Chatham Grabs Strategic Hotel in Off-Market Deal

ATLANTA—Chatham Lodging Trust has acquired the 160-room SpringHill Suites by Marriott in the Savannah Downtown/Historic District. The hotel REIT paid $39.8 million.

The SpringHill Suites is directly across the street from the Savannah Civic Center and is close to the Savannah College of Art and Design (SCAD). The college was the driving force in the redevelopment and renaissance of the Historic District, which now spans over 2 million square feet. The hotel is within walking distance of Savannah's City Market and River Street, both prime entertainment areas within the Historic District.

“Despite the current competitive transaction climate in the lodging industry, we continue to source high quality acquisitions in off-market transactions through our extensive industry relationships,” says Jeffrey H. Fisher, Chatham's CEO. “This hotel matches our strategy perfectly with its infill location, recent construction in 2009, high barriers to new competition and strong, growing demand.”

The hotel's location is expected to benefit from nearby development, both planned and underway. For example, the hotel is close Port of Savannah, the nation's second busiest container port, which is completing a $650 million expansion to deepen the Savannah River and expand the harbor. The expansion will make it possible for the port to serve the larger Post-Panamax vessels in 2015. What's more, the proposed Savannah Cultural Arts Center is planned across the street from the hotel.

“Similar to our downtown Portland, Maine Hampton Inn and Suites, demand at this hotel is consistently strong for leisure travelers year-round, due to its great location,” Fisher says. “The hotel also attracts the corporate traveler segment, which seeks a premium-branded hotel in a great location within the beautiful Historic District.”

The SpringHill Suites is the newest hotel within Savannah's landmark waterfront Downtown/Historic District. Constructed under the strict guidelines of the Historic District's Preservation Plan and the Savannah Metropolitan Planning Commission, the hotel blends in well with the neighborhood. The Historic District is considered the largest National Historic Landmark District in the United States and is ranked as one of the "Top 10 City Destinations" in the United States attracting more than 50 million visitors in the past decade.

The purchase price represents a forward 12-month capitalization rate of about 8.5% based on the hotel's projected net operating income. Year-to-date through Sept. 30, 2013, the hotel's RevPAR is up nearly 6% to $113. Chatham funded the purchase with available cash and borrowings on its secured revolving credit facility.

“Since December 2012, we have significantly enhanced our portfolio's asset quality, acquiring seven hotels with an average age of less than four years in very desirable locations for approximately $260 million,” says Peter Willis, Chatham's chief investment officer. “These are top-quality assets with excellent operating fundamentals and significant upside potential. We have a very active and deep pipeline of prospective targets and intend to use capacity on our balance sheet to continue to acquire hotels that meet our strict underwriting criteria.”