PHILADELPHIA-Hersha Hospitality Trust has purchased the remaining 20% of Hampton Inn Philadelphia. The locally based REIT acquired an 80% stake in the property in joint venture with Affordable Hospitality Associates LP, also based here, in January 2006.
The latest transaction values the hotel at approximately $41.9 million, which includes about $21.4 million in debt. Ashish Parikh, CFO, tells GlobeSt.com the company paid $27 million for its initial share and $4.2 million for the final share, “which means we made a good buy,” he says. The cap rate on the entire property, Parikh says, is 10%, and “the cap rate on the final 20% share is closer to 8%.” Affordable was a Hersha development partner, and this was its only asset, according to Parikh.
The 250-room Hampton Inn Philadelphia was built in 2001 and is located at 1301 Race St., across the street from the Pennsylvania Convention Center. Hersha's initial 80% interest in the property carried a 9% participating preferred return on the asset.
Commenting on today's deal, Jay Shah, Hersha's CEO, says, “our cost basis equates to 8.8 times trailing 12 months earnings before EBITDA.” He adds that the property “has been a strong performing asset since our initial transaction with steady growth in revenue per available room, led by rate gains and increased occupancy. The strength of the Philadelphia market, in conjunction with the improved performance of the hotel, strongly supports the growth in the value of the asset and provides us with a very attractive cost basis in the asset.”
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