A publicly traded hotel company founded in Harrisburg is going private in a deal valued at roughly $1.4 billion.
- Hersha Hospitality Trust, now based in Philadelphia, has agreed to be acquired by KSL Capital Partners, a Denver-based private equity firm that specializes in travel and leisure businesses.
- Under the deal, KSL is paying $10 per share for Hersha, a substantial premium over the hotel company’s closing price of $6.28 on Aug. 25.
- Hersha Hospitality is expected to retain its current leadership team, which includes the sons of company founder Hasu Shah, according to letters to employees and managers that are included in Hersha’s merger-related disclosures.
- Neil Shah is CEO, while his brother Jay Shah is executive chairman.
- “KSL has a long history of investing in fantastic businesses in hospitality and leisure, including ski resorts, golf courses, private clubs and all-inclusive resorts,” Neil Shah wrote in one of the letters. “With KSL’s extensive track record investing in high-quality assets in dynamic metropolitan markets across North America and around the world, they are uniquely suited to position the business for further success over the long term.”
The seller: Hasu Shah launched what would become Hersha Hospitality Trust with the purchase of the Riverfront Hotel in Harrisburg’s Shipoke neighborhood in 1984.
- The company is named for his wife, Hersha, who ran the hotel while he worked for the state during the day.
- They expanded their hotel business, and Hersha Hospitality eventually went public in 1998 as a real estate investment trust.
- As of the end of last year, the company owned 22 hotels, and had an interest in three others through joint ventures.
- Located in California, Connecticut, D.C., Florida, Maryland, Massachusetts, New York and Pennsylvania, the 25 hotels operate under the Marriott, Hilton, Hyatt and InterContinental brands. Some are independent.
- Like everyone in the hotel business, Hersha took a hit during the Covid-19 pandemic.
- The company lost $3.5 million in the first half of this year, down from a loss of $7 million for the same period in 2022.
- Revenue was nearly $173 million for the period, down from $205.2 million last year, largely due to the sale of 10 hotels in the second half of 2022 to pay down debt.
- Hasu Shah retired last year as company chairman.
The buyer: Based in Denver, KSL has additional offices in New York, London and Stamford, Connecticut.
- The firm has raised more than $21 billion since 2005, money that has been plowed into luxury destinations and travel brands around the world.
- Its portfolio includesBaillie Lodges, a small chain of luxury resorts in Australia; Cameron House, a hotel in a former Scottish castle on Loch Lomond; and Heritage Golf Group, a string of golf and country clubs around the U.S.
- KSL also owns Camelback Resort in the Poconos.
- “Hersha and its team have built an impressive, curated portfolio of experiential luxury and lifestyle hotels and resorts in strategic markets,” KSL partner Marty Newburger said in a statement. “With KSL’s extensive track record investing in high-quality assets in dynamic metropolitan markets across North America and around the world, we are uniquely suited to position the business for further success over the long term.”
- A KSL spokesperson declined to comment further.
What’s next: The deal is expected to close in the fourth quarter of 2023, subject to shareholder approval.
- Hersha’s board has been advised by Goldman Sachs on the financial side. Legal advice has come from Latham and Watkins and Venable.
- Wells Fargo and Citigroup are the financial advisers for KSL. The firm’s legal advisers are Simpson Thacher & Bartlett and Miles and Stockbridge.
