PHILADELPHIA—Hersha Hospitality Trust has acquired the 111-room Rittenhouse Hotel in Philadelphia for $23.9 million or $215,315 per key in an all-equity deal.
The company purchased the hotel, which includes 152 residential condominiums, from Rittenhouse Development Corporation, which developed, owned and managed the property. Hersha Hospitality Management will manage the hotel.
The purchase also included 44,000 square feet of retail and office space and a fee interest in an adjacent parking garage. The total acquisition cost was $42 million.
Hersha, a Philadelphia-based REIT, used proceeds from the sale of non-core assets, which the company completed during February, to fund the purchase, said Ashish Parikh, CFO of the company.
The Rittenhouse acquisition price of $215,315 per key is 58% higher than comparable recent transactions in the Philadelphia hotel market from October 2009 through October 2012, when the Hotel Monaco ($325,000 per key) is scheduled to open, according to a Hersha supplement on the transaction.
The Rittenhouse, an AAA 5-diamond property, achieved revenue per available room of $208 during 2011, yielding a RevPAR index of 182% compared to the Philadelphia Center City Tract, according to the supplement.
Hersha expects the hotel to generate RevPAR of $225 during 2012, consisting of 75% occupancy and $300 average daily rate.
In 2012, the hotel’s retail, office and parking leases will provide stable income amounting to $1.6 million. Using an 8% cap rate, the value of the retail, office and parking leases is approximately $20.3 million.
Hersha will invest approximately $20,000 per key or $2.2 million in the hotel upgrading guestrooms and the public space.
The company identified an opportunity to increase the Rittenhouse’s room count by 15 keys to 126 total keys using space that is empty or better served as hotel rooms, according to the supplement.
Hersha intends to be a long-term holder of the asset, Parikh said.
“Because we’re a public company and not a private equity fund, we don’t have any type of a fund life,” he said. “For us, this is a perpetual hold until we feel there’s better uses for our capital or for some reason there’s an exit point.”
Contact:
Hersha Hospitality Trust
Ashish Parikh, CFO
Phone: 215-238-1046