Chatham Adds Five Hotels to Portfolio in Part of $1.3B Deal

July 19, 2011
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user krossbow

Chatham Lodging Trust has completed the first step of its multi-faceted expansion plan with the acquisition of five Innkeepers hotels totaling 764 rooms for an aggregate $195 million. The purchase marks one segment of an approximately $1.3 billion deal allowing Chatham to buy the five assets in their entirety, as well as a 9.2 percent interest in a 64-hotel, $1.1 billion portfolio purchase with joint venture partner Cerberus Capital Management L.P., from Innkeepers USA Trust, as part of the Innkeepers’ Bankruptcy Court-approved plan of reorganization.

Two of the five Innkeepers hotels Chatham just bought are located in California: the 200-room Residence Inn Anaheim in Garden Grove, and the 192-room Residence Inn San Diego in Mission Valley. The acquisition also allows Chatham to make its entrance into the lively metropolitan Washington, D.C., market with the 121-room Residence Inn Tysons Corner in Tysons Corner, Va., and the 105-room Doubletree Guest Suites Washington, D.C. And with Homewood Suites on the Riverwalk in San Antonio, Tex., the lodging REIT expands its presence in the Lone Star State with an additional 146 guestrooms. Hotel management company Island Hospitality Management, 90 percent of which is owned by Chatham president and CEO Jeffrey H. Fisher, will continue to manage the five properties.

“The hotels are in excellent physical condition, with four of the five hotels having been recently renovated, providing a solid foundation for future growth,” Fisher said. “Based on our previous operating experience with these properties, we know these assets well and expect great results from them.” Chatham parted with just $60.8 million in cash in the transaction, taking money from its stash of cash on hand and borrowings under its senior secured revolving credit facility. The REIT funded the remainder of its obligation through the assumption of five mortgage loans totaling $134.2 million.

The largest part of Chatham’s two-step growth spurt, the acquisition of the 64 Innkeepers hotels in partnership with Cerberus, is on schedule to close later this month.