PALM BEACH, FL-Hotel real estate investment trust Chatham Lodging Trust has completed the purchase of five Innkeepers hotels for $195 million. Chatham paid about $255,000 per room for the 764 rooms in the portfolio. The acquisition process began in May.

The acquisition nearly doubles Chatham's existing hotel investments. These five hotels will continue to be managed by Island Hospitality Management, a hotel management company that is 90-percent owned by Jeff Fisher, Chatham’s president and CEO.

“When you know these assets as well as we do--having owned these hotels in our prior life at Innkeepers--and since Jeff’s management company, Island Hospitality or its predecessor Innkeeepers Hospitality, has managed these hotels for a long time, it is much better to buy those assets than the unknown,” Dennis Craven, CFO at Chatham Lodging Trust, tells GlobeSt.com. Chatham scooped up hotels in Garden Grove and Mission Valley, CA; Tysons Corner, VA; Washington, DC and San Antonio, TX.

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“These top-tier branded hotels give us a strong presence in some of the country's prime hotel markets,” Fisher said in a statement. “The hotels are in excellent physical condition, with four of the five hotels having been recently renovated, providing a solid foundation for future growth. Based on our previous operating experience with these properties, we know these assets well and expect great results from them.”

Chatham funded the acquisition through the assumption of five individual mortgage loans, secured by the hotels, totaling $134.2 million, as well as available cash and borrowings under its senior secured revolving credit facility. The five loans have a weighted average interest rate of 6% and mature in 2016. 

“The capital markets have been open and banks are more willing to lend money on hotels than they were a year ago, but as you I am sure see, the equity markets have been volatile lately,” Craven says. “The same goes for the debt markets, which are a bit choppy with interest rate spreads moving around a lot.”

As Craven sees it, now is a strategic time to invest in hotels. Other than the Great Depression, RevPAR has never dropped as much as 2008 to 2009, he says, therefore EBITDA and values dropped precipitously.

“Prior to 2007, there were five public select-service hotel REITS—all but one were bought in highly-levered deals at the peak,” Craven says. “[Those], together with many other private transactions, provided the largest number of over-levered select-service hotels that were being held by short-term real estate owners--many of which will transact at prices substantially below replacement cost.”