Chatham Lodging Sells Hilton Carlsbad's Homewood Suites

Chatham Lodging Trust (NYSE:CLDT) announced that it recently sold California-based Hilton Carlsbad’s 145-suite Homewood Suites for $33 million, or roughly $228,000 per suite.

The hotel has been sold by the company for about 6.5% net operating income capitalization rate, based on the trailing 12-month performance.

The buyer of this property undertook a $20-million CMBS loan, with a 4.3% interest rate. The balance amount of $13 million will be used to decrease Chatham’s unsecured credit facility borrowings.

As per Chatham’s chief executive officer and president, Jeffrey H. Fisher, “Our goal is to opportunistically sell assets when we believe we can re-deploy those proceeds into high-quality hotel investments that earn higher yields in higher growth markets, thus enhancing our net asset value.”

The sale is part of Chatham’s aggressive capital-recycling program, which was announced this year. This marks the first sale by the company after undertaking the initiative.

We expect such moves to offer an upside potential to the company and strengthen its high-end portfolio, which consists of ownership interests in 135 hotels, totaling 18,516 rooms/suites.

Further, year to date, shares of Chatham have outperformed the industry it belongs to. During this time frame, the stock has rallied 11.3%, whereas the industry has registered growth of 2.1%.

However, the Zacks Consensus Estimate for funds from operations (FFO) per share for 2017 has remained unchanged at $2.16 in a month’s time.

Chatham currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Picks

Better-ranked stocks in the real estate investment trust (REIT) space include Arbor Realty Trust (NYSE:ABR) and One Liberty Properties (NYSE:OLP) sporting a Zacks Rank of 1, and Columbia Property Trust (NYSE:CXP) carrying a Zacks Rank of 2 (Buy).

Arbor Realty’s 2017 FFO per share estimates moved up 8.7% over the last 60 days. The stock has been up 15.8%, so far this year.

One Liberty Properties’ FFO per share estimates for the current year climbed 7.1% over the last 60 days. Its shares have gained 5%, year to date.

Columbia Property Trust’s FFO per share estimates for 2017 moved up 2.7% over the past 60 days. Its share price has gained 3.7%, year to date.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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