Chatham Lodging Trust Acquires High-Quality Extended-Stay Hotels in Austin, Texas

Rhea-AI Summary

Chatham Lodging Trust (NYSE: CLDT) has announced the acquisition of two premium-branded hotels in Austin, Texas, for $71.2 million, equating to approximately $265,000 per room. The portfolio includes the Residence Inn and TownePlace Suites, totaling 269 rooms. Expected to generate an estimated NOI yield of 8.0% to 8.5%, these acquisitions aim to enhance portfolio RevPAR and systematically reduce the average age of the portfolio. The properties are strategically located in a rapidly growing area, benefiting from significant corporate demand.

Positive

• Acquisition of two high-quality hotels for $71.2 million, expected to yield 8.0% to 8.5% NOI.
• Strategic enhancement of portfolio with premium-branded, extended-stay hotels.
• Anticipated higher RevPAR levels due to location and market demand.

Negative

• None.

Chatham Lodging Trust (NYSE: CLDT), a hotel real estate investment trust (REIT) focused on investing in upscale, extended-stay hotels and premium-branded, select-service hotels, today announced that the company has acquired in an off-market transaction two, high-quality, premium-branded hotels comprising 269 rooms at the Domain in Austin, Texas, for $71.2 million, or approximately $265,000 per room (the “Austin Acquisitions”). The acquired hotels include the 132-room Residence Inn Austin Domain, which opened in July 2016, and the 137-room TownePlace Suites Austin Domain, which opened in June 2021. Upon stabilization, the Austin Acquisitions are expected to generate an estimated NOI yield of 8.0% to 8.5%.

Residence Inn Austin Domain (Photo: Business Wire)

“Having actively managed our way through the worst era in the history of the hotel industry, our actions have enabled us to emerge from the pandemic with a stronger balance sheet and more liquidity,” highlighted Jeffrey H. Fisher, Chatham’s chief executive officer and president. “This has given us the flexibility and the confidence to be acquisitive when we identify opportunities that fit our stringent criteria, and the Austin Acquisitions are ideal additions to our portfolio. Strategically, our acquisitions are aimed at increasing further our exposure to premium-branded, extended-stay hotels, enhancing portfolio RevPAR and reducing the average age of our portfolio. The Austin Acquisitions check all of these boxes, will be two of our four newest hotels and are expected to producing RevPAR levels higher than our portfolio average.”

The Domain is a rapidly growing mixed-use development known as Austin’s “second downtown” with over 4.2 million square feet of office space, 1.8 million square feet of retail space, plus another 2.8 million additional square feet of office space expected to be delivered over the next two years and another 3.8 million square feet of office space planned thereafter. Companies with large offices located at The Domain include IBM, Amazon, Facebook, Indeed, Expedia / VRBO and Trend Micro Companies. Apple currently is constructing a 2 million square foot office campus approximately 5 miles from the Austin Acquisitions that will cost over $1 billion and eventually accommodate around 15,000 employees. For comparison purposes, Apple Park, Apple’s main campus in Cupertino, Calif., is approximately 2.8 million square feet.

Other key Austin attributes that will drive significant demand include:

• Austin receives over 27 million visitors annually
• Austin is considered one of the nation’s dominant tech hubs after Silicon Valley
• Austin is the third fastest growing city in the United States over the last decade
• Austin was ranked the most desirable real estate investment market in the country in CBRE’s 2021 Investor Intentions survey
• #1 real estate market in 2020 according to the Urban Land Institute and PwC
• In its 2019 rankings, Business Insider ranked Austin the best place to live, and Travel and Leisure ranked Austin a top 10 city to visit
• The Austin office market ranks fourth nationally in terms of rent per square foot at $49 (only behind New York, San Francisco and Silicon Valley) and third nationally in percentage of square feet under construction relative to existing square feet at 10%
• The $260 million Austin FC Stadium recently opened up within a short walking distance of both hotels

“Austin is unique in that it benefits from strong corporate, group and leisure demand as evidenced by many of these market attributes, and the Domain is an absolutely booming market within Austin. The Austin Acquisitions are in an outstanding location within walking distance of everything the Domain has to offer. We will be able to leverage our deep relationships with key accounts in our other markets such as Silicon Valley or Bellevue, Wash., to drive higher RevPAR performance in Austin. Lastly, the Austin Acquisitions will generate premium RevPAR growth over the next cycle, be accretive to FFO and enhance our net asset value,” Fisher concluded.

Chatham funded the purchase using a portion of the proceeds from the recently completed Series A Preferred Share offering. The hotels will be managed by Island Hospitality Management, which is owned by Fisher.

About Chatham Lodging Trust

Chatham Lodging Trust is a self-advised, publicly traded real estate investment trust focused primarily on investing in upscale, extended-stay hotels and premium-branded, select-service hotels. The company owns 41 hotels with 6,169 rooms/suites in 15 states and the District of Columbia. Additional information about Chatham may be found at chathamlodgingtrust.com.

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Statements about the company's business that are not historical facts are "forward-looking statements." Forward-looking statements are based on current expectations. You should not rely on our forward-looking statements because the matters they describe are subject to known and unknown risks and uncertainties that could cause the company's future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such statements. Such risks are set forth under the captions "Item 1A. Risk Factors" and "Forward-Looking Statements" in our annual report on Form 10-K and under the caption "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" (or similar captions) in our quarterly reports on Form 10-Q, and as described in our other filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the dates on which they are made, and the company undertakes no obligation to update publicly or revise any guidance or other forward-looking statement, whether as a result of new information, future developments, or otherwise, unless required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804005157/en/

FAQ

What hotels did Chatham Lodging Trust acquire?

Chatham Lodging Trust acquired the Residence Inn and TownePlace Suites in Austin, Texas.

How much did Chatham pay for the Austin hotels?

Chatham paid $71.2 million for the two hotels, approximately $265,000 per room.

What is the expected NOI yield from the Austin acquisitions?

The expected NOI yield from the acquisitions is between 8.0% and 8.5%.

Why is the acquisition significant for CLDT?

The acquisition enhances CLDT's portfolio by increasing its exposure to premium-branded hotels and potentially improving RevPAR.

What factors contribute to demand for these hotels?

Strong corporate presence, growing office space development, and Austin's recognition as a leading tech hub contribute to demand.