The lodging real estate investment trust (REIT), Chatham Lodging Trust (CLDT - Snapshot Report), declared a public offering of 4.5 million common shares of beneficial interest, with a par value of one cent per share. Further, to cover any over-allotments, the company provided a 30-day option to underwriters to buy up to an additional 675,000 shares.
Barclays PLC (BCS - Analyst Report) and UBS Investment Bank of UBS AG (UBS - Analyst Report) supported Chatham as the joint book-running managers of the offering. Chatham expects to use the net proceeds in its operating partnership, in exchange for common units of limited partnership interest that it has at present.
Notably, Chatham’s operating partnership intends to utilize the obtained amount to finance Chatham’s recent hotel acquisition – Hyatt Place Pittsburgh/North Shore. Earlier this week, the company inked a deal to acquire the particular hotel for $40 million (including customary pro-rated amounts and closing costs).
In addition, the rest of the offering amount is expected to be used to pay off the debt under the company’s senior secured revolving credit facility and spend for proposed investments as well as for other corporate purposes.
We believe that this public offering will provide the company financial flexibility and position it favorably to pursue investment opportunities and acquisitions, which will go a long way in boosting its top-line growth. However, the effect of share dilutions cannot be ignored.
Chatham mainly invests in premium-branded extended-stay and select-service hotels. Currently, the company owns 20 hotels, with an aggregate of 2,733 rooms, across 11 states and the District of Columbia.
Chatham currently carries a Zacks Rank #3 (Hold). Better performing lodging REITs include Host Hotels & Resorts, Inc. (HST - Analyst Report) carrying a Zacks Rank #2 (Buy).