The portfolio has an aggregate of 1,005 keys. Neil Shah, Hersha's president and COO, tells GlobeSt.com the average age of the properties is five to six years, and all are currently being converted to the Hyatt Summerfield Suites brand. "They operated without a major brand and did well," he says, "and we think the Hyatt brand will add substantial upside to rate and occupancy.
"This was just too good to pass up," Shah says. The buy will be accredited to 2007 earnings and was acquired at favorable cap rates and at prices below replacement cost in these key markets, according to Shah. Hersha plans to invest $2.5 million in capital improvements to the portfolio while LodgeWorks will bear any additional costs of brand compliance.
The portfolio includes a 159-unit asset in White Plains; 128-unit property in Bridgewater, NJ; 140 units in Gaithersburg, MD; 144 units in Charlotte, NC; 164 units in Scottsdale, AZ; 142 units in Pleasant Hill/Walnut Creek, CA; and 128 units in Pleasanton, CA.
Regarding the properties in the West, Shah says the company "has been looking at a handful of other markets that have multiple demand generators and high barriers to entry," and cites the San Francisco and Northern California markets as well as Florida. All of these, including the Scottsdale asset, fit Hersha's criteria "for areas with significant barriers to entry with few or no pieces left for development." Hersha plans to keep the entire portfolio, he says.
LodgeWorks will manage the assets, "which makes us comfortable with going to California," Shah says. LodgeWorks become Hersha's fifth independent management company, and Shah says he anticipates further development relationships with LodgeWorks.
During a third-quarter conference call, Jay Shah, CEO, said Hersha was slowing the pace of acquisitions. But Neil Shah says, "that statement applied to 2007. We had some acquisitions in the pipeline for 2006," and this is one of them.
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