PALM BEACH, FLORIDA A joint venture between Cerberus Capital Management LP and Chatham Lodging Trust has won a bankruptcy auction for 64 hotels owned by Innkeepers USA Trust.
The winning bid, which topped bids from Lehman Brothers Holdings Inc. and Five Mile Capital Partners, is for US$1.125 billion, including assumed debt. Chatham will fund its investment in the joint venture with available cash and borrowings under its secured revolving credit facility.
“We are excited to acquire these premium-branded, select-service hotels early in the recovery of the lodging industry,” says Chatham CEO Jeffrey Fisher. “With a new capital structure in place, a committed partner in Cerberus and strong franchisor affiliation, our joint venture is well positioned to create value for our shareholders and Cerberus.”
In a separate transaction yesterday, Chatham also acquired five more properties from Innkeepers for an additional US$195 million. That deal—for three Residence Inns, a DoubleTree and a Homewood Suites, will be funded through the assumption of debt and from borrowings under Chatham’s secured revolving credit facility.
All but one of the 69 hotels owned by the joint venture or Chatham will continue to be managed by Island Hospitality Management, a hotel management company that is 90%-owned by Fisher.
Chatham also announces that it successfully amended its US$85 million revolving secured line of credit. The amendment provides for an increase to the allowable consolidated leverage ratio to 60% through 2012, reducing to 55% in 2013. The line of credit still has an accordion feature that provides the company with the ability to increase the facility to US$110 million.
“We appreciate the continued support of our lenders and shareholders as we look to build Chatham into the premier owner of upscale extended-stay and premium branded select-service hotels,” says Dennis M. Craven, Chatham’s chief financial officer. “Although this transaction increases our overall leverage higher than our targeted 35%, we are comfortable with temporarily increasing our leverage at this early stage of the lodging cycle recovery to take advantage of these opportunities.”