Hersha Hospitality Trust Taken Private in $1.4B Deal
It is being acquired by KSL Capital Partners in an all-cash transaction.
Hersha Hospitality Trust is being acquired by KSL Capital Partners, a private equity firm that specializes in the travel and leisure industries, in an all-cash deal valued at $1.4 billion. KSL is buying the REIT’s common shares at $10 per share, representing a premium of 60% over Hersha’s closing share price on August 25, 2023, the last full trading day prior to the announcement.
The company has “built an impressive, curated portfolio of experiential luxury and lifestyle hotels and resorts in strategic markets,” says Marty Newburger, partner at KSL, in prepared remarks. “We are uniquely suited to position the business for further success over the long term.”
Like most commercial real estate asset classes, hotel transactions have dropped this year and along with the fewer transactions, prices have slipped. According to a recent report from Marcus & Millichap, the average entry cost during the first half of 2023 was $103,200 per key, a 4.1% decline relative to last year’s measurement.
However, it continued, “Hotels remain an attractive investment option for yield-driven buyers, especially as the 10-year treasury rate remains near a decade peak in the high-3 to low-4 percent range. The average cap rate in the hospitality sector was at 8.7 percent in June, which is nearly 100 basis points higher than any other major commercial property type.”
Hersha’s acquisition is expected to close in the fourth quarter of 2023, subject to customary closing conditions, including approval by the holders of a majority of Hersha’s outstanding common shares.
Goldman Sachs & Co. LLC is serving as exclusive financial advisor and Latham and Watkins LLP and Venable LLP are serving as legal advisors to the Transaction Committee of Hersha’s Board of Trustees. Hunton Andrews Kurth LLP is serving as legal advisor to Hersha. Wells Fargo and Citigroup are serving as financial advisors and Simpson Thacher & Bartlett LLP and Miles and Stockbridge P.C. are serving as legal advisors to KSL. Additionally, Wells Fargo and Citigroup provided a debt financing commitment to KSL in connection with the transaction.