NorthStar, Chatham JV buying $1.1bln worth of Inland American hotels

Portfolio deals are alive and well, and today comes news of a big one. Inland American Real Estate Trust, which in August announced plans to spin off its lodging subsidiary into a publicly traded company called Xenia Hotels & Resorts, has entered into a definitive agreement to sell a portfolio consisting of 52 select-service hotels with 6,976 rooms to a joint venture formed by NorthStar Realty Finance Corp. and Chatham Lodging Trust for approximately $1.1 billion.

“We are pleased to have reached a mutually beneficial agreement with Northstar and Chatham for the sale of this portfolio,” said Marcel Verbaas, president and CEO of Xenia Hotels & Resorts. “Although these select-service hotels have performed well in our portfolio, we believe this was the appropriate time to sell these assets."

Verbaas went to on to say that the deal reprsents the company's transition from the select-service market into its long-term strategy of investing primarily in full-service, lifestyle and urban-upscale hotels, with a focus on the top 25 U.S. lodging markets.

As a result of the transaction, expected to close in the fourth quarter, Inland American expects to realize approximately $480 million of net proceeds.

In regard to the JV acquiring the portfolio, NorthStar Realty will own 90 percent of it, while Chatham will own the remaining 10 percent. Island Hospitality, which is 90-percent owned by Chatham CEO Jeffrey Fisher, will manage a majority of the hotels, the breakdown of which goes this way: about 63 percent are Marriott brands, 32 percent are Hilton brands.

As The Wall Street Journal points out, the deal comes as NorthStar has increasingly turned its focus to hospitality. The company, which owns a variety of commercial properties, from health care to retail, expects to close on another $700-million hotel portfolio this month, WSJ reports. NorthStar's hotel portfolio will grow to 159 hotels on the close of both deals.

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This is also the second time in months that NorthStar and Chatham have engaged to acquire a hotel portfolio. In May, a JV of Chatham Lodging Trust and Cerberus Capital Management agreed to selll a 6,848-room, 51-hotel portfolio in a transaction worth $1.3 billion. A JV of Chatham and Northstar was the buyer. NorthStar acquired Cerberus' 89.7-percent stake in the JV, while Chatham retained its existing 10.3-percent share.

Subsequent to the deal closing, New York-based NorthStar said its total hotel investments will rise to 159 properties and over 20,000 rooms. Chatham, based in Palm Beach, Fla., owns interests in 78 hotels, or 10,882 rooms. Chatham also announced Thursday that it bought the 194-room Hyatt Place Denver Cherry Creek for $32 million.

In addition to the news today, Chatham also announced it acquired the recently re-opened 194-room Hyatt Place Denver/Cherry Creek for $32 million.


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