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 several key events related to its 10.3 percent interest in a joint venture with affiliates of Cerberus Capital Management. The joint venture was formed to acquire most of the former Innkeepers USA Trust hotel portfolio out of bankruptcy in October 2011.
The joint venture recently refinanced its existing debt with a new $950 million, non-recourse loan with JPMorgan Chase Bank, National Association. Collateralized by the remaining 51, core hotels in the Innkeepers portfolio, the new, five-year, interest only loan, which is comprised of a two-year loan with three, one-year extension options, carries an interest rate of one month LIBOR plus 480 basis points. The previous loans carried an average interest rate of approximately 6.74 percent. In connection with the loan closing, the joint venture pre-funded approximately $52 million of capital expenditures related to future renovations at the joint venture’s hotels and $5 million of other customary, lender required reserves.
“When the Innkeepers acquisition closed in late 2011, the joint venture assumed a $675 million, fixed rate, long-term loan, and we negotiated a key provision that allowed us to repay the loan anytime without prepayment penalty or defeasance,” said Dennis Craven, Chatham’s chief financial officer. “Since closing the Innkeepers acquisition, the value of the joint venture portfolio has risen significantly, and we were able to opportunistically refinance all of the joint venture’s $786 million of debt, reducing the joint venture’s interest costs by approximately $5.5 million per year based on current LIBOR rates, extending the maturity of the Innkeepers portfolio debt to 2018 and pre-funding a significant amount of capital expenditures.”
Additionally, the Innkeepers joint venture has completed its non-core hotel disposition strategy with the sale of the last of its 13, non-core hotels last week. Total sales proceeds to the joint venture related to the sale of the 13 hotels were approximately $75 million.