Wednesday, May 19, 2010

Chatham Lodging Trust Signs contract for four hotels (CLDT)

I've not spoken to management yet, so I do not own shares. But I'm still quite interested in this recent IPO of a hotel REIT that (until recently) owned no hotels.

As I wrote a month ago:

I usually look skeptically at an IPO like this, because you don't want to "take the other side of a trade" with this guy. Meaning his timing has been impeccable, so watch out.
The important difference here is that this Chatham IPO is a "blank check" for Fisher to go buy some depressed hotel assets on our behalf. We can be comforted by the most important aspect of a good IPO...the management is investing alongside the rest of us, as Fisher will purchase 500,000 shares at whatever the IPO price is.

Well the IPO performed much better than other deals have in the past month, yet shares are trading a couple dollars below the well-subscribed $20 offering price.

Today, the company announced the signing of contracts on four new properties, brining the total to ten. The price paid per room is higher than the previous purchases, bu that is due to more favorable geography.

From today's release:

"This transaction increases our geographic diversity and gives us our first Marriott-branded hotels," Fisher said. "With this acquisition, our hotel portfolio now comprises upscale extended-stay hotels and premium-branded select-service properties located in major markets with high barriers to entry near strong demand generators, which is in line with our acquisition strategy. With the closing of this transaction, we will have invested a total of $134.5 million since the completion of our IPO. We have an active pipeline and continue to look for additional opportunities.
"Three of the hotels will require only modest investment in brand-required product improvement plans that occur at a change of ownership, and the fourth is due for a larger upgrade, which we expect will make it more competitive in its market," he added.
The four hotels are:
  • The 133-room Residence Inn by Marriott® White Plains, White Plains, N.Y. (Westchester County)
  • The 120-room Hampton Inn & Suites® Houston – Medical Center, Houston, Texas
  • The 86-room SpringHill Suites by Marriott®, Washington, Pa.
  • The 105-room Courtyard by Marriott®, Altoona, Pa.

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