Hersha Takes New Sheraton JFK Airport for $34M

Expanding its New York City area holdings, Hersha Hospitality Trust has acquired the new Sheraton JFK Airport Hotel, an upper upscale 150-room hotel located a half-mile from the busy international airport in Queens, N.Y., for $33.9 million. The full-service hotel, located at 134th Street and South Conduit Avenue, has about 2,300 square feet of meeting space. It will be managed by Hersha Hospitality Management L.P. The seller was not identified. In connection with the purchase, Hersha assumed a floating rate loan for $23.8 million at LIBOR plus 2 percent. It also issued 1,177,306 Hersha Hospitality Limited Partnership Units to a third-party developer and to Hersha Conduit Associates, L.L.C., a related party entity comprised of members of the company’s management team and trustees, according to a Hersha news release today. “New properties provide us solid growth opportunities, as they mature, and have been one of the catalysts for our industry leading revenue per available room (RevPAR) and growth in funds from operations,” Jay Shah, Hersha CEO, stated in the release. Shah said the Philadelphia-based REIT now owns 15 properties in the New York-New Jersey area, including the NU Hotel being developed in Brooklyn. Hersha had purchased a 93-room independent upscale hotel development project at 75 Smith St. in Brooklyn for $17.24 million from Atlantic Court L.L.C. in January, according to the REIT’s first quarter 2008 financial results issued May 5. The mixed-use project also contains 50 residential units and two ground-level retail units. The boutique hotel is expected to be open by the third quarter. Hersha is increasingly focusing on the smaller, boutique hotels as a new niche. The REIT announced June 11 that it was opening an upscale 24-room boutique hotel called The Independent in Center City, Philadelphia, this week. A company release noted the fully restored property is part of Hersha’s Independent Hotel Collection. Also part of that group is the Duane Street Hotel, a 45-room boutique property in New York City’s Tribeca neighborhood that it also purchased this January for $24.75 million. Shah noted today that New York City properties continue to “have solid RevPAR trends from strong domestic and increased international demand.” In addition to the 15 properties in the New York City metro region, the REIT also owns interests in 60 hotels primarily along the Northeast Corridor from Boston to Washington, D.C. It now has more than 9,500 rooms in those areas as well as at a hotel in Scottsdale, Ariz., and two in the San Francisco Bay area. Hersha focuses on high quality upscale hotels in high barrier to entry markets. The transaction announced today, Shah said, “is a direct result of the success of our development loan program, which affords us the right to earn strong cash returns on our investment in high barrier to entry markets while avoiding many of the risks associated with construction in these central business districts. An added benefit of the program is our right to purchase these difficult to source properties on an off-market basis.”