Dealmaker: Hersha Hospitality Trust Refinances Seven Manhattan Hotels

Michael Tucker mtucker@mba.org

March 09, 2018


Hersha Hospitality Trust, Philadelphia, refinanced $335 million in debt on seven Manhattan hotels owned in a joint venture with investment manager Cindat Capital Management Limited, Beijing.

"Through this refinancing we have lowered the weighted-average cost of borrowing, increased the duration of our debt and entered into a capital structure that provides the joint venture significantly more financial flexibility going forward," said Hersha CEO Jay Shah.

The joint venture entered into a new $300 million mortgage and $85 million of mezzanine financing and refinanced the prior $285 million senior loan and term loan and a $50 million mezzanine loan.

Shah noted Hersha also redeemed all its preferred equity in the joint venture, giving it additional capital to pursue other opportunities. It redeemed $43.2 million of Hersha's 9 percent cumulative redeemable preferred interest in the joint venture.

Hunton & Williams LLP served as Hersha's legal counsel on the transaction, while Sidley Austin LLP advised Cindat.

Hersha also sold two hotels, the Gaithersburg, Md. Hyatt House for $19 million and the Chester, N.Y. Holiday Inn Express for $8.4 million. Shah called the assets "non-core hotels" and said the real estate investment trust plans to continue selling older suburban assets to focus on younger, higher-growth hotels in gateway markets and coastal destinations. The sale price represents a 4.9 percent blended twelve-month capitalization rate.

"We re-deployed the proceeds of this sale in repurchases of our stock at a deep discount to private market value," Shah said.

After these transactions, Hersha Hospitality Trust owns 49 hotels totaling 7,584 rooms in New York, Washington, D.C., Boston, Philadelphia, Miami and on the west coast.

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