The Real Deal New York

REIT raises $110M for two Chang hotels on West 39th Street

January 25, 2010 03:08PM
By Adam Pincus

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Sam Chang is selling the Hampton Inn at 337 West 39th Street and the Candlewood Suites at 339 West 39th Street

Hersha Hospitality Trust, a Pennsylvania real estate investment trust, plans to spend $110 million it raised as part of a public offering last week to buy two Midtown hotels developed by Sam Chang, according to an announcement from the investment company last week.

Hersha will pay $54.3 million for the purchase of the 184-room Hampton Inn at 337 West 39th Street and $55.5 million for the 188-room Candlewood Suites next door at 339 West 39th Street, documents filed with the U.S. Securities and Exchange Commission show.

The purchase price of $110 million for the 372 rooms comes to a cost of $295,698 per room.

The two hotels, as well as a third hotel, a 210-room Holiday Inn Express at 343 West 39th Street, all between Eighth and Ninth avenues, were developed by Chang’s McSam Hotel Group and opened in July 2009, and were expected to be sold together last summer to Hersha.

Chang said in an interview today his company still owned the third hotel at 343 West 39th Street, which remains available for sale.

And he said he will not make money on the sale of the two hotels when they do close.

“Pretty much we probably broke even. Maybe lost a little money,” he said.

In an interview last year, Chang said the three hotels, which were all built together, had been his “most painful” project ever. 

A spokesperson for Hersha said in an e-mail that the REIT plans to close on the purchase of the two hotels at 337 West 39th Street and 339 West 39th Street by the end of the first quarter.

Hersha signed a purchase agreement for the two hotels Nov. 11 with an original closing date of Dec. 31 that was extended to Feb. 1, 2010, but that date can also be extended, the SEC documents say. The $110 million is part of a total of $155 million raised in an offering, the company announced Jan. 21, but the balance would be used to pay down a revolving credit line.

Hersha owns 74 hotels nationwide including 14 in New York City such as the Hampton Inn at 116 West 31st Street and the Nu Hotel at 85 Smith Street in Brooklyn, the company Web site says.

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