Hersha Hospitality Trust formed a joint venture with Cindat Capital Management Ltd. for seven hotels in New York City. Cindat will pay US$571.4 million for a 70% stake in the properties and a preferred equity position. The hotels operate under the Holiday Inn, Hampton Inn and Candlewood Suites brands.
Hersha reportedly expects US$300 million in proceeds with taxable gains of US$170 million to US$180 million that it will use to acquire other assets, including the 86-room Ritz-Carlton Georgetown for US$50 million, and the 238-room Hilton Garden Inn M Street for US$106.5 million, both in Washington, D.C.
“Hersha’s consolidated NYC exposure should decline from 43% to 25% following this transaction, but we note it will generate ~$10 million of unconsolidated EBITDA from its 30% ownership stake,” wrote R.W. Baird analyst David Loeb. “This pending sale is another example of Hersha’s willingness to complete portfolio dispositions to successfully recycle capital into higher-growth assets.”
“The city’s preeminence as a financial, cultural, and technological hub, combined with the security and scarcity of its real estate, provides significant yield for a strategic, long-term partner such as Cindat,” stated Neil Shah, Hersha’s president and chief operating officer.
Cindat is a subsidiary of China-based Cinda Asset Management that has ownership interests in several high-profile residential and office buildings in New York and Chicago.
The transaction is scheduled to close in March.