By Barbra Murray, Contributing Editor
With the stroke of a pen—and a whopping $1.1 billion payment—NorthStar Realty Finance Corp. will soon become the owner of a 7,000-room portfolio of upscale extended stay and select service hotels. The REIT has entered into a definitive agreement to buy a collection of 52 lodging properties from Inland American Real Estate Trust.
NorthStar will acquire the assets in a joint venture with Chatham Lodging Trust where NorthStar will have a 90 percent ownership stake, leaving Chatham with a 10 percent minority interest. In terms of financing the acquisition, neither company is sitting on a billion dollars; they expect to secure non-recourse financing for as much as 75 percent of the purchase price. For its part, Inland American anticipates walking away with approximately $480 million of net proceeds, which will be utilized to further the growth of its student housing and retail portfolios.
“This transaction will accomplish important goals for both parties,” Ben Carlos Thypin, director of market analysis with data and analytics firm Real Capital Analytics, told Commercial Property Executive. “Northstar will continue to gain economies of scale by growing their hospitality portfolio by over 50% while Inland will be able to provide its shareholders with a big win and focus on the spin-off of its remaining hospitality assets.”
The Inland portfolio purchase agreement marks NorthStar’s second major hotel announcement within the last few months. In June, the company acquired a 47-property hotel portfolio from Cerberus Capital Management L.P. in a joint venture with Chatham for $958.5 million. With the completion of the Inland deal, NorthStar will boast a hotel portfolio consisting of 20,000 rooms at 159 hotels valued at $3.2 billion.
The Inland transaction is scheduled to close in the fourth quarter of this year.