Hersha Purchases Remaining Interest in Hampton Inn Manhattan
Purchases Hotel From First Joint Venture Partner
NEW YORK, NY, July 17, 2006. Hersha Hospitality Trust (AMEX: HT) today announced that it has signed an agreement to purchase the remaining two-thirds interest in the joint venture than owns its 144-room Hampton Inn Manhattan-Chelsea from its joint-venture partner, CNL Hotels & Resorts, Inc.
This transaction values the hotel at approximately $54 million, which was based upon current operating results and comparable sales data in Manhattan. Hersha initially contributed $4.0 million in cash for its 33.3% equity interest in the joint venture. As a result of this transaction, Hersha's cost basis for the asset will be approximately $45 million (reflecting the approximately $15.9 million of outstanding debt on the property), which equates to approximately $312,000 per key.
Jay H. Shah, Chief Executive Officer commented, "We are pleased to be able to purchase the remaining interest in this strong hotel at an attractive yield of over 9 percent on a forward basis. CNL's management has been terrific to work with in this project. This transaction shows that our joint-venture program can generate solid shareholder value, by having the option to purchase full control of our joint-venture assets at compelling yields in noncompetitive situations. We would expect to undertake similar transactions with our other joint-venture assets should certain performance criteria be met."
This transaction is expected to close during the third quarter of 2006. Closing is subject to obtaining lender and franchisor consents and to other customary closing conditions. Hersha's joint venture with CNL has been reported on its financial statements as an unconsolidated joint venture interest. As a result of this transaction, the financial results of the Hampton Inn Manhattan-Chelsea will be reported as a consolidated, wholly-owned hotel.
The Hampton Inn Manhattan-Chelsea, New York, built in 2003, is located on 108 W. 24th Street, near the dynamic Chelsea, West Village and Midtown areas of New York City. The hotel is also located near Hersha's 100% owned Hampton Inn Manhattan-Madison Square Garden.
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