Dealmaker: Chatham Lodging Trust Acquires N.H. Hotel for $44M

Chatham Lodging Trust, Palm Beach, Fla., acquired the 131-room Hilton Garden Inn Portsmouth in New Hampshire for $43.5 million, or $332,000 per room.

Chatham CEO and President Jeffrey Fisher noted the downtown Portsmouth asset benefits from diversified demand due to a combination of leisure, corporate and government business.

“Portsmouth is an extremely high barrier-to-entry market, and the city has done a fantastic job balancing growth and maintaining the integrity of this historic community,” Fisher said. He noted Portsmouth enacted “sweeping” changes to its zoning codes that made permitting and development more stringent, making it harder for new supply to enter the downtown market.

Built in 2006, the Hilton Garden Inn Portsmouth Downtown received a full renovation within the past two years; Fisher said Chatham expects it will require no major capital investment until 2022.

Local demand drivers include Pease International Tradeport and Portsmouth Naval Shipyard. Pease International Tradeport–formerly Pease Air Force Base–is across the harbor from the hotel. The office and industrial park encompasses 3,000 acres and houses 250 companies employing more than 10,000 people. Portsmouth Naval Shipyard is the region’s largest employer with more than 7,500 jobs. The U.S. Navy recently received approval to expand its current fleet of 275 deployable ships to 355 over the next decade, which should spur job and economic growth at the shipyard and the regional economy.

Chatham COO and Executive Vice President Dennis Craven noted the real estate investment trust is under contract to sell two hotels within the next 60 days. “This acquisition reinvests a portion of those proceeds into a hotel that is younger, yields higher cash-on-cash returns and increases our portfolio revenue per available room given its projected 2017 RevPAR of $163,” he said.

Chatham funded the purchase through available cash and borrowings on its revolving credit facility. It estimated it acquired the property at a first-year net operating income capitalization rate in the eight percent range.