KSL Capital Partners and Hersha Hospitality Trust have closed on a $1.4 billion deal to take the hotel real estate investment trust private.
Filings with the U.S. Securities and Exchange Commission records show the deal closed Tuesday morning. The Form 25 Hersha filed states the company will be removed from the New York Stock Exchange in a few weeks on Dec. 11.
Hersha's shareholders overwhelmingly voted in favor of KSL Capital acquiring Hersha at a Nov. 8 special meeting. The two companies announced the deal in late August.
The terms of the all-cash deal called for KSL Capital to acquire all outstanding common shares of Hersha for $10 per share. The price represents a premium of about 60% over Hersha's closing share price on Aug. 25.
In a note to investors about discontinuing coverage of Hersha, Michael Bellisario, senior hotel research analyst and director at Baird, wrote that at $10 per share, excluding transactions costs, the deal represents a price of $365,000 per key in Hersha's consolidated portfolio. The calculation includes the estimated equity value for Hersha's two joint-venture properties. Pricing at the hotel level represented a 11.5-times hotel earnings before interest, taxes, depreciation and amortization and a 7.3% net operating income cap rate on 2024 estimated metrics.
From KSL Capital's perspective and including the transaction cost, the purchase price is $383,000 per key, including the pro rate allocation to the two joint-venture properties, Bellisario wrote. Pricing at the hotel level represents a 12.2-times hotel EBITDA and a 6.8% NOI cap rate on estimated 2024 metrics.
As of Hersha’s second-quarter earnings report — its last as a publicly traded company — the REIT had a portfolio of 25 hotels with 3,811 rooms. The portfolio's 23 comparable hotels generated an average daily rate of $303.34 and revenue per available room of $233.92. Hersha reported net income of $1.7 million, down from $2.4 million in the second quarter of 2022. The REIT focused on luxury and lifestyle hotels in urban gateway and regional resort markets.
The Harrisburg, Pennsylvania-based REIT started as the Hersha Group in 1984, founded by Hasu Shah, now Hersha's chairman emeritus, according to the company's website. In 1998, the company became a publicly traded REIT, named after Hasu's wife, Hersha. Their sons, Jay and Neil Shah, have served in several leadership roles at the REIT over the years, with Jay currently serving as the executive chairman and Neil as president and CEO.
KSL Capital is a Denver-based private equity firm that focuses on travel and leisure segments, including hospitality. It has acquired several hospitality companies over the years. Prior to the Hersha deal, it acquired a majority of Italy's Sereno Hotels, bought The Pig Hotels in the United Kingdom and also increased its investment in Under Canvas. In 2016, the company acquired Outrigger Resorts & Hotels.
KSL Capital formed Alterra Mountain Company in 2018 in a joint venture with Henry Crown and Co. as a platform for the ski resorts they each own. The company also launched Mission Hill — a select-service hotel acquisition platform — in 2021.
It is still unclear how the closing will affect Hersha Hospitality Management, the third-party management company also founded by the Shahs. HHM operated a majority of the REIT's portfolio.