PHILADELPHIA--(BUSINESS WIRE)--Hersha Hospitality Trust (NYSE: HT), owner of upscale and select service hotels in major metropolitan markets, announced that the Company has entered into a purchase contract to acquire the 263 room Courtyard Miami Beach Oceanfront and an adjacent beachfront land parcel, for $95.0 million, or $361,217 per key. The Courtyard Miami Beach Oceanfront was originally constructed as the art deco Cadillac Hotel, and was reopened in 2004 after a complete restoration. The entire property has been renovated to the latest Courtyard brand standards this year, and remains the only franchised Marriott hotel in the Miami Beach market.
“We are excited to expand our presence into one of the strongest lodging markets in the country with the acquisition of our first hotel in Miami,” stated Jay H. Shah, Chief Executive Officer. “This is a truly unique fee-simple asset, a fully-renovated historic hotel occupying an entire block of oceanfront property. The hotel is ideally situated in the Mid-Beach submarket in a resort-style setting with easy access to the primary commercial district, the Miami Beach Convention Center and the Miami Airport. With minimal new supply, multiple transient demand generators and the continued strength of international travel, we anticipate strong growth for this hotel and this market for the foreseeable future. Furthermore, with the opportunity to develop an additional all-suite oceanfront tower, this acquisition has the potential to become one of the premier hotel destinations in Miami.”
Included in the acquisition is the adjacent land parcel that has received approval from the Historic Preservation Board for the construction of an additional 93 room oceanfront tower, additional meeting space and structured parking. The Company plans to commence construction of this tower in 2012 and anticipates that the construction would be completed in late 2013 with an estimated cost of $200,000 per room. Including estimated construction costs of this tower, the Company’s all-in per key cost for the 356 room hotel would be $319,101. The hotel also features a 7,200 square feet casual dining restaurant, leased to Carrabba’s Italian Grill, and the 138 seat Tiki Beach Bar. The hotel also generates income from parking, a Starbucks, 2,700 square feet of meeting facilities, onsite spa services and beach rentals.
The Miami hotel market has displayed favorable dynamics, with trailing twelve month growth of 12.7% in Revenue per Available Room (“RevPAR”). Smith Travel Research projects that Miami will be one of the leading hotel markets in 2012, and the Miami Beach Convention Center is anticipating its strongest year since opening. During the 2002 through 2007 lodging cycle, the greater Miami market registered a compounded annual growth rate of 16% in RevPAR, ranking Miami as the highest-growth top-25 market in the United States during this time period. Additionally, the market average RevPAR is still approximately 12% below its 2008 peak. Upon acquisition, the hotel will be managed by Hersha Hospitality Management, LP.
The purchase price represents a forward capitalization rate of more than 7.6% on the hotel’s projected 2012 net operating income, with the asset stabilizing at over 10%. The acquisition is anticipated to be funded by assuming $30.7 million of existing debt, cash on hand and borrowings drawn on the Company’s line of credit. The Company anticipates closing on the acquisition in the fourth quarter of 2011 and expects to refinance the first mortgage loan in June 2012.
The Company’s acquisition of the hotel is subject to a variety of conditions, including the receipt of lender and franchisor consents and the satisfaction of other customary closing conditions. As a result, there can be no assurance that the Company will complete the acquisition of the Courtyard Miami Beach Oceanfront described above on the schedule or on the terms described above or at all. In addition, no assurance can be given that construction of the oceanfront tower will be completed on time or within the Company’s current estimated budget.
The Company has posted a presentation of supplemental information about its Courtyard Miami acquisition located at www.hersha.com on the investor relations section under “presentations.”
About Hersha Hospitality Trust
Hersha Hospitality Trust is a self-advised real estate investment trust, which owns 79 hotels in major markets including New York, Washington, Boston, Philadelphia, and Los Angeles. HT focuses on upscale and mid-priced hotels in urban gateway markets.
Forward-Looking Statements
Certain matters within this press release are discussed using forward-looking language as specified in 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 projected in the forward-looking statement. These forward-looking statements include, among others, statements related to the Company’s plan to acquire the Courtyard Miami Beach Oceanfront, the Company’s plan to construct an oceanfront tower on the adjacent land parcel being acquired by the Company, anticipated growth in the Miami Beach hotel market, the Company’s current estimate of construction costs and the Company’s current forecast of 2012 NOI for the Courtyard Miami Beach Oceanfront. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-looking statements, please review the information under the heading “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 and other documents filed by the Company with the Securities and Exchange Commission.