NEW YORK CITY-A stalled hotel on Manhattan’s East Side is getting a big jump-start from a new buyer, GlobeSt.com has learned. Hersha Hospitality Trust, a Philadelphia-based hotel REIT, has entered into a purchase and sale agreement to acquire a site at 52nd Street and Third Avenue where a 205-room Hilton Garden Inn is being developed, the company confirms.
According to Ashish Parikh, chief financial officer at Hersha Hospitality Trust, the REIT picked up the hotel from seller RS206 LLC, a firm they have done business with in the past, for $74 million, or approximately $361,000 per key. Hersha is providing $17 million to the seller as a non-refundable deposit earning a current cash coupon of 10% per annum. Upon completion, the company will assume or extinguish $42 million of first mortgage debt and make an additional cash payment of $15 million. The deal gives Hersha the acquire to acquire the completed hotel, but it will not assume construction risk.
Parikh tells GlobeSt.com that the hotel’s proximity to Midtown East’s 20 million-square-foot office market and national landmarks like Grand Central Station, Rockefeller Center and the United Nations made the deal attractive. “Midtown East is one of the best office submarkets in Manhattan, and there are no other hotels being built there at this time,” he says. “There’s no Hilton Garden Inn product as well. There are very high barriers to entry and very high office demand.”
Currently, Hersha has 13 New York hotels in its 64-property portfolio, including others such as the Hilton Garden Inn TriBeCa, Holiday Inn Wall Street and the Candlewood Suites at Times Square South. Parikh says two more New York City hotels will be opening this December, and the Midtown East Hilton Garden Inn will become its 16th hotel in early 2014.
According to a statement from Hersha, the company’s acquisition of the hotel is subject to a variety of conditions, including the substantial completion of the hotel by the seller and completion of the construction within the contractual scope, as well as the satisfaction of other customary closing conditions. As a result, "there can be no assurance that the company will complete the acquisition of the 52nd Street Hotel described above on the schedule or on the terms described above or at all."
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