition to the continued out-performance of our resort markets, especially in March, we were very encouraged by the increased demand in our urban markets," Shah said in the filing. "Our portfolio registered a 31% increase in urban RevPAR in the back half of the month versus the front half, and that demand has carried into April."
“Ongoing dialogue with our corporate accounts indicates return to office and business travel should accelerate in the second quarter and will be further supplemented by renewed small group, as well as in-person training programs. We expect these trends will drive further group and business transient demand during the summer.”
)
)
)
)
)
)
)
)
)
)
)
)