Hersha Hospitality Acquires Envoy Hotel; Selling Two MA Residence Inns

The Envoy Hotel in Boston opened for business in June.

BOSTON—Hersha Hospitality Trust has acquired the recently opened Envoy Hotel in the Seaport District from Norwich Partners for $112.5 million. The Philadelphia-based REIT confirmed that it has added the fee-simple 136-room boutique hotel to its portfolio. Hersha Hospitality now owns 56 hotels totaling 8,899 rooms located in New York, Boston, Philadelphia, Washington, DC, Miami and select markets on the West Coast. HFF marketed the property on behalf of Norwich Partners. The Envoy Hotel, which opened this past June, is affiliated with Marriott’s Autograph Collection and also features the 6,000-square-foot Lookout rooftop bar, and the 3,900-square-foot Outlook restaurant and bar. Hersha Hospitality, which announced its second quarter results on Wednesday, also reported it has entered into a definitive agreement to sell the 125-room Residence Inn in Framingham, MA and the 96-room Residence Inn in Norwood, MA for a combined $47 million, or approximately $213,000 per key. “We are very pleased to acquire the award-winning, 4-Diamond Envoy Hotel in Boston’s Seaport District. The Envoy’s premiere waterfront location at the nexus of Boston’s Financial and Seaport districts leverages corporate demand from over 48 million square feet of office space, as well as 7-day-per-week leisure demand given the hotel’s proximity to Boston’s various tourist attractions and entertainment venues,” says Hersha CEO Jay H. Shah. He later touted the Seaport District as the city’s “burgeoning Innovation District,” and noted the relocations of GE and Vertex to the area as well as the development of restaurants, retail and residential projects that have transformed the Seaport into a 24-7 destination. “The Envoy will gain market share as the hotel continues to ramp following its successful debut in June 2015. In addition, we will implement a more aggressive revenue management approach and plan to re-evaluate guestroom touch points and service delivery, along with the hotel’s food and beverage offerings, to align the overall guest experience with the discerning business and leisure guests in this fast growing submarket,” Shah says. The acquisition of the Envoy in Boston was funded with 1031 exchange proceeds from the company’s sale $571.4-million sale in April of seven limited service assets in New York City to the company’s joint venture with an affiliate of Cindat Capital Management Limited at a trailing full-year 5.4% economic capitalization rate. The Cindat transaction generated $177 million in taxable gains for the REIT. Through a series of reverse 1031 acquisitions that included the Ritz-Carlton Georgetown, the Sanctuary Resort and the Hilton Garden Inn M Street, as well as the acquisition of the Envoy, approximately $16 million of deferred taxable gains remain from the Cindat sale, Hersha reports. Hersha states that the sale price for the two suburban Boston Residence Inn hotels reflects a blended economic capitalization rate of 7.7% based on the hotels’ net operating income for the 12-month period ended June 30, 2016, and a blended hotel EBITDA multiple of 11.7x. The hotels are being sold to an unnamed offshore entity as a portfolio unencumbered of debt and management. The sale is expected to close in third quarter of 2016. Hersha Hospitality’s Boston area portfolio includes (consolidated properties): The Boxer, Courtyard by Marriott Brookline, Holiday Inn Express Cambridge, Residence Inn Framingham, Residence Inn Norwood and the Hawthorne Suites Franklin. Its non-consolidated Boston portfolio includes the Courtyard by Marriott South Boston and the Holiday Inn Express South Boston.