PALM BEACH, FL-Locally based Chatham Lodging Trust has signed a commitment letter with a group of lenders for an $85-million senior secured-credit facility.  The paper includes an accordion feature that will allow the company to increase the size of the facility to $110 million.  It will mature in three years and the interest rate will be Libor plus 3.25% with a Libor floor of 1.25%.

Barclay’s Capital and Regions Capital Markets are the joint lead arrangers for the revolving credit facility, with Barclays Bank PLC serving as the administrative agent and Regions Bank acting as the syndication agent. Other banks providing commitments for the credit facility include Credit Agricole Corporate and Investment Bank, UBS Investment Bank and US Bank and National Association.

“Generally speaking, we will be making acquisitions with the credit facilities,” says Jeff Fisher, chief executive officer for the company. The line of credit will supplement the funds made available through  Chatham’s $182 million initial public offering of April 21, 2010, he says.

“We have an acquisition pipeline, but we don’t have anything under contract or identified right now,” says Fisher, who adds that he expects to close on the credit facility within the next 30 days. Chatham specializes in Homewood Suites by Hilton, Residence Inns by Marriott, Marriott Courtyards and the Hampton Inn & Suites. Chatham Lodging generally focuses on the Northeast and the mid-Atlantic states, as well as Southern California, says Fisher.

Chatham is benefitting from the improvement in lodging industry fundamentals during second quarter 2010, says Felicia R. Hendrix, a lodging industry analyst with Barclays Capital in her “2Q Quick Look” report. Chatham reported better than expected results for the first quarter as a public company, she says.

"Chatham reported 2Q10 adjusted FFO/share of $.08, above our estimate of $.04 and concensus of $.02. Upside was driven by better than expected RevPAR growth of 10.2% versus our 4.1% estimate. The company's 2Q results and our estimates reflect the results of operations of the six Homewood Suites properties that were acquired on April 23, 2010," according to Hendrix's report.

In the third quarter, Chatham completed two acquisitions—the Houston Hampton Inn & Suites and the Residence Inn Holtsville, New York for a total of $35.3 million. The REIT also announced an agreement to purchase a 124-suite Residence Inn by Marriott in New Rochelle, New York in an all cash transaction for $21 million or approximately $169,000 a key. The hotel represents the 12^th property either acquired or under contract to purchase by Chatham since its April 21, 2010 initial public offering.

Currently, Chatham owns eight hotels with an aggregate of 1057 rooms/suites in seven states in addition to the four hotels it has under contract.