Company's First Joint Venture Interest Becomes Wholly-owned Hotel
Hersha Hospitality Trust (AMEX:HT), a real estate investment trust (REIT) and owner of 62 nationally franchised, upper-upscale, upscale and midscale limited service and extended-stay hotels, today announced that it has finalized its purchase from its joint-venture partner, CNL Hotels & Resorts, Inc ('CNL') of the remaining two-thirds interest in the joint venture that owns its 144-room Hampton Inn Manhattan-Chelsea.
This transaction values the hotel at approximately $54 million, which was based upon current operating results and comparable sales data in Manhattan. Hersha initially contributed $4.0 million in cash for its 33.3% equity interest in the joint venture. As a result of this transaction, Hersha's cost basis for the asset will be approximately $45 million, which equates to approximately $312,000 per key. Simultaneous with the closing of this transaction, Hersha has placed a $36.0 million first mortgage loan on the property at a fixed rate of 6.24% for 10 years.
Jay H. Shah, Chief Executive Officer stated, 'We are pleased at the price of this transaction, which, on a per key basis, is below replacement cost for New York City hotels, and represents an attractive forward cap rate of 9 percent. CNL's management has been terrific to work with in this project and we look forward to working with them on future projects. Having made our first joint-venture property a wholly-owned hotel, we can now look to the other joint-venture assets in our portfolio as a means of generating solid shareholder value, by having the option to purchase full control of these hotels at compelling yields in noncompetitive situations.'
The Hampton Inn Manhattan-Chelsea, New York, built in 2003, is located on 108 W. 24th Street, near the dynamic Chelsea, West Village and Midtown areas of New York City. The hotel is also located near Hersha's 100% owned Hampton Inn Manhattan-Madison Square Garden.
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