Very interesting news today! The rationale for the sale seems to make sense, but perhaps someone on the board can analyze the dollar value of the sold hotels. Was the HT price high enough? I will try to do my own analysis over the next few days. This could be a real buying opportunity (or not) in view of the big declines in all traded stocks.
It seems to me that this sale is an act Of desperation to raise cash. Either they have unfunded obligations coming up, want to buy some assets, of are trying to raise cash anticipating a downturn will create some opportunities. As a general rule no one sells to stare wood capital for top dollar.
Also just looking at the terms with interest rates where they are why would a REIT sell assets earning 81/2 percent unleveraged. I would think that the leveraged yield was north of 11percent. So they net about 55m in cash, but cash flow drops 5m+. And the northwest is an improving market.
they are getting ready to purchase more assets in "core" areas..their main goal is to hold onto hotels in major cities, not the suburbs. They made a fast yet under market deal to get cash so they can play more in NYC as the hotel market is heating up again... Their market value is at least 50-100M under market.
Here is a rough first cut. Hersha sold 18 hotels with 1924 rooms. Fairly small hotels averaging 107 rooms each, in generally low population communities (compared to Boston, NY, Wash DC).
The total sale price was $155,000,000, which implies a sale price of $80,561/room. Does anyone know if this is a fair (or typical) value in todays marketplace? It would be interesting to know what Hersha paid for these 18 hotels. Presumably hotel values have dropped since the highs prior to the 2008/2009 crash.
The deal is good for Starwood, not Hersha, if you look at the typical selling price per room, even in mediocre areas, the prices are around $100,000 per room. Of course the values of hotels have dropped so maybe the prices are reasonable. I can easily say they didn't benefit though.