NEW YORK CITY—NorthStar Realty Finance,headquartered here, and Chatham Lodging Trust haveentered a $1.3-billion joint venture on the 51-propertyInnkeepers portfolio, the twoREITs announced Friday as part of their respectivequarterly earnings reports. Headquartered in Palm Beach, FL,Chatham and its previous JV partner, Cerberus CapitalManagement, put the portfolio up for sale this past January.

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Under terms of the new JV, NorthStar and Chatham will pair up onownership of 47 of the 51 upscale extended-stay and select-serviceproperties, totaling about 6,100 keys mainly on the East and Westcoasts and mainly affiliated with Marriott or Hilton brands. The89.7/10.3 JV is valued at $958.5 million, with NorthStar acquiringCerberus' stake.

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Chatham is paying $341.5 million for the remainder, a quartet ofResidence Inn hotels in Silicon Valley that total 750 rooms, andplans to redevelop them. Inland Hospitality willcontinue managing the entire Innkeepers portfolio, as it did underthe Chatham/Cerberus JV.

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David T. Hamamoto, NorthStar's chairman andCEO, says his company is enthusiastic about both the portfolioacquisition and “the start of a broader strategic relationship withthe teams at Chatham Lodging and Island Hospitality. Having spent asubstantial portion of my career in and around the hotel industry,I believe that this investment, and the extended stay and selectservice space generally, will provide strong risk-adjusted returns,particularly as the broader economy continues to gainmomentum.”

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At Chatham, CFO Dennis Craven cites the successof his company's partnership with Cerberus, “turning our initial$37 million investment into distributions of approximately $114million and profits of approximately $77 million or $2.90 per sharein less than three years.” Chatham and Cerberus paid $1.02 billionfor what was then a 64-asset portfolio in October 2011, in a dealthat enabled Innkeepers to exit Chapter 11 bankruptcy.

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Jeff Fisher, Chatham's CEO, says his companyand NorthStar “share similar outlooks regarding the health of thehotel industry and performance expectations for the portfolio. Ourlong-term interests are aligned with a solid capital structure thatwe believe will provide strong, risk-adjusted returns for ourshareholders.”

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.