NorthStar Realty Finance Inks $1.1B Deal for Inland Properties

NEW YORK (The Deal) -- NorthStar Realty Finance (NRF)  said Thursday it has a deal in place to acquire a portfolio of hotel properties from Inland American Real Estate Trust for $1.1 billion, continuing an aggressive expansion campaign by the New York-based REIT.

The portfolio to be acquired is comprised of 52 extended stay and select service hotels with about 7,000 rooms. NorthStar said that it is acquiring the units in a joint venture with Chatham Lodging Trust  (CLDT) in which NorthStar will claim about 90% of the ownership interest.

NorthStar has been a prolific buyer of late. The company this year has inked deals to buy 47 hotel properties from Cerberus Capital Management and Chatham and in August said it would acquire Griffin-American Healthcare REIT II for $4 billion. It also acquired a healthcare portfolio from investment partnerships owned and managed by Formation Capital and Safanad Ltd.

Post-deals NorthStar said it would have a $3.2 billion portfolio of hotel properties consisting of 159 locations with more than 20,000 rooms. Island Hospitality, an existing partner, will manage a majority of the new hotels to be acquired from Inland.

"We are excited about the continued expansion of our portfolio of extended stay and limited service hotels and the deepening of our relationship with Chatham and Island Hospitality," NorthStar chairman and CEO David Hamamoto said in a statement. "This portfolio is expected to generate strong risk-adjusted returns for our shareholders and provides NorthStar Realty with substantial optionality, scale and diversification in a sector that we strongly believe will continue to benefit meaningfully from a growing economy."


NorthStar said that its portfolio would primarily be affiliated with Marriott and Hilton, saying that the hotels are spread across 21 states with large concentrations in Texas, New Jersey, New York and North Carolina. The REIT said it expects to obtain non-resource financing for about 70% to 75% of its purchase price.

Oak Brook, Ill.-based Inland American said it expects to realize about $480 million in net proceeds from the transaction after prepayment of debt. The company said it would use the proceeds to invest in student housing and retail, as well as to pay down debt and other corporate purposes.

The company is also in the process of spinning off Xenia Hotels & Resorts Inc., another owner of hotel properties. Inland American president Thomas P. McGuinness in a statement said that the sale and spin "are important steps toward achieving Inland American's goals of enhancing long-term stockholder value and creating potential liquidity events for our stockholders."

Goldman Sachs (GS)  and Morgan Stanley  (MS) are acting as financial advisers to Inland American, with Latham & Watkins serving as legal counsel.

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