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North America

KSL to Take Hersha Hospitality Private in $1.4 Billion Deal

Alan Woinski and Kim Woinski

August 28th, 2023

Skift Take

  • DJIA gained 213 points, Nasdaq increased by 114 points, and S&P 500 rose 28 points; 10-year treasury yield decreased by 0.03 to 4.21%. Lodging stocks surged on Hersha Hospitality buyout news, particularly REITs: HT up 56%, BHR up 16%, AHT up 10%, others up 6% each, while AINC traded down -9%.
  • Hersha Hospitality Trust and KSL Capital Partners will merge in an all-cash deal worth $1.4 billion, where common shareholders receive $10.00 per share and preferred shareholders receive varying amounts based on their holdings. The merger aims to close in Q4 2023, leading to a rally in hotel REIT stocks.
  • Major US and Chinese hotel groups have strengthened post-pandemic, while Europe lags behind. Marriott, Jin Jiang, and Hilton lead the world hotel ranking, with only one European representative (Accor). US has six companies in top 10, China has three, and Spanish companies see shifts in their rankings.

The DJIA rose 213 points while Nasdaq was up 114, the S&P 500 was up 28 points, and the 10-year treasury yield was down .03 to 4.21%. Lodging stocks jumped on the Hersha Hospitality buyout news, led by the REITs. HT was up 56%, BHR rose 16%, AHT was up 10%, and then CLDT, INN, XHR, and SHCO were up 6% each. On the other side, AINC traded down -9% to a new low.

Hersha Hospitality Trust and KSL Capital Partners, LLC announced a definitive merger agreement under which affiliates of KSL will acquire all of the outstanding common shares of Hersha for $10.00 per share in an all-cash transaction valued at approximately $1.4 billion. Under the merger agreement’s terms, Hersha shareholders will receive $10.00 in cash for each common share they own. Holders of Hersha’s 6.875% Series C Cumulative Redeemable Preferred Shares, 6.50% Series D Cumulative Redeemable Preferred Shares, and 6.50% Series E Cumulative Redeemable Shares will receive $25.00 in cash, plus any accrued and unpaid dividends to which they are entitled, for each preferred share they own. The transaction is expected to close in the fourth quarter of 2023. The price, 60% above Friday’s close when you include the one additional dividend that will be granted, sent a signal to Wall Street, judging by the rally in the hotel REIT group today. Will this cause a re-rating of the valuations of the Lodging REITs, analysts going from more bearish to more bullish, or is this a sign that the next phase of M&A in the space will be on the REIT side? The initial commentary from the sell-side analysts was positive, with many pointing out how much lower HT and the others have been trading to their NAV.

The hotel giants of the U.S. and China have emerged stronger after the pandemic to the detriment of Europe. The latest edition of the world hotel ranking prepared annually by Hotels Magazine shows that the three largest hotel groups in the world (Marriott, Jin Jiang, and Hilton) exceed one million rooms. At the same time, Europe continues to have only one representative in the top 10. France’s Accor, with 5,400 hotels and 802,000 rooms, ranked seventh in the latest edition. The ranking places Marriott first with 8,082 hotels and 1.49 million rooms, China’s Jin Jiang is second with 12,359 hotels and 1.26 million rooms, and Hilton with 6,463 hotels and 1.14 million rooms in third place. The U.S. places six companies in the top ten (Marriott, Hilton, IHG, Wyndham, Choice, and Best Western), while China appears with three (Jin Jiang, H World Group, and BTG). In the case of the Spanish companies, Melia, Barcelo, and Riu remain the top three. Melia appears in 23rd place, with 347 hotels and 90,916 rooms; Barcelo falls to 32nd, with 277 hotels and 61,996 rooms, and Riu drops to 35th, with 95 hotels and 49,444 rooms. Iberostar does not appear in the ranking, and Eurostars usually occupies the fourth place it holds, gaining two positions to 65th, with 240 assets and 23,617 rooms. Palladium and the Pinero Group have also disappeared from this year’s ranking. Minor International has also fallen back compared to 2019 and appears in 27th place with 526 hotels and 77,292 rooms. 

Truist reported on investor meetings they held with the executive team of Playa Hotels & Resorts. Conversations mainly centered around management’s confidence that Caribbean leisure demand is not a bubble about to pop and, secondly, opportunistically buying shares given the inexpensive valuation and $100 million of annual free cash flow. Truist said management was adamant they do not believe the party is over. They expect a more normalization of travel patterns and growth rates following a year-long rebound in the Caribbean.

