Hersha Hospitality Trust has entered into a purchase agreement for the 155-room St. Gregory Hotel & Suites in Washington, D.C., for $57 million, or around $367,000 per key, showing the strength and pricing non-branded hotels can command.
"The high quality, well-located St. Gregory characterizes the type of strategic investment that we seek in our core markets. The hotel will be immediately accretive to our portfolio's RevPAR and EBITDA growth and will further benefit from our pricing and positioning strategies. The independent upscale hotel affords operational flexibility to drive strong margin performance. Through Hersha's active and aggressive asset management program, we will shift the hotel's operational and sales strategies and reposition the asset to leverage growing demand in the vibrant DuPont Circle submarket. The acquisition of the St. Gregory also demonstrates our conviction in Washington, D.C. as the market recovers from a period of muted growth. The evolution of private and public sector demand drivers in Washington, DC over the past year provide excellent prospects for meaningful RevPAR growth over the long-term," said Jay Shah, Hersha's CEO.
The St. Gregory is in D.C.'s DuPont Circle neighborhood at 21st and M Street. The hotel operated at an average daily rate of $169.36 and occupancy of 89.5 percent in the trailing 12 months ending April 30, 2015. The nine-story building contains 155 rooms, 101 of which are suites with kitchens. The property features a restaurant and bar, 3,500 square feet of meeting space, exercise facilities and a 50-space underground parking facility. The hotel's rooms were renovated in Fall 2014.
Based on the Company's underwriting assumptions, the Company anticipates the purchase price for the St. Gregory reflects a forward economic capitalization rate and EBITDA multiple of 7.0 percent and 12.9x, respectively.
The acquisition of the St. Gregory will be funded with cash on hand and proceeds from the company's $250 million senior unsecured credit facility. The acquisition includes the assumption of $25.8 million in mortgage debt that matures in September 2021. Hersha anticipates closing by the end of June 2015.