SAVANNAH, Ga.—Chatham Lodging Trust, a hotel real estate investment trust (REIT) focused on investing in upscale, extended-stay hotels and premium-branded, select-service hotels, announced that it has acquired the 160-room SpringHill Suites by Marriott Savannah Downtown/Historic District for $39.8 million, plus customary acquisition and closing costs.
Chatham funded the purchase with available cash and borrowings on its secured revolving credit facility. Following the acquisition, the company’s leverage ratio is 37 percent, calculated as net debt to hotel investment at cost. Chatham currently has the capacity to make incremental acquisitions in the range of $150-$200 million on its balance sheet.
The purchase price represents a forward 12-month capitalization rate of approximately 8.5 percent based on the hotel’s projected net operating income. Year-to-date through September 30, the hotel’s RevPAR is up nearly 6 percent to $113. The SpringHill Suites is the newest hotel within Savannah’s landmark waterfront Downtown/Historic District. Constructed under the strict guidelines of the Historic District’s Preservation Plan and the Savannah Metropolitan Planning Commission, the hotel blends in well with the neighborhood, which is characterized by meticulously restored buildings.
“Despite the current competitive transaction climate in the lodging industry, we continue to source high quality acquisitions in off-market transactions through our extensive industry relationships,” said Jeffrey H. Fisher, Chatham’s chief executive officer. “This hotel matches our strategy perfectly with its infill location, recent construction in 2009, high barriers to new competition and strong, growing demand.”
The hotel’s location is expected to benefit from nearby development, both planned and underway. The hotel is proximate to the Port of Savannah, the nation’s second busiest container port, which is completing a $650 million expansion to deepen the Savannah River and expand the harbor, enabling the Port to serve the larger Post-Panamax vessels in 2015. In addition, the proposed Savannah Cultural Arts Center is planned across the street from the hotel.
The 160-suite hotel features solid concrete construction, an underground parking garage and a brick/stucco exterior. All of the units feature separate living and sleeping areas, microwaves, mini-fridges, and flat-panel televisions with high-definition channels. Amenities at the hotel include a heated outdoor pool, fitness center, 2,645 square feet of meeting space, and valet parking.
“Since December 2012, we have significantly enhanced our portfolio’s asset quality, acquiring seven hotels with an average age of less than four years in very desirable locations for approximately $260 million,” said Peter Willis, Chatham’s chief investment officer. “These are top-quality assets with excellent operating fundamentals and significant upside potential. We have a very active and deep pipeline of prospective targets and intend to use capacity on our balance sheet to continue to acquire hotels that meet our strict underwriting criteria.”
The SpringHill Suites by Marriott Savannah Downtown/Historic District is managed by Island Hospitality Management (IHM), which is 90 percent owned by Fisher.