Hersha Hospitality To Be Taken Private In $1.4B Acquisition
Private equity firm KSL Capital Partners is acquiring Hersha Hospitality Trust in a $1.4B all-cash deal, paying 60% over Hersha’s closing share price from Friday, the companies announced Monday.
Hersha Hospitality Trust owns 25 hotels totaling 3,811 rooms throughout the East Coast, South Florida and California. KSL Capital Partners is an investor in the travel and leisure industries. The merger will take the REIT private, paying $10 for each common share.
Hersha's stock rose 57% to $9.83 a share in trading on Monday morning.
“This step will allow us to deliver value for our shareholders while refocusing on growing the business over a longer period of time,” Hersha Executive Chairman Jay H. Shah said in a news release.
Hersha was founded with the purchase of a hotel in Harrisburg, Pennsylvania, in 1984 before going public as a REIT in 1998, according to its website. In a move to strengthen its upscale holdings and pay off corporate debt, Hersha last year sold seven hotels throughout Washington, D.C., Boston, Los Angeles and Philadelphia for a combined $505M.
The merger comes as hotel prices have slipped and the number of hotel transactions has dropped, GlobeSt reported. A Marcus & Millichap report shows the average entry cost during the first half of this year was $103K per key, a 4.1% decrease from the year prior.
Yet hotels remain an attractive investment. The average cap rate in the hospitality sector was 8.7% in June, which is almost 100 basis points higher than any other major commercial property type, GlobeSt reported, citing the Marcus & Millichap report.
KSL was attracted to Hersha’s “impressive, curated portfolio of experiential luxury and lifestyle hotels and resorts in strategic markets,” according to the news release. KSL partner Marty Newburger said KSL’s track record investing in high-quality assets in dynamic metropolitan markets should help position the business for further success.
The transaction is expected to close in the fourth quarter, subject to conditions, including approval by the holders of Hersha’s outstanding common shares, according to the news release.
