Chatham Lodging Trust Acquires Home2 Suites Phoenix Downtown

Rhea-AI Summary

Chatham Lodging Trust (NYSE: CLDT) has acquired the 148-room Home2 Suites by Hilton Phoenix Downtown for $43.3 million, approximately $293,000 per room. This marks Chatham's first acquisition in over two years. The hotel is strategically located in downtown Phoenix and integrates the historic Fuller Paint Company Building, featuring unique public spaces and a signature food outlet. Upon stabilization, the acquisition is expected to generate a RevPAR exceeding $150 and an NOI yield over 9%. The purchase was funded through proceeds from the sale of Chatham's Denver Tech hotel and available cash. The hotel will be managed by Island Hospitality Management, owned by Chatham’s CEO, Jeffrey H. Fisher. This acquisition is part of Chatham's strategy to invest in high-quality, premium-branded hotels in locations with diverse demand drivers.

Positive

• Acquisition of a 148-room, high-quality hotel in downtown Phoenix for $43.3 million.
• Strategic location near top attractions like Footprint Center and Chase Field.
• Expected RevPAR exceeding $150 and an NOI yield over 9%.
• Funded through proceeds from the sale of Denver Tech hotel and available cash.
• First acquisition in over two years, aligning with long-term growth strategy.
• Diversifies portfolio by adding a new geographic area and traveler segments.
• Managed by Island Hospitality Management, ensuring operational oversight.

Negative

• High acquisition cost of $43.3 million.
• Potential risk if stabilization targets for RevPAR and NOI yield are not met.
• Dependency on sports and entertainment events for hotel occupancy.
• Management by Island Hospitality Management, owned by CEO, could pose conflict of interest concerns.

Insights

Real Estate Investment Analyst

The acquisition of the Home2 Suites by Hilton Phoenix Downtown by Chatham Lodging Trust is a notable move in the real estate investment trust (REIT) sector. Chatham purchased the property for $43.3 million (approximately $293,000 per room) and the projected NOI yield of over 9% signifies a potentially lucrative investment. For investors, this represents a strategic repositioning by Chatham to diversify its portfolio, especially given the vibrant, high-demand environment of downtown Phoenix. RevPAR (Revenue Per Available Room) projected to exceed $150 underscores the competitive revenue-generation capabilities of this asset. These figures suggest an attractive financial outlook, provided the local market conditions remain favorable.

Long-term benefits include the strategic location in a rapidly growing urban center, which will likely drive sustained demand. Short-term, the acquisition helps diversify and stabilize income streams for Chatham, offering a hedge against market volatility. However, investors should watch for potential risks such as economic downturns that could impact travel and hospitality sectors.

Financial Analyst

Chatham's decision to fund this acquisition using proceeds from the sale of the Denver Tech hotel, which yielded about 4% and reinvesting into a property with over twice the yield indicates a savvy capital allocation strategy. This shift suggests a focus on maximizing asset performance and enhancing shareholder value. Chatham's ability to recycle capital efficiently is critical for its growth strategy, especially in a competitive real estate market.

For the retail investor, it’s important to understand that the FFO (Funds From Operations) per share improvement implies potential for higher dividends, enhancing the attractiveness of Chatham’s stock. Additionally, increased distributable cash flow provides more flexibility for future investments or returns to investors. It's essential, however, to monitor the effective management of this property and ensure projected yields are met.

Market Research Analyst

From a market analysis perspective, Phoenix is in a prime position for growth, with the largest population increase in the U.S. in recent years. The diverse range of demand generators, from sports arenas to educational institutions, ensures a steady influx of visitors. The hotel’s proximity to major attractions like the Footprint Center and Chase Field, as well as the Phoenix Convention Center, places it in a highly advantageous location. This not only drives occupancy rates but also premium pricing potential.

The fact that this is the only Hilton-branded extended-stay hotel in downtown Phoenix gives Chatham a unique competitive edge in the market. This exclusivity can translate into strong brand loyalty and repeat clientele, further supporting robust RevPAR figures and overall property performance. For investors, understanding this competitive positioning is key to appreciating the potential return on investment.

First Arizona Acquisition Adds Exposure to Booming Phoenix MSA

WEST PALM BEACH, Fla.--(BUSINESS WIRE)-- 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 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 the heart of Downtown Phoenix and includes the historic Fuller Paint Company Building that houses the hotel’s customized public spaces, including a signature food & beverage outlet. Upon stabilization, the acquisition is expected to produce RevPAR in excess of $150 and generate an estimated NOI yield over 9 percent.

Downtown Phoenix is a vibrant, 1.7 square miles that drives incredibly diverse 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 essentially double that size in the coming years, almost 1.0 million square feet of retail space, numerous museums and theatres and lastly, 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 chief executive officer 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.”

Strategically located in the heart of downtown Phoenix, 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), mere blocks from the Phoenix Convention Center and adjacent to the revitalized Warehouse District that houses numerous upscale event venues, including the world class 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. The Convention Center ranks among the top 10 convention centers in the country and offers nearly 1,000,000 square feet of meeting and prime exhibition space, including three exhibition halls, two 45,000-plus square foot ballrooms and an Executive Conference Center.

Fisher highlighted, “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.

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 39 hotels with 5,883 rooms/suites in 17 states and the District of Columbia. Additional information about Chatham may be found at chathamlodgingtrust.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

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/20240531903813/en/

Dennis Craven (Company)

Chief Operating Officer

(561) 227-1386

Source: Chatham Lodging Trust

FAQ

What company acquired Home2 Suites by Hilton Phoenix Downtown?

Chatham Lodging Trust (NYSE: CLDT) acquired the hotel.

How much did Chatham Lodging Trust pay for Home2 Suites Phoenix Downtown?

Chatham Lodging Trust paid $43.3 million for the hotel.

How many rooms does the Home2 Suites Phoenix Downtown have?

The Home2 Suites Phoenix Downtown has 148 rooms.

Where is the newly acquired Home2 Suites by Hilton located?

It is located in downtown Phoenix, near Footprint Center and Chase Field.

What is the expected RevPAR for Home2 Suites Phoenix Downtown?

The expected RevPAR is in excess of $150.

What is the expected NOI yield for the newly acquired hotel?

The expected NOI yield is over 9%.

How was the acquisition of Home2 Suites Phoenix Downtown funded?

The acquisition was funded using proceeds from the sale of Chatham's Denver Tech hotel and available cash.

Who will manage the Home2 Suites Phoenix Downtown?

The hotel will be managed by Island Hospitality Management.