REITs continue to make transaction noise

Real estate investment trusts are as active on the sell side as they are on the buy side.

Chatham Lodging Trust, a REIT focused on investing in upscale extended-stay hotels and premium-branded, select-service hotels, just completed the previously announced acquisition of a 51-hotel, 6,848-room portfolio from a joint venture comprised of Cerberus Capital Management and Chatham in two separate transactions. The combined total purchase price was $1.3 billion, before capital expenditure reserves credited to the buyers of $39.7 million.

Chatham acquired four Residence Inns in Silicon Valley, comprising 751 rooms, as part of the sale of the 51-hotel portfolio for a net cash purchase price of $272.6 million, or approximately $363,000 per room. The transaction consists of the gross purchase price of $341.5 million less reserve credits of $15.1 million, resulting in a net purchase price of $326.4 million.

Word is Chatham is considering the redevelopment and expansion of all four of the hotels to increase the room count by 36 percent to a total of 1,023 rooms. The 272-room expansion would include a new lobby and public spaces in each location with an estimated aggregate cost of approximately $59.0 million, or approximately $217,000 per additional room.

Meanwhile, the remaining 47 hotels were purchased by a joint venture between NorthStar Realty Finance Corp, a commercial real estate investment and asset management company, and Chatham for a gross purchase price of $958.5 million, a net cash purchase price of $933.9 million after reserve credits, or $153,000 per room.

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NorthStar acquired Cerberus' 89.7-percent interest in the prior joint venture, while Chatham retained its 10.3-percent interest.

In the past year, Chatham has been very active snatching up hotels. Prior to this deal, it made a record-setting buy in Washington, in Novembe purchasing the 213-room Bellevue Residence Inn for $71.8 million

Any plus-billion-dollar deal is big news, for sure. And while Chatham is busy buying, FelCor Lodging Trust is selling. The REIT has sold its 196-room Doubletree Suites Hotel-Dana Point and its 251-room Embassy Suites Hotel-BWI Airport for aggregate gross proceeds of $54.1 million.

And they may not be done. The company reports it is currently negotiating contracts or has agreed to sell four other hotels for aggregate proceeds of approximately $73 million. To date, FelCor has sold 28 non-strategic hotels for aggregate gross proceeds of $627 million.

 

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