The properties include Hampton Inn & Suites Paducah and Homewood Suites by Hilton Paducah in Kentucky; Hampton Inn & Suites Effingham and Home2 Suites by Hilton Effingham in Illinois; and Home2 Suites by Hilton Joplin and Homewood Suites by Hilton Joplin, MO in Missouri.
Chatham funded the acquisition with available cash and borrowings on its revolving credit facility.
“This very strategic acquisition truly complements our existing portfolio for multiple reasons,” said Jeffrey H. Fisher, Chatham’s president/CEO. “First, the hotels are generally the highest quality properties in their respective markets, with the average age of the portfolio only 10 years. Second, 66% of the portfolio’s rooms are extended-stay, an exact match to our existing portfolio, more than double our nearest peer and is our preferred segment. Third, the hotels benefit from very favorable labor dynamics and generate hotel EBITDA margins that will further increase our margins. Fourth, the portfolio diversifies our geographic footprint into areas of the country that are benefiting from expanded investments in manufacturing and distribution.”
To illustrate, Paducah sits on Interstate 24 and is proximate to the many high traffic commerce routes between St. Louis, Louisville, Nashville and Memphis. Effingham sits at the crossroads of Interstates 57 and 70, midway between Indianapolis and St. Louis, and brings into town almost 200,000 workers from eight neighboring counties each week. Joplin is adjacent to the intersection of both Interstates 44 and 49 in southwest Missouri and benefits from its location between Kansas City, Saint Louis, Oklahoma City and northwest Arkansas, home to Walmart, J.B. Hunt and Tyson Foods.
Fisher continued, “This transaction highlights our extremely successful recycling initiative over the past 18 months, selling older, lower RevPAR, lower-margin hotels at a low capitalization rate and reinvesting those proceeds into newer, higher RevPAR, higher-margin hotels at a higher capitalization rate that will be accretive to earnings and cash flow in 2026.”
Over the past 18 months, Chatham sold six hotels for approximately $100 million. The hotels had an average age of 25 years, RevPAR of $101 and hotel EBITDA margins of 27%. In comparison, the $92 million acquired portfolio has an average age of 10 years, generated RevPAR of $116 and hotel EBITDA margins of 42% in 2025. Although the acquired portfolio will only be included in Chatham’s results for 10 months in 2026, the following summarizes the financial contributions of the acquired portfolio to Chatham’s on a full-year basis:
- 2025 hotel EBITDA of approximately $10 million would represent a 12% increase
- Using 2025 hotel EBITDA and a pro forma blended interest rate of 6%, the acquired portfolio would add approximately $0.10 of adjusted FFO per year
- Chatham’s net debt to EBITDA ratio increases approximately 50 basis points
Fisher concluded, “We have multiple levers to enhance shareholder returns and are executing on those. We have been aggressively repurchasing shares and will continue to do so using free cash flow. We are increasing our common dividend by double digits for the second consecutive year. We have been patiently analyzing many acquisition opportunities, waiting for the right deal that ticks a lot of boxes, and this deal certainly does that. It represents our first acquisition in almost two years. We are enthusiastic about our future.”
Dividend update
The company also increased its quarterly common dividend by 11% to $0.10 per share, the second consecutive year of double-digit increases to its common share dividend.
Chatham’s board of trustees declared both its quarterly common and preferred dividends. The $0.10 per share common dividend and preferred share dividend of $0.41406 per preferred share are payable on April 15 to shareholders of record as of March 31.
Fisher highlighted, “We are proud of the job we’ve done over the past few years repositioning the company for growth. The combination of historically low new supply growth, record amounts of new investments in technology, especially with respect to artificial intelligence and reshoring manufacturing back into the U.S. should result in strong, multi-year growth for the lodging industry. Operationally, management expense pressures, particularly with respect to labor costs, are moderating. Furthermore, this accretive acquisition, which equates to an approximate 10 percent capitalization rate using 2025 hotel net operating income, will provide further growth in free cash flow, giving us the confidence to boost our dividend by a healthy 11% for 2026.”
Tags: Hampton Inn & Suites Paducah Homewood Suites by Hilton Paducah Jeffrey H. Fisher, Chatham Lodging Trust