BOSTON—Chatham Lodging Trust looks to be regaining its appetite for hotel deals following its joint-ventured investment into the Innkeepers portfolio last fall.
During an interview at the Hotel Equity and Lender Perspectives conference earlier this month, Jeffrey H. Fisher, Chatham’s chairman, president and CEO, said the real-estate investment trust might not stand pat for long.
“When we get currency back in our stock, of course we want to grow,” Fisher said. Chatham’s stock closed Monday at $13.07 per share and is up 21% year to date.
For the time being, however, the REIT will focus on the basic “blocking and tackling” involved with managing its portfolio.
Chatham, along with joint-venture partner Cerberus Capital Management LP, hammered out a deal to pay $1.02 billion (including the assumption of $675 million in mortgage debt) for the 64-hotel former Innkeepers portfolio. Chatham owns a 10% interest in the portfolio via its $37-million investment. Thirteen of the properties are being marketed for sale.
Chatham and Cerberus initially walked away from a $1.13-billion deal to acquire the hotels after the capital markets tanked last summer.
In addition to the Innkeepers investment, Chatham owns outright 18 hotels comprising 2,414 rooms. The ultimate goal for Chatham is to double the size of the portfolio “in a reasonable time,” Fisher said.
Chatham could look to acquire some of the Innkeepers hotels, Fisher said.
“Even though the (90-day option to acquire the hotels) technically expired, we believe we have the ability (to buy) and are having ongoing conversations with Cerberus ,” he said. “They would like to transact.”
Fisher, previously the chairman, CEO and president of Innkeepers USA Trust, said part of the appeal of acquiring Innkeepers assets is that he knows the product well.
“There are no surprises in there,” he said. “There are assets we could transact pretty quickly there.”
Stock fluctuations
REIT stock prices fell sharply late last summer when the capital markets tanked. The decline in prices eroded capital bases and hamstrung REITs’ ability to move forward with transactions.
The “overreaction” of stock prices last August is what has most surprised Fisher of late. “It got crushed,” Fisher said of the stock prices.
He added, “Investors should realize we are in a very good part of the cycle.”
As such, Fisher said the Innkeepers portfolio has notched strong performance since the acquisition.
“It’s been really strong performance in the portfolio. Strong RevPAR,” he said.
In its earnings report earlier this month, Chatham said revenue per available room; net operating income; and earnings before interest, taxes, depreciation, and amortization of the Innkeepers portfolio all exceeded internal budget expectations.
Fisher also is optimistic about the future performance of the industry at large. “RevPAR is up more than most folks expected,” he said, adding that he expects average-daily-rate growth to pick up during the second half of 2012.
“This year should be our year to shine,” he said.