Two adjoining hotels and a restaurant in the $260 million Red Cedar development in Lansing, Michigan, will be finished by August 31. The 156-room AC by Marriott, the adjacent 139-room Hyatt House, and the Italian steakhouse Toscana are among the last unfinished additions to the project. Hyatt House opened on August 17, while the AC by Marriott and Toscana are expected to open on August 31. Continental Real Estate Companies developed both hotels. Managed by Concord Hospitality Enterprises, the two hotels share amenities, including 5,000 square feet of meeting space, an indoor pool, and a fitness center.

Texas Western Hospitality announced the opening of its newest property, Home2 Suites by Hilton, in Davenport, Florida. The hotel features trademark Home2 Suites amenities such as Spin2 Cycle, Home2 MKT, and the Inspired Table. Additional amenities include a fitness center, outdoor pool, and outdoor patio with a fire pit.

Drury Hotels Co. LLC is exploring the development of a Drury Inn & Suites near St. Johns Town Center in Jacksonville, Florida. Drury Southwest, the development arm of Drury Hotels Co., is the developer of the 187-room hotel that will offer a pool, fitness center, business center, and meeting space. 

The Oliver Hotel, Oxford, formerly named Chancellor’s House Hotel, unveiled interior upgrades, three new food and beverage concepts, and an enhanced level of service for its guests. Managed by Oliver Hospitality, the historic hotel in Oxford, Mississippi, expanded from 37 to 40 guest rooms, all of which were upgraded including all bathrooms.

Hotel Downstreet, located in the heart of downtown North Adams, Massachusetts, has been transformed by Main Street Hospitality. The 90-room hotel offers an indoor pool, onsite laundry, and an inviting lobby that provides a meeting space for guests.

Hotelier Alex Ohebshalom and Flaneur Hospitality announced the September opening of The Fifth Avenue Hotel in New York. The new property will feature 153 guestrooms and suites and a café.

Practice Hospitality announced the opening of the Americana Motor Hotel on Route 66 in Flagstaff, Arizona. The renovated hotel offers 89 guestrooms, fire pits, hammocks, and games. The heated pool is expected to open next month and will be open year-round. Still in the final stages of construction is the hotel’s walk-up restaurant concept, Far Out Food. 

Sales have started for the luxury condo project under development at the Adelphi Hotel in downtown Saratoga Springs, New York. The Residences at the Adelphi are part of a $100 million-plus expansion and renovation of the Adelphi Hotel into a 200,000-square-foot resort. Developers Mike Dubb and Larry Roth are behind the project when two years ago, the owners got together to map out a strategy for expanding the Adelphi by tying it into the former Rip Van Dam hotel next door. Construction to expand the hotel from 32 to 65 rooms will be finished before the busy Saratoga track season starts. Construction is underway to build the 79 condo units, which are housed in a new six-story building connected to the historic hotels. The Adelphia will offer residents access to a spa, concierge services, housekeeping, a ballroom, room service or catering from the onsite restaurants, a gym, a business center, common rooms, and parking. Construction of the condos is expected to be completed by next spring, with the last units finished by this time next year. 

Europe Highlights

The opening of the first W Hotels property in Scotland by Marriott is scheduled for November 2023. W Edinburgh will offer 244 rooms, a rooftop restaurant, a cocktail bar, a W Lounge, a gym, and a spa. This will be the second W Hotels property in the UK. 

The Heritage Park Hotel, in Pontypridd Wales, was acquired by the Zaman family, owners of Brilliant Hotels, for an undisclosed sum. The 43-room hotel, currently under refurbishment, has an adjoining bar and restaurant. Colliers handled the sale.

Alan Woinski and Kim Woinski

August 28th, 2023

Companies: AC Hotels by Marriott, Accor, Ashford Hospitality Trust, Barcelo Hotel Group, Best Western Hotels & Resorts, Braemar Hotels & Resorts Inc., Choice Hotels International, Colliers, Drury Development Corporation, Hersha Hospitality Trust, Hilton Hotels & Resorts, Home2 Suites by Hilton, Host Hotels & Resorts, Inc., Hyatt Hotels Corporation, Hyatt House, IHG Hotels & Resorts, KSL Capital Partners, Marriott International, Melia Hotels International, Minor Hotels, Palladium Hotel Group, Playa Hotels & Resorts, Practice Hospitality, RIU Hotels & Resorts, Soho House and Co Inc., W Hotels, Wyndham Hotels & Resorts, Xenia Hotels & Resorts

Locations: Edmonton, Florida, Massachusetts, Michigan, Mississippi, New York, Wales

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