KSL Capital acquires in a $1.4bn deal the owner of 25 U.S. luxury hotels

Aug 31, 2023 | News | 0 comments

Private equity firm KSL said on Monday it intends to buy Hersha Hospitality Trust, the owner of 25 U.S. lifestyle and luxury hotels, in an all-cash transaction worth about $1.4bn. The move would take private Hersha at an approximately 60% premium to the real-estate investment trust’s closing stock price on Friday.

The deal is slated to close by year-end after shareholders okay the move. Its value was 14 times Hersha’s estimated year-to-date earnings before interest, taxes, depreciation, and amortization of $99m for 2023, according to S&P Capital IQ.

“Hersha and its team have built an impressive, curated portfolio of experiential luxury and lifestyle hotels and resorts in strategic markets,” said Marty Newburger, partner at KSL.

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About 60% of Hersha’s 3,900 room count is at properties in urban markets that have not recovered as quickly from the pandemic as resort-based hotels. Some of Hersha’s hotels include Hyatt Union Square in New York City, The Rittenhouse Hotel in Philadelphia, The Envoy in Boston Seaport, The Ritz-Carlton Georgetown in Washington, D.C., and The Cadillac Hotel & Beach Club in Miami Beach.

The KSL/Hersha deal underscored the ongoing popularity of lifestyle properties. Developers plan to build as many as 60,000 upper-end lifestyle hotels in the U.S. over the next four years, according to an analysis by The Highland Group of CoStar’s STR data.

The deal also highlighted private equity’s ongoing interest in the hotel sector, especially as some segments of commercial real estate in some urban parts of the U.S. stagger under the weight of rising interest rates and changed post-pandemic demand needs for office space.

KSL has focused on travel and leisure businesses, deploying about $21bn of capital across its equity, credit, and tactical opportunities funds since 2005. It recently took a stake in Soneva Holdings, which owns three hotels in Asia.

Source: SKIFT

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