Starwood buys 49.9% stake in Hersha Hospitality

The Greenwich, Connecticut-based firm said it will “aggressively” target US hospitality after acquiring a minority stake in private hotel investment firm Hersha Hospitality Management.

Starwood Capital Group has acquired a 49.9 percent stake in private hotel investment firm Hersha Hospitality Management and is looking to “aggressively” target the US hospitality sector.

The firm, led by chief executive officer Barry Sternlicht, acquired the stake for an undisclosed sum. Hersha Hospitality Management currently operates more than 70 hotels across in Boston, Connecticut, New York, New Jersey, Philadelphia and Washington DC.

Starwood said in a statement it would “contribute capital, deal flow and enterprise-building resources” to help grow Hersha. The Starwood-Hersha venture will also target distressed select service hotels across the US, as well as full-service hotels in “select suburban” markets, the statement added.

Hersha president and chief executive officer Naveen Kakarla said Starwood had “unparalleled access to capital” with the deal helping build a “multi-brand platform that is both scalable and process-oriented”. Hersha’s headquarters will remain in Philadelphia while its operations and administrative headquarters will remain in Harrisburg, Pennsylvania.

Real estate investors are increasingly eyeing the hospitality sector as occupancy levels and revenues start to rise across much of the US. In 2010 alone, revenue per available room (revPAR) is expected to grow by 1.7 percent, according to research firm PKF Hospitality, compared to actual declines of 8.8 percent in 2009.

This week, PERE has reported on numerous ventures targeting the hospitality sector, including G2 Real Estate Partners, which has hired former Lehman Brothers global commercial real estate managing director Alan Kanders to build its hospitality business; and Alvarez & Marsal Capital Real Estate, which will provide advisory and restructuring work, as well as make investments, in distressed situations, notably in the hotel sector.

Starwood is well-known for its hotel acquisitions, including the 2005, $3.2 billion purchase of French conglomerate Groupe Taittinger and Société du Louvre, which owns the Baccarat brand and which Sternlicht is hoping to expand into the Baccarat Hotels and Resorts chain.

The firm is also trying to break into the Brazilian hospitality sector, with plans to open an office in the country, possibly in Sao Paulo, by the summer. Around three to five people are expected to work there, sources said, adding that the firm would likely invest capital from its recently closed vehicle, the $965 million Starwood Capital Hospitality Fund II.