with Waterford Hospitality Group
HT Acquires Preferred Equity Interest in Nine Marriott and Hilton Hotels
|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.”
“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.
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.
Hersha Hospitality Trust
|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|