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Chatham, Northstar Realty Finance JV to Acquire Innkeepers Portfolio

NEW YORK—Lodging REITs Chatham Lodging Trust and Northstar Realty Finance have teamed in a joint venture to acquire 47 of the 51 hotels contained in the Innkeepers portfolio that was placed on the market in January by Chatham and Cerberus Capital Management LP. Chatham will acquire the remaining four hotels outright.

“The Cerberus/Chatham joint venture has been a great partnership and has proven to be a highly successful investment, turning our initial $37 million investment into distributions of approximately $114 million and profits of approximately $77 million or $2.90 per share in less than three years,” stated Dennis Craven, Chatham’s chief financial officer.  Chatham and Cerberus bought the 6,848-room portfolio from bankrupt Innkeepers USA Trust in 2011.

Northstar will acquire Cerberus’ 89.7% interest in the joint venture, and Chatham will retain its 10.3% ownership stake. The joint venture will acquire 47 of the 51 hotels for a gross purchase price of $958.5 million, a net cash purchase price of $933.9 million or $153,000 per room.

“We look forward to a successful partnership with Northstar in this joint venture,” stated Chatham’s CEO Jeff Fisher. “We share similar outlooks regarding the health of the hotel industry and performance expectations for the portfolio. Our long-term interests are aligned with a solid capital structure that we believe will provide strong, risk-adjusted returns for our shareholders.”  

As part of the transaction, Chatham will acquire four Silicon Valley Residence Inn hotels from the Cerberus/Chatham portfolio, comprising 751 rooms, for a net cash purchase price of $272.6 million or approximately $363,000 per room.

Chatham plans to partially redevelop and expand all four Silicon Valley Residence Inn hotels, increasing the room count by 36% to a total of 1,023 rooms. The 272-room expansion will include a new lobby and public spaces in each location with an estimated cost of approximately $59 million or $217,000 per room. On a pro-forma basis, the all-in cash cost for the four hotels would be approximately $331.9 million or $324,000 per room. 

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