Chatham grabbed the two hotels from Claremont Companies for $55.5 million. That's about $298,000 per room.
"Our outlook on the industry remains bullish, and we continue to find excellent opportunities to add properties that match our strategy of acquiring premium-branded, high-quality, in-fill hotels with high barriers to entry and growing demand in two of the country's strongest lodging markets," says Jeffrey H. Fisher, Chatham's CEO and president. "The Residence Inn Fort Lauderdale Intracoastal/Il Lugano is an absolute gem of an asset located directly on the Intracoastal Waterway with stunning views in a rapidly growing area of South Florida that we believe will realize outsized growth over the next few years.
The Residence Inn Fort Lauderdale Intracoastal/Il Lugano opened in 2008 as the Il Lugano Hotel and Residences and was converted to a Residence Inn in 2014. The 14-story building is on the eastern edge of the Intracoastal Waterway at Oakland Park Boulevard.
Hotel amenities include the Coastal View Restaurant, intracoastal waterfront meeting room, 177-space parking garage and waterfront deck with docks that can be expanded for added food and beverage operations. The building includes independently owned condominiums that are not a component of the hotel's operations.
Chatham was quick to note that the hotel will benefit from the almost $2.5 billion expansion and renovation of the Fort Lauderdale International Airport currently underway which will attract more travelers from the United States, Central America, and South America. Chatham estimates it will acquire the property at a year one net operating income capitalization rate in the 7 to 7.5 percent range.
"The Residence Inn Boston (Dedham) is ideally located in a thriving area just southwest of downtown Boston in the heart of the Route 1/Route 128 corridor, inside of the Route 128 loop," says Fisher. "The hotel fits in perfectly with our Homewood Suites Billerica and Hilton Garden Inn Burlington northwest of downtown Boston along the same Route 128 beltway and will give us strong economies of scale."
Opened in 1998, the Residence Inn Dedham is close to 9.7-million square feet of office space within a 10-mile radius and is within walking distance to the 675,000-square-foot Legacy Place Life Style Retail Center, the market's premier retail and restaurant destination with high profile stores such as Apple, Whole Foods, Lululemon and Yard House. Chatham estimates it acquired the property at a year one net operating income capitalization rate in the 7.5-percent to 8-percent range.
"These hotels are in very strong markets with revenue per available room within the Boston Dedham and Fort Lauderdale Intracoastal hotels' markets up 17 percent and 11 percent, respectively, year-to-date through June 2015," says Chatham COO Dennis Craven. "Supplementing the strong embedded RevPAR growth, we believe there are incremental value-enhancing opportunities at each hotel through transitioning management to Island Hospitality Management, potentially adding rooms to the Boston hotel and adding waterfront amenities to the Fort Lauderdale Intracoastal property. Accordingly, we expect our stabilized returns post year one to be in the upper single digit range."