WEST PALM BEACH, Fla. - Chatham Lodging Trust (NYSE: NYSE:CLDT), an upscale and extended-stay hotel-focused real estate investment trust, has expanded its portfolio with the acquisition of the Home2 Suites by Hilton Phoenix Downtown. The transaction, valued at $43.3 million or approximately $293,000 per room, introduces a 148-room property into the company's holdings.
The newly opened six-story hotel is situated in the bustling heart of Downtown Phoenix and incorporates the historic Fuller Paint Company Building, which now serves as the hotel's customized public spaces and food & beverage outlet. With expectations of a RevPAR exceeding $150, the acquisition is projected to yield an estimated NOI of over 9 percent upon stabilization.
Downtown Phoenix, covering 1.7 square miles, is a hub for diverse hotel demand due to its proximity to major venues such as the Footprint Center, Chase Field, and the Phoenix Convention Center. It is also a center for office spaces, retail, bioscience, education, and cultural institutions.
Jeffrey H. Fisher, CEO and president of Chatham, expressed enthusiasm about the investment, noting the region's significant population growth and its ranking for talent attraction and real estate investment. The Home2 Suites is positioned to capitalize on the area's growth, being the only Hilton branded extended-stay hotel in downtown Phoenix and located near key demand generators.
The strategic location places the Home2 Suites adjacent to the Warehouse District and within walking distance to major sports and entertainment venues, which collectively attract millions of visitors annually. The hotel's proximity to these locations positions it well within a high-growth phase lodging market.
The purchase was funded through the sale of the Denver Tech hotel and available cash. The new property will be managed by Island Hospitality Management, which is under the ownership of Fisher. This marks Chatham's first acquisition in over two years, aligning with its strategy to invest in young, high-quality hotels in prime locations with diverse demand generators.
Chatham Lodging Trust's portfolio now comprises 39 hotels with nearly 6,000 rooms and suites across 17 states and the District of Columbia. The acquisition is anticipated to enhance the company's revenue per available room (RevPAR) and operating margins, as well as contribute positively to funds from operations (FFO) per share and shareholder value.
This report is based on a press release statement from Chatham Lodging Trust.
In other recent news, Chatham Lodging Trust has seen significant growth in Q1 2024, with key financial metrics surpassing consensus estimates. The company reported a 2% increase in Revenue per Available Room (RevPAR) and a noteworthy 20% rise in other operating profit. A strong performance was particularly observed in tech-driven hotels, especially in Silicon Valley and Bellevue, where RevPAR surged by 17%.
The company also announced plans to strategically sell lower-performing hotels and reinvest in higher-growth properties, underlining its commitment to maintaining a strong balance sheet. This strategy is aimed at repaying all maturing debt within the year, supported by the $50 million raised in increased borrowings. Chatham Lodging Trust ended Q1 2024 with a 10% increase in free cash flow, amounting to $8.3 million.
Analysts noted a bearish trend with GOP margins negatively impacted by labor and benefits, decreasing by 120 basis points, and the Los Angeles market underperforming due to a lack of business travel. However, the company's tech-driven hotels saw a 12% increase in RevPAR in April, indicating a bullish trend.
Chatham Lodging Trust aims to leverage opportunities due to a significant amount of CMBS debt maturing in 2024 and 2025. The company's Q2 guidance predicts RevPAR growth of 2.5% to 4%, adjusted EBITDA of $28.7 million to $30.4 million, and adjusted FFO per share of $0.33 to $0.36. Despite some areas of underperformance, the company's executives remain cautiously optimistic, providing conservative guidance while navigating a dynamic market landscape.
InvestingPro Insights
Chatham Lodging Trust's recent acquisition of the Home2 Suites by Hilton Phoenix Downtown comes at a time when the company's stock, as per InvestingPro data, is trading near its 52-week low, with a previous close at $8.39. This could indicate a potential discount for investors looking to capitalize on the company's strategic growth initiatives.
InvestingPro Tips suggest that the stock is currently in oversold territory, which may appeal to contrarian investors seeking to invest in assets that could be undervalued. Additionally, the company is trading at a low EBITDA valuation multiple, which could be attractive to value investors considering the hotel's promising location and the expected increase in RevPAR.
From a financial standpoint, Chatham Lodging Trust's market capitalization stands at $420M, and while the company has not been profitable over the last twelve months, it boasts a robust gross profit margin of 48.53% for the last twelve months as of Q1 2024. However, investors should be aware of the company's short-term liquidity challenges, as short-term obligations exceed liquid assets.
For those interested in further analysis and additional InvestingPro Tips, there are 6 more tips available which can be accessed through InvestingPro's comprehensive service at https://www.investing.com/pro/CLDT. Remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering a deeper dive into Chatham Lodging Trust's financial health and market position.
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