WEST PALM BEACH, Florida—Chatham Lodging Trust announced that the company has acquired the recently opened, 148-room Home2 Suites by Hilton Phoenix Downtown for $43.3 million or approximately $293,000 per room. The institutional quality, six-story hotel sits in downtown Phoenix and includes the Fuller Paint Company Building that houses the hotel’s public spaces, including a food and beverage outlet. Upon stabilization, the acquisition is expected to produce RevPAR in excess of $150 and generate an estimated NOI yield of over 9 percent.
Downtown Phoenix is 1.7 square miles which drives demand for hotels into its urban core. In addition to the Footprint Center, Chase Field, and Convention Center, downtown Phoenix includes 11.5 million square feet of office space, a 28-acre Bioscience Core comprised of 1.6 million square feet with plans to double that size in the coming years, almost 1.0 million square feet of retail space, numerous museums and theatres, and expanding downtown campuses for Arizona State University, University of Arizona Medical School, and Norther Arizona University (combined approximately 16,000 students).
“We are really excited about this beautiful, brand new, high-quality hotel located in the heart of downtown Phoenix, a market in the early stages of the type of renaissance we have seen occur in other large urban downtowns across the country over the past decade,” said Jeffrey H. Fisher, Chatham’s CEO and president. “Phoenix and Maricopa County-at-large have benefitted immensely from population growth over recent years. In fact, the area experienced the largest population growth of any county in the country in 2022. Phoenix ranks best in the country for talent attraction and generally ranks among the top markets in the country for real estate investment growth and future job growth. The hotel enters a thriving lodging market as Phoenix has experienced the second-highest RevPAR CAGR over the past five years. This is the only Hilton branded extended-stay hotel in downtown Phoenix and will benefit from the diverse demand generators, all of which are in a high-growth phase.”
The Home2 Suites is the closest hotel to the Footprint Center (home to the NBA Phoenix Suns and WNBA Phoenix Mercury) and Chase Field (home to the Arizona Diamondbacks), blocks from the Phoenix Convention Center, and adjacent to the revitalized Warehouse District that houses numerous event venues, including the On Jackson Events Center, and will also be home to the under-construction headquarters/practice facility/fan experience for the Suns and the Mercury. In excess of two million guests visit each of the Footprint Center and Chase Field annually for sports and entertainment events.
Fisher said, “This is Chatham’s first acquisition in more than two years and fits our long-term growth strategy to acquire younger, premium-branded, high-quality hotels in infill locations with diverse demand generators. The hotel further diversifies our portfolio by adding an underrepresented geographic area and also increases our exposure to segments of travelers other than purely business transient. Selling our Denver Tech hotel for $24 million, inclusive of deferred renovation costs, at a yield of approximately 4 percent, and recycling that capital into a brand-new asset that will yield over twice that investment is a great trade for us. This hotel will enhance our RevPAR and operating margins, be accretive to FFO per share, increase distributable cash flow, and enhance shareholder value.”
Chatham funded the purchase using proceeds from the sale of the Denver Tech hotel in the first quarter and available cash. The hotel will be managed by Island Hospitality Management, which is owned by Fisher.
