Chatham Lodging Trust (NYSE: CLDT), a hotel real estate investment trust (REIT) focused on investing in upscale, extended-stay hotels and premium-branded, select-service hotels, today announced that the company has acquired in an off-market transaction two, high-quality, premium-branded hotels comprising 269 rooms at the Domain in Austin, Texas, for $71.2 million, or approximately $265,000 per room (the “Austin Acquisitions”). The acquired hotels include the 132-room Residence Inn Austin Domain, which opened in July 2016, and the 137-room TownePlace Suites Austin Domain, which opened in June 2021. Upon stabilization, the Austin Acquisitions are expected to generate an estimated NOI yield of 8.0% to 8.5%.
“Having actively managed our way through the worst era in the history of the hotel industry, our actions have enabled us to emerge from the pandemic with a stronger balance sheet and more liquidity,” highlighted Jeffrey H. Fisher, Chatham’s chief executive officer and president. “This has given us the flexibility and the confidence to be acquisitive when we identify opportunities that fit our stringent criteria, and the Austin Acquisitions are ideal additions to our portfolio. Strategically, our acquisitions are aimed at increasing further our exposure to premium-branded, extended-stay hotels, enhancing portfolio RevPAR and reducing the average age of our portfolio. The Austin Acquisitions check all of these boxes, will be two of our four newest hotels and are expected to producing RevPAR levels higher than our portfolio average.”
The Domain is a rapidly growing mixed-use development known as Austin’s “second downtown” with over 4.2 million square feet of office space, 1.8 million square feet of retail space, plus another 2.8 million additional square feet of office space expected to be delivered over the next two years and another 3.8 million square feet of office space planned thereafter. Companies with large offices located at The Domain include IBM, Amazon, Facebook, Indeed, Expedia / VRBO and Trend Micro Companies. Apple currently is constructing a 2 million square foot office campus approximately 5 miles from the Austin Acquisitions that will cost over $1 billion and eventually accommodate around 15,000 employees. For comparison purposes, Apple Park, Apple’s main campus in Cupertino, Calif., is approximately 2.8 million square feet.
Other key Austin attributes that will drive significant demand include:
- Austin receives over 27 million visitors annually
- Austin is considered one of the nation’s dominant tech hubs after Silicon Valley
- Austin is the third fastest growing city in the United States over the last decade
- Austin was ranked the most desirable real estate investment market in the country in CBRE’s 2021 Investor Intentions survey
- #1 real estate market in 2020 according to the Urban Land Institute and PwC
- In its 2019 rankings, Business Insider ranked Austin the best place to live, and Travel and Leisure ranked Austin a top 10 city to visit
- The Austin office market ranks fourth nationally in terms of rent per square foot at $49 (only behind New York, San Francisco and Silicon Valley) and third nationally in percentage of square feet under construction relative to existing square feet at 10%
- The $260 million Austin FC Stadium recently opened up within a short walking distance of both hotels
“Austin is unique in that it benefits from strong corporate, group and leisure demand as evidenced by many of these market attributes, and the Domain is an absolutely booming market within Austin. The Austin Acquisitions are in an outstanding location within walking distance of everything the Domain has to offer. We will be able to leverage our deep relationships with key accounts in our other markets such as Silicon Valley or Bellevue, Wash., to drive higher RevPAR performance in Austin. Lastly, the Austin Acquisitions will generate premium RevPAR growth over the next cycle, be accretive to FFO and enhance our net asset value,” Fisher concluded.
Chatham funded the purchase using a portion of the proceeds from the recently completed Series A Preferred Share offering. The hotels will be managed by Island Hospitality Management, which is owned by Fisher.
About Chatham Lodging Trust
Chatham Lodging Trust is a self-advised, publicly traded real estate investment trust focused primarily on investing in upscale, extended-stay hotels and premium-branded, select-service hotels. The company owns 43 hotels with 6,451 rooms/suites in 16 states and the District of Columbia. Additional information about Chatham may be found at chathamlodgingtrust.com.