Hotel Online  Special Report

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Hersha Hospitality Trust Forms Joint Venture
with Waterford Hospitality Group
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HT Acquires Preferred Equity Interest in Nine Marriott and Hilton Hotels 
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PHILADELPHIA, Pa., June 15, 2005 — Hersha Hospitality Trust (AMEX: HT), a real estate investment trust (REIT) and owner of nationally franchised, upscale and mid-scale hotels,  today announced that it has signed definitive agreements to enter into a joint venture with Waterford Hospitality Group, LLC.  The newly formed company, to be named Mystic Partners, LLC, will own a portfolio consisting of nine Marriott and Hilton-branded hotels with 1,707 rooms in Connecticut and Rhode Island and an aggregate value of approximately $250 million. 

Under the terms of the transaction, HT is acquiring a 66.7 percent preferred equity interest in the seven stabilized properties in the portfolio and a 50 percent preferred equity interest in the two newly developed properties in the portfolio.  This joint venture intends to place approximately $160 million of debt on the individual hotels.  The stabilized portfolio is being purchased at a price equating to a 7.8 percent cap rate on 2004 net operating income and a projected 2005 cap rate of approximately 8.0 percent.  The development assets will be purchased at a price equating to a projected first year net operating income cap rate of 7.1 percent.  The acquisition is scheduled to close during this summer, but is subject to certain conditions to closing, including debt financing, assignment of franchise agreements and other customary closing conditions.  The acquisition is expected to be accretive to HT’s 2006 earnings. 

“We have admired the Waterford Group and Len Wolman’s team for many years and have looked forward to working together to share our innovative practices and development focus,” said Hasu P. Shah, chairman and CEO of Hersha Hospitality Trust.  “Our shared background as entrepreneurs in this challenging industry is a source of great strength for both of our companies.” 

Waterford Hospitality will retain a minority subordinated equity interest in the portfolio, and will remain the property manager of the nine hotels.  The joint venture, Mystic Partners, will actively develop new hotels in geographic areas of mutual interest.  “Our relationship with Waterford marks our fifth joint venture platform,” said Jay H. Shah, president and COO of Hersha Hospitality Trust.  “These highly selective partnerships offer HT accretive and predictable cash flow in markets with sustainable growth and are a proven platform for strategic new development projects.  This transaction represents a significant step forward in executing Hersha’s strategy of investing in hotels in the high barrier to entry markets in the Northeastern United States.  This transaction also highlights Hersha’s ability to structure transactions which meet both its own needs and those of its partner.  Waterford is a highly respected operator who is very familiar with the Connecticut market and will continue to manage the properties.”

Initial Portfolio

“This is a very high-quality portfolio of assets and premium brands in markets with high barriers to new entry and embedded growth,” Jay Shah said.  “It produces a great fit with our acquisition profile, cluster strategy and aggressive growth plans.  It also furthers our goal of working with premium brands and best-in-class operators and development partners.”

