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Hersha leverages joint-venture money to buy Boston hotel

Hersha Hospitality Trust didn’t waste much time before using the proceeds of a recent joint-venture deal to buy another hotel.

The hotel real estate investment trust, which has corporate offices in Harrisburg and Philadelphia, has bought the 136-room Envoy Hotel in Boston for $112.5 million.

The money comes from a a joint-venture deal Hersha closed in May. Under the deal, Hersha sold a 70 percent interest in seven of its Manhattan hotels to Cindat Capital Management Ltd., a Chinese-based global real estate investment firm

Cindat paid $571.4 million.

The deal ultimately generated $177 million in taxable gains for Hersha.

Because the company used a 1031 tax-deferred exchange — in which it turned around and bought hotels in Washington, D.C, and California — it owed less in taxes than it otherwise would. Hersha bought the 86-room Ritz-Carlton Georgetown in D.C.; the 238-room Hilton Garden Inn M Street; and the 60-room Sanctuary Beach Resort in Monterey, Calif.

A 1031 exchange is a tool used by commercial real estate investors to replace properties with an investment of equal or greater value to avoid paying capital gains taxes.

The Envoy purchase was part of the 1031 exchange.

Hersha, which focuses on upscale properties, recently sold the 129-room Hyatt Place in King of Prussia. The company also has entered into an agreement to sell two Residence Inn properties in suburban Boston.

Hersha, which trades its shares on the New York Stock Exchange under the ticker symbol HT, owns 56 hotels that have about 8,900 rooms in all. In its second quarter earnings report, released today, the company said it does expect any additional acquisitions or dispositions this year.

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