Hersha Hospitality to Acquire Capitol Hill Suites in Washington, DC

Company Release -
1/20/2011 8:00 AM ET
  • Company Will Now Own Eight Hotels In The D.C. Region
  • Purchases a Brand New Full Service Hotel Near Wilmington, Delaware

PHILADELPHIA--(BUSINESS WIRE)-- Hersha Hospitality Trust(NYSE: HT), owner of select service and upscale hotels in major metropolitan markets, announced that it has signed a definitive agreement to purchase the 152 room Capitol Hill Suites, Washington, D.C. for approximately $47.5 million, or $312 thousand per key excluding closing costs.

The Capitol Hill Suites is centrally located in the Capitol Hill district, a block away from the United States Capitol Complex, the House of Representative office complex, the United States Supreme Court and the Library of Congress. The hotel is a short walk to the National Mall and the Smithsonian Museums. The Capitol Hill historic district has undergone dynamic revival becoming a highly sought after Washington, D.C. neighborhood with numerous restaurants, retail locations and cultural and community organizations based there.

Jay H. Shah, Chief Executive Officer, stated, “We are pleased to continue our growth in the highly desirable Washington, D.C. market. As a large beneficiary of increased investments in federal and private sector capital outlays, the D.C. region has strong economic and employment fundamentals. The strong real estate fundamentals are equally attractive, with high barriers to entry and negligible planned construction forecasted for several years, combined with growing demand. We are particularly encouraged by the Capitol Hill submarket and our specific location as it benefits from a wide variety of corporate and leisure demand generators related to the nation’s legislative and judicial institutions that are within blocks of the hotel. As we expand our presence in the region, we expect to achieve operational synergies while also benefiting from the ongoing recovery. We continue to effectively execute on our long term strategy of increasing our presence in the highest growth markets in the nation, which combined with our high quality select service portfolio, will allow Hersha to continue to outperform through the recovery.”

The Capitol Hill Suites is an all-suite boutique hotel, with rooms among the largest in the city. It attracts both extended stay guests and transient guests seeking more space in a desirable location. The hotel completed an extensive $8.0 million renovation in 2008, consequently, it is anticipated that minimal capital expenditures over the near term will be required.

The purchase price represents a forward capitalization rate of approximately 7.3% on the hotel’s projected 2011 net operating income, stabilizing at approximately 10%. The acquisition is anticipated to be funded by assuming $32.5 million of existing debt with a 5.81% interest rate and cash on hand.

The Company anticipates the closing of this acquisition will occur by the end of the first quarter of 2011. The proposed acquisition is subject to a variety of closing conditions and as a result, there can be no assurance that the Company will be able to consummate the acquisition on the schedule or on the terms described.

Additionally, the Company has purchased and closed on a 191 room hotel at Delaware Park in New Castle, Delaware for $15 million, or $78 thousand per key excluding closing costs. The Company took advantage of ongoing market dislocation in the development community to pursue the opportunistic acquisition of this hotel which has never been opened. It is expected to open by the third quarter of 2011 and will be franchised with a leading upper upscale brand. The hotel is in as-new condition, and including the costs to upfit and furnish, the all-in cost to Hersha is targeted to be less than $20 million. The hotel is in a highly visible location on Route 95, five miles south of downtown Wilmington and near the Delaware Park Casino and Racetrack, the New Castle Corporate Airport, a 400 acre commercial park, the Christiana Mall which is the largest regional mall in Delaware, and the University of Delaware. The hotel includes 8,000 square feet of market-leading social and business meeting space overlooking the Delaware Wetlands.

About Hersha Hospitality

Hersha Hospitality Trust is a self-advised real estate investment trust, which owns interests in 77 hotels, totaling 10,262 rooms, primarily along the Northeast Corridor from Boston to Washington D.C. Hersha also owns hotels in Northern California and Scottsdale, Arizona. Hersha focuses on upscale, mid-scale and extended stay hotels in major metropolitan markets.

Forward Looking Statement

Certain statements in this press release, including the statement related to the newly acquired hotel’s potential for growth in cash flows, are forward-looking statements within the meaning of the federal securities laws, 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. For a description of these factors, please review the information under the heading “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the U.S. Securities and Exchange Commission.

Source: Hersha Hospitality Trust

Contact:

Hersha Hospitality Trust

Ashish Parikh, 215-238-1046

Chief Financial Officer

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