Hersha Hospitality Trust to Sell Non-Core Urban Select Service Properties for $505 Million

Rhea-AI Summary

Hersha Hospitality Trust (NYSE: HT) announced a definitive agreement to sell seven non-core properties for $505 million, expected to reduce net debt by $460-$480 million. This transaction aligns with the company's strategy to focus on luxury and lifestyle segments and urban markets. The sale is projected to enhance financial metrics, including an increase in Total RevPAR from $206 to $219 and EBITDA per key from $32,000 to $33,000. The deal is anticipated to close in Q3 2022, subject to customary conditions.

Positive

• Transaction expected to reduce net debt by $460-$480 million.
• Sale proceeds will enhance liquidity for the company.
• Increased Total RevPAR from $206 to $219 and EBITDA per Key from $32,000 to $33,000 projected.

Negative

• None.

– Accelerates Transformation with Focus on Resort, Luxury & Lifestyle and Destination-Orientated Portfolio –
– Transaction Expected to Reduce Net Debt by $460-$480 million –

PHILADELPHIA, April 28, 2022 (GLOBE NEWSWIRE) -- Hersha Hospitality Trust (NYSE: HT) (“Hersha” or the “Company”), owner of high-quality hotels in urban gateway markets and regional resort destinations, today announced that it has entered into a definitive agreement to sell seven of its non-core Urban Select Service properties outside of New York (the “USS Portfolio”) for gross proceeds of $505 million, or approximately $360,000 per key.

Mr. Jay H. Shah, Hersha’s Chief Executive Officer, stated, “We’re pleased to have reached an agreement that supports our long-term strategic objectives and delivers immediate shareholder value. With the sale of these non-core properties, we are able to continue our transformation by deepening our focus on our luxury & lifestyle and New York portfolios – both demonstrating resiliency coming out of the pandemic. Our resort markets and lifestyle properties continue to outperform – as reflected in our first quarter financial results announced yesterday – and our purpose-built New York City cluster, coupled with our unique operating model, positions us for strong performances across the recovery.”

The following Select Service Properties will be included in the transaction:

Hotel

Courtyard Brookline

Hampton inn – Philadelphia

Hilton Garden Inn M Street

Hampton Inn – Washington D.C.

Courtyard Sunnyvale

Courtyard Los Angeles Westside

TownePlace Suites Sunnyvale

Hersha intends to use the proceeds from the sale of the USS Portfolio to provide immediate liquidity for a significant net debt reduction of approximately $460 - $480 million. In addition to approximately $390 - $410 million of corporate debt, the Company expects to reduce mortgage debt associated with the USS Portfolio by approximately $75 million, resulting in a pro forma consolidated leverage ratio of 4.9x-5.1x.¹ The Company also expects to recast its existing credit facility, which would eliminate all corporate-level debt maturities through 2024.

Following completion of the transaction, Hersha will own 26 hotels in six key destination markets across the U.S. On a pro forma basis, the remaining portfolio’s Total RevPAR based on 2019 actual performance would have increased from $206 to $219, total ADR would have increased from $247 to $262, and EBITDA per Key would have increased from approximately $32,000 to $33,000.

The transaction is expected to close in the third quarter of 2022, subject to customary closing conditions. The transaction is not subject to any financing conditions. Further details on the transaction can be found on the Company’s website at www.hersha.com.

First Quarter 2022 Financial Results and Conference Call

In a separate press release issued yesterday, Hersha announced financial results for the first quarter of 2022. The Company will host a conference call to discuss these results and this transaction at 9:00 AM Eastern Time on Thursday, April 28, 2022.

A live audio webcast of the conference call will be available on the Company’s website at www.hersha.com. The conference call can be accessed by dialing 1-844-200-6205 or 1-929-526-1599 for international participants and entering the passcode 245010 approximately 10 minutes in advance of the call. A replay of the call will be available from 11:00 AM Eastern Time on Thursday, April 28, 2022 through 11:59 PM Eastern Time on Saturday, May 28, 2022. The replay can be accessed by dialing 1-866 813-9403 or +44-204-525-0658 for international participants. The passcode for the replay is 607135. A replay of the webcast will be available on the Company’s website for a limited time.

About Hersha Hospitality Trust

Hersha Hospitality Trust (HT) is a self-advised real estate investment trust in the hospitality sector, which owns and operates high-quality hotels in urban gateway markets and regional resort destinations. The Company's 36 hotels totaling 5,802 rooms are located in New York, Washington, DC, Boston, Philadelphia, South Florida and select markets on the West Coast. The Company's common shares are traded on The New York Stock Exchange under the ticker “HT.” For more information on the Company, and the Company’s hotel portfolio, please visit the Company's website at www.hersha.com

Forward Looking Statement

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those reflected in the forward-looking statement. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “believe,” “expect,” “continue,” “realize,” “intend,” and words of similar import. Because these forward-looking statements relate to future events, the Company’s plans, strategies, prospects and future financial performance, and involve known and unknown risks that are difficult to predict and may be outside the Company’s control, they are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement. Therefore, you should not rely on any of these forward-looking statements. Examples of such forward-looking statements include, but are not limited to, those pertaining to: the Company’s operating model, viability in the New York City market, the use of proceeds for the planned disposition, the Company’s ability to close on the disposition on the terms and timing it expects, if at all, the pro forma effects of the transaction on the Company’s leverage ratio, RevPAR and EBITDA, and the Company’s ability to recast its existing credit facility on the terms and timing it expects, if at all. For a description of these factors, please review the information under the heading “Risk Factors” included in Hersha Hospitality Trust’s filings with the U.S. Securities and Exchange Commission Annual Report on Form 10-K for the year ended December 31, 2021 and subsequent reports filed by the Company with the Securities and Exchange Commission from time to time.

Contact:
Ashish Parikh, Chief Financial Officer
Phone: 215-238-1046

¹ Net Debt: Adjusted EBITDA, excluding Cumulative Redeemable Preferred Shares.

FAQ

What properties is Hersha Hospitality Trust selling for $505 million?

Hersha is selling seven non-core Urban Select Service properties as part of a strategic realignment.

How will the sale impact Hersha's net debt?

The transaction is expected to reduce net debt by $460-$480 million.

When is the expected closing date for the property sale?

The sale is anticipated to close in the third quarter of 2022.

What is the expected increase in Total RevPAR after the sale?

Total RevPAR is projected to increase from $206 to $219.

What is the expected EBITDA per key after the transaction?

EBITDA per key is expected to rise from approximately $32,000 to $33,000.