All nine hotels were developed by Waterford or its affiliates and are, on average, four years old.  The six select-service hotels (three Residence Inns, two Courtyards, and one SpringHill Suites) are being purchased for approximately $115,000 per room.  The two newly developed full-service hotels, the Marriott Convention Center Hotel Hartford and the Hilton Hartford, and the four-year old Marriott Hotel in Mystic, Conn., are being acquired for approximately $165,000 per room. 
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Hotel
Location
# of 
Rooms
Mystic Residence Inn Mystic, CT 133
Danbury Residence Inn  Danbury, CT 78
Southington Residence Inn  Southington, CT 94
Mystic Marriott Hotel & Spa  Mystic, CT 285
Marriott Hartford Downtown  Hartford, CT 409
Norwich Courtyard by Marriott and Rosemont Suites Norwich, CT 144
Warwick Courtyard by Marriott  Warwick, RI 92
Hilton Hartford  Hartford, CT 392
Waterford SpringHill Suites  Waterford, CT 80
Total rooms: . 1,707
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The Hotels
  • The 133-room Mystic Residence Inn is located at 40-42 Whitehall Avenue in Mystic, Conn.  Conveniently located off I-95, the property is also within 1/8-mile of the Olde Mystic Village and the Mystic Aquarium, one mile from Mystic Seaport Museum and 12 miles from Foxwoods Resort Casino.  Pfizer Pharmaceuticals and the Naval Submarine Base in New London are within 10 miles of the property. 
  • The 78-suite Danbury Residence Inn at 22 Segar Street in Danbury, Conn., is conveniently located at the intersection of I-84 and Route 7, adjacent to the Danbury Fair Mall and two train stations.  The property is within five miles of the Danbury Hospital and numerous corporate offices, including General Electric.
  • The 94-suite Southington Residence Inn at 778 West Street in Southington, Conn., is situated on I-84, two miles from ESPN’s headquarters and less than five miles from Lake Compounce Theme Park, Mount Southington, and two hospitals.
  • The 285-room Mystic Marriott Hotel & Spa at 625 North Road in Groton, Conn., is located just off of I-95 between Boston and New York City.  It is proximate to Fortune 500 companies, including Pfizer Pharmaceutical and Dow Chemical, two casinos and the leisure attractions in Mystic and southeastern Connecticut.  The AAA Four Diamond hotel property features 20,000 square feet of flexible meeting space, an Elizabeth Arden Red Door Spa, Starbucks and Octagon, an AAA Four Diamond fine dining steak restaurant.  The hotel was built from the ground-up in 2001. 
  • The newly built 409-room Marriott Hartford Downtown, located at 200 Columbus Boulevard in downtown Hartford, is connected to the 540,000 square foot Connecticut Convention Center and anchors the $770 million Adriaen’s Landing development, which will include the development of a new science museum, as well as retail, entertainment and residential units.  The convention center, which also is being managed by Waterford, opened in June 2005, and the hotel is scheduled to open in August 2005.  HT will purchase its 50 percent preferred equity interest in the Marriott within 60 days of certificate of occupancy.
  • The 92-room Warwick Courtyard by Marriott located at 55 Jefferson Park Road in Warwick, Rhode Island, opened in 2003.  The property is located on I-95 near T.F. Green Airport, eight miles south of Providence.  The hotel is also proximate to several corporations, including Textron and Touchpoint Solutions.
  • The 120-room Norwich Courtyard by Marriott and 24-unit Rosemont Suites at 181 West Town Street in Norwich, Conn., enjoys excellent visibility from I-395.  The property is located within minutes of William W. Backus Hospital, Mohegan Sun Casino, Foxwoods Resort Casino and the Mystic Seaport. 
  • The 392-room Hilton Hartford, located at 315 Trumbull Street in downtown Hartford, Conn., is connected to the Hartford Civic Center and is six blocks from the new Connecticut Convention Center.  The Hilton Hartford is located in the heart of the Hartford CBD and was re-opened in March 2005 after a comprehensive $30 million renovation and total repositioning.  The hotel includes the popular Morty and Ming’s restaurant, 15,000 square feet of flexible meeting space, and a 200 space parking garage connected to the property. 
  • The 80-room Waterford Springhill Suites at 401 N. Frontage Road in Waterford, CT, is located off of I-95 and is adjacent to New London Mall.  The property is one mile from the U.S. Coast Guard Academy and Connecticut College, and within three miles of Pfizer Pharmaceutical.
Waterford Hospitality Group is a closely held real estate development and hotel operating company based in Waterford, Connecticut.  Waterford owns or manages more than 25 hotels throughout the United States.  Waterford is an active builder, developer, manager and owner in hotel real estate, residential and retail projects, and gaming.

Hersha Hospitality Trust is a self-advised real estate investment trust that owns mid-scale and upscale hotels in the eastern United States with strong, national franchise affiliations.  The company focuses on acquisition and joint venture opportunities of high quality assets in high barrier to entry markets.

Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. 

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Contact:

Hersha Hospitality Trust
http://www.hersha.com/

Chris Daly
Ph: (703) 435-6293

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Also See: Waterford Hotel Group Awarded Management of Clarion Inn & Suites Albany Airport; The Firms Portfolio Now at 28 Properties / May 2005
The Waterford Group and Partners Reopen the 392-Room Hilton Hartford Following a $33 million Transformation / March 2005


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