Hersha Hospitality Gains More Than 12% Following $571 Million Asset Sale

Shares of

surged higher by more than 12 percent on Thursday after the company

it has entered into an agreement with Cindat Capital Management. As part of the agreement, Hersha Hospitality will form a joint venture with Cindat Capital for 7 of its limited service hotels in Manhattan totaling nearly 1,100 rooms for a total purchase price of $571.4 million, or $526,000 per key. The joint venture is structured in a way that Cindat Capital will be the preferred joint venture partner with a 70 percent ownership stake while Hersha retains a 30 percent equity interest. Hersha noted that due to a large tax gain on the sale of its 7 hotels, the company intends to acquire assets as part of a like-kind exchange. The remaining proceeds will be used to repurchase its common stock, pay down debt and for general corporate purposes. Hersha is pleased to enter into a joint-venture with Cindat for 7 limited service hotels in Manhattan. The city's preeminence as a financial, cultural, and technological hub, combined with the security and scarcity of its real estate, provides significant yield for a strategic, long-term partner such as Cindat," stated Neil H. Shah, Hersha's President and Chief Operating Officer. "On a pro forma basis, the sale reduces Hersha's EBITDA exposure in New York City from approximately 43.0% in 2015 to 25.0% of consolidated EBITDA in 2016. The Company intends to utilize a portion of the sale proceeds to make hotel investments in Washington, DC and California, continue its share repurchase program and repay debt."