A joint venture between Chatham Lodging Trust and affiliates of Cerberus Capital Management has refinanced the debt associated with the Innkeepers USA Trust hotel portfolio
The new loan is with JPMorgan Chase Bank NA with a balance of $950 million. It is nonrecourse, has a two-year term with three one-year extension options and a floating interest rate indexed to the one month Libor plus 480 basis points.
This replaces previous loans with an average interest rate of 6.74%.
In connection with the new loan, the joint venture prefunded $52 million of capital expenditures related to future renovations and $5 million of other lender required reserves.
“When the Innkeepers acquisition closed in late 2011, the joint venture assumed a $675 million, fixed rate, long-term loan, and we negotiated a key provision that allowed us to repay the loan anytime without prepayment penalty or defeasance,” said Dennis Craven, Chatham’s chief financial officer. “Since closing the Innkeepers acquisition, the value of the joint venture portfolio has risen significantly, and we were able to opportunistically refinance all of the joint venture’s $786 million of debt, reducing the joint venture’s interest costs by approximately $5.5 million per year based on current Libor rates, extending the maturity of the Innkeepers portfolio debt to 2018 and prefunding a significant amount of capital expenditures.”
The joint venture has sold 13 noncore hotels in this portfolio, with the last sale taking place last week. The proceeds from all the sales were approximately $75 million.
At the time of the bankruptcy sale, there were 64 properties in the portfolio, with 45 of those securing the original loan.
Chatham’s initial investment in the joint venture was $37 million. It has recovered $33.2 million of that so far.
