PHILADELPHIA—Hersha Hospitality Trust, owner of upscale hotels in urban gateway markets, announced the company has closed on the joint venture for seven of the company’s premium limited service hotels in Manhattan with Cindat Capital Management Limited, a China-based investment management platform with offices in Beijing, Shanghai and New York City, for a total purchase price, including closing and capital improvement costs, of $571.4 million, or $526,000 per key.
Cindat, backed by investors including China Cinda Asset Management Co. and Taikang Life Insurance and its affiliate, is the senior preferred joint venture partner holding a 70.0 percent ownership stake, while Hersha retains a 30.0 percent equity interest, as well as a $37 million preferred equity interest in the venture at a 9.0 percent fixed coupon.
“We are pleased to close our previously announced joint venture with Cindat, and look forward to capitalizing on future opportunities within this venture with a sophisticated and strategic long-term partner. These seven high-quality, cash-flowing hotels, located in dynamic and diverse submarkets in Manhattan, will continue to benefit from strong demand for core real estate and lodging assets given the city’s preeminence as a global financial, cultural, and technological hub. Cindat’s investment expertise in global gateway market real estate, combined with Hersha’s fifteen-year track record of owning and operating hotels in the most valuable and liquid real estate market in the world, form a strong foundation for a long-term partnership,” stated Neil H. Shah, Hersha’s president and chief operating officer.
Greg Peng, Cindat’s chief executive officer, stated, “Demand for high-quality U.S. real estate assets is great from Chinese investors. Limited service hotels in Manhattan, in our opinion, offer steady cash flow with relatively low volatility, and hence, good risk-adjusted investment returns. Hersha is one of the best investors and managers in the hotel industry, and Cindat is very pleased to form this partnership with Hersha to grow its hotel investment portfolio in the U.S.”
Natixis Real Estate Capital led a syndicate of international and domestic financial institutions and provided $285 million of senior acquisition financing to the joint venture, while an affiliate of Oaktree Real Estate Finance provided $50 million of mezzanine financing to the venture. Hunton & Williams served as legal counsel to Hersha on the transaction, while Sidley Austin served as legal counsel to Cindat. Both law firms collectively advised the newly formed joint venture. Solid Rock Advisors advised Cindat on the transaction.
The assets comprising the joint venture are: Holiday Inn Express Times Square; Candlewood Suites Times Square; Hampton Inn Times Square; Hampton Inn Chelsea; Hampton Inn Herald Square; Holiday Inn Wall Street; and Holiday Inn Express Water Street.