Business Context and Reporting Period
Company: Chatham Lodging Trust
Filing Type: Form 8-K (Current Report)
Date of Report: June 29, 2011
Event: Entry into a Material Definitive Agreement following U.S. Bankruptcy Court approval of the Innkeepers USA Trust Plan of Reorganization.
Key Financial Metrics and Transaction Details
Total Investment: Approximately $232 million across two transactions.
- Transaction 1 (Outright Purchase): $195 million for 5 hotels (764 rooms).
- Price per room: ~$255,000.
- Financing: Assumption of $134.2 million in mortgage loans (6.00% weighted average interest, maturing 2016) plus cash and revolver borrowings.
- Transaction 2 (Joint Venture): $37 million for a 9.2% interest in a JV with Cerberus Capital Management.
- JV Total Purchase Price: ~$1.125 billion for 64 hotels (8,329 rooms).
- JV Price per room: ~$135,000.
- JV Debt Assumption: ~$725 million (6.71% weighted average interest, maturing 2017).
- Chatham Funding: Borrowings under senior secured revolving credit facility.
Liquidity and Debt: The filing does not provide current consolidated balance sheet figures for Chatham's total debt or cash on hand prior to these transactions. Funding relies on existing credit facilities and assumed debt.
Material Changes Versus Prior Period
This filing represents a significant expansion of Chatham's portfolio through the acquisition of interests in 69 premium-branded hotels from Innkeepers USA Trust. The filing does not provide comparative financial performance data (revenue, profit, or cash flow) for the prior period as it is a transactional report rather than a periodic earnings report.
Outlook, Management Commentary, and Risks
- Completion Timeline: Acquisitions are expected to close in July 2011.
- Management: Post-acquisition, the 5 direct hotels and 63 of the 64 JV hotels will be managed by Island Hospitality Management (90% owned by Mr. Fisher).
- Joint Venture Structure: Chatham will receive a promote interest based on meeting certain return thresholds. The JV may sell non-core assets.
- Debt Terms: Assumed mortgages are prepayable without premiums. One loan (Garden Grove) is interest-only for the first two years.
Investor Verification Checklist
- Verify the closing date of the July 2011 acquisitions.
- Confirm the impact of the $134.2 million and $725 million debt assumptions on Chatham's leverage ratios.
- Review the terms of the senior secured revolving credit facility to ensure sufficient capacity for the $37 million JV investment and cash portion of the direct purchase.
- Assess the concentration risk regarding Island Hospitality Management managing the majority of the new portfolio.
- Monitor the performance of the 64 JV hotels to determine if return thresholds for the promote interest are met.