BOSTON–Hersha Hospitality Trust, owner of upscale hotels in urban gateway markets, announced the Company has acquired the fee simple 136-room Envoy Hotel in Boston for $112.5 million.
“We are very pleased to acquire the award-winning, 4-Diamond Envoy Hotel in Boston’s Seaport District. The Envoy’s premiere waterfront location at the nexus of Boston’s Financial and Seaport districts leverages corporate demand from over 48 million square feet of office space, as well as 7-day-per-week leisure demand given the hotel’s proximity to Boston’s various tourist attractions and entertainment venues,” said Jay H. Shah, Hersha’s Chief Executive Officer.
He said world-class companies such as GE, which ranks 8th on the Fortune 500, and Vertex Pharmaceuticals have re-located their corporate headquarters to the city’s burgeoning Innovation District, now considered Boston’s most vibrant and fastest growing submarket. In addition, the development of popular restaurants, retail and residential have created a 24/7 atmosphere.
“The Envoy will gain market share as the hotel continues to ramp following its successful debut in June 2015. In addition, we will implement a more aggressive revenue management approach and plan to re-evaluate guestroom touchpoints and service delivery, along with the hotel’s food and beverage offerings, to align the overall guest experience with the discerning business and leisure guests in this fast growing submarket,” said Shah.
The Envoy’s location straddles downtown Boston and the Seaport. The hotel is proximate to significant and diverse corporate demand in Boston’s Financial District and the flourishing Innovation District, the 516,000 square foot Boston Convention & Exhibition Center, and the U.S. Federal Courthouse, and within walking distance to Boston Common, Faneuil Hall, the North End, South Station and only 3 miles from Logan International Airport.
The Envoy, recognized by USA Today as the ‘Best New Hotel in America’, and named the ‘Best New Hotel in Boston’ by Forbes, features 136 rooms, all with floor-to-ceiling windows that showcase views of Boston Harbor, the Financial District and the North End. The Envoy is also home to the popular 6,000 square foot Lookout rooftop bar, and the 3,900 square foot Outlook restaurant and bar. The fee simple asset, acquired unencumbered of debt or management, is affiliated with Marriott’s Autograph Collection, leveraging Marriott’s powerful distribution capabilities.
The acquisition was funded with 1031 exchange proceeds from the Company’s sale of seven limited service assets in Manhattan to the Company’s joint venture with an affiliate of Cindat Capital Management Limited (“Cindat”) at a trailing full-year 5.4% economic capitalization rate. The Cindat transaction generated $177 million in taxable gains for the Company. Through a series of reverse 1031 acquisitions that included the Ritz-Carlton Georgetown, the Sanctuary Resort and the Hilton Garden Inn M Street, as well as the acquisition of the Envoy, approximately $16 million of deferred taxable gains remain from the Cindat sale.