Chatham REIT’s acquisition of 69 Innkeepers hotels approved by court

PALM BEACH, FLORIDA A bankruptcy judge has approved the acquisition of 69 Innkeepers USA Trust-owned hotels by Chatham Lodging Trust.

Chatham will invest a total of approximately US$232 million into the two transactions, consisting of US$195 million in an outright purchase of five of the hotels and a US$37 million acquisition of a 9.2% interest in a joint venture with affiliates of Cerberus Capital Management LP that will acquire 64 of the hotels for approximately US$1.125 billion. The price for the 64-property joint venture portfolio equates to about US$135,000 per key.

Completion of the acquisitions is expected in July. The deals were first announced back in May, but since Innkeepers is going through bankruptcy proceedings, they required court approval. Innkeeper’s secured creditors and more than 90% of its unsecured creditors favor the plan.

Chatham President and CEO Jeffrey Fisher founded Innkeepers in 1994, with a portfolio of seven hotels.

All but one of the 69 hotels in question will continue to be managed by Island Hospitality Management, a hotel management company that is 90%-owned by Fisher.

“This is an accretive transaction that can produce shareholder value precisely because the portfolio of hotels we are acquiring aligns with our investment and growth strategies,” Fisher says. “Plus, our management team knows the ins and outs of these hotels and their markets, so, while these hotels are performing well and our going-in returns are expected to be healthy, we anticipate being able to generate even stronger returns on these investments with the continued improvement in industry fundamentals.”

The vast majority of the acquired portfolio consists of select-service brands, including 36 Residence Inns, 12 Hampton Inns, six Summerfield Suites and five Courtyards by Marriott.