Acquisitions Help Chatham Lodging Double Its Overall Room Count

Chatham Lodging Trust, a hotel real estate investment trust focused on investing in upscale extended-stay hotels, was the successful bidder in two separate bankruptcy court auctions resulting in aggregate investments of over $230 million.

The first winning bid for Chatham was a joint venture with the private equity firm Cerberus Capital Management relating to 64 of Innkeepers USA Trust hotels. The two companies acquired the hotels for a total purchase price of approximately $1.1 billion, including the assumption of debt through a plan of reorganization.

“We are excited to acquire these premium-branded select-service hotels early in the recovery of the lodging industry,” said Jeff Fisher, CEO and president of Chatham. “With a new capital structure in place, a committed partner in Cerberus and strong franchisor affiliation, our joint venture is well positioned to create value for our shareholders and Cerberus.”

In a separate transaction, Chatham has acquired five hotels that contain 764 rooms for $195 million. The hotels, owned by affiliates of Innkeepers, include Residence Inn’s in Garden Grove and Mission Valley, Calif., and Tysons Corner, Va., the Doubletree Guest Suites in Washington and Homewood Suites in San Antonio.

This acquisition will be funded through the assumption of five individual loans amounting to $134.2 million at a weighted average interest rate of 6% and a maturity date in 2016. The remaining money will come from borrowings under Chatham’s secured revolving credit facility.

“These top-tier branded hotels are great hotels, in prime markets and in excellent physical condition having been recently renovated, providing a solid foundation for future growth,” Fisher said. “This is an incredible opportunity for us and gives us a strong presence in some of the best hotel markets in the country.”

By acquiring the five premium hotels as well as the joint venture, Chatham’s portfolio now comprises 19 wholly owned hotels with 2,588 rooms/suites in 10 states, a 57% increase in room count over its existing portfolio.

All but one of the 69 hotels owned by the joint venture or Chatham is going to be managed by Island Hospitality Management, a hotel management company 90% owned by Fisher.