Hersha Hospitality Trust announced this month that it had signed a definitive agreement for the purchase of Capitol Hill Suites, an all-suite boutique hotel in Washington, DC, for $47.5 million, or $312 thousand per key excluding closing costs. Hersha assumed a $32.5 million loan with a 5.81% interest rate and cash on hand according to a CoStar report. CoStar also disclosed that Starwood Hotels and Resorts Worldwide had previously sold the Capitol Hill Suites to AEW Capital Management for $38.14 million or $250, 935 per door in January 2007. Hersha's purchase price represents a forward capitalization rate of approximately 7.3% on the hotel’s projected 2011 net operating income, stabilizing at approximately 10%.
Jay H. Shah, Chief Executive Officer of Hersha, said in a statement regarding the decision to purchase, "As a large beneficiary of increased investments in federal and private sector capital outlays, the D.C. region has strong economic and employment fundamentals. The strong real estate fundamentals are equally attractive, with high barriers to entry and negligible planned construction forecasted for several years, combined with growing demand."
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