Business Context and Reporting Period
This Form 8-K Current Report was filed by Chatham Lodging Trust on December 5, 2013. The filing reports the completion of a strategic asset acquisition to expand the Company's hotel portfolio.
Key Financial Metrics and Transaction Details
- Asset Acquired: SpringHill Suites by Marriott Savannah Downtown/Historic District (160 rooms).
- Purchase Price: $39.8 million in cash, plus customary pro-rated amounts and closing costs.
- Funding Source: Available cash and borrowings under the Company's senior secured revolving credit facility.
- Management Fees: Base fee of 3% of gross room revenue, plus $1,000 monthly revenue management fee and $1,200 monthly accounting fee.
- Management Term: Initial five-year term with automatic renewals for two successive five-year terms.
Material Changes
The primary material change is the addition of the Savannah Hotel to the Company's portfolio. The transaction introduces a new managed property with a related-party management agreement. The filing does not provide specific revenue, profit, or cash flow figures for the Company or the acquired asset as of the reporting date.
Outlook, Risks, and Contingencies
- Related-Party Transaction: The hotel is managed by Island Hospitality Management (IHM), which is 90% owned by Jeffrey H. Fisher, the Company's Chairman, President, and CEO.
- Termination Rights: The management agreement may be terminated for cause, including failure to meet specified operating performance levels, or upon the sale of the hotel.
- Pending Filings: Financial statements of the business acquired and pro forma financial information are currently being prepared and will be filed via Form 8-K/A within 71 calendar days.
Investor Verification Checklist
- Verify the final closing costs and pro-rated amounts added to the $39.8 million base price.
- Review the upcoming Form 8-K/A for the acquired hotel's historical financial performance and pro forma impact on the Company's balance sheet.
- Assess the impact of the new debt drawn from the senior secured revolving credit facility on the Company's liquidity and leverage ratios.
- Confirm the specific operating performance metrics required to avoid termination of the management agreement with IHM.