Cerberus Capital Management LP and Chatham Lodging Trust won a bankruptcy auction for 64 hotels owned by Innkeepers USA Trust with a bid of about $1.13 billion.
A joint venture between Cerberus and Chatham won the bidding for the properties after a Lehman Brothers Holdings Inc. affiliate and Five Mile Capital Partners agreed to lead off the auction with a $970.7 million offer. The purchase price includes assumed debt.
“We are excited to acquire these premium-branded select-service hotels early in the recovery of the lodging industry,” Jeffrey Fisher, Chatham’s chief executive officer, said today in a statement. “With a new capital structure in place, a committed partner in Cerberus and strong franchisor affiliation, our joint venture is well positioned to create value for our shareholders and Cerberus.”
Chatham also won the bidding for five additional properties with a bid of more than $190 million, said a person with knowledge of the auction.
Brian Lennon of the law firm of Kirkland & Ellis, which represents Innkeepers, didn’t return a phone call seeking comment.
The parent of Innkeepers, owner of hotels in 20 states, including Residence Inns by Marriott and Hampton Inns, is managed by an affiliate of Apollo Global Management LLC, Leon Black’s private-equity firm.
Cerberus, based in New York, said it has about $23 billion under management. Chatham, a Palm Beach, Florida-based real estate investment trust, owns 13 hotels with about 1,650 rooms in nine states.
“Our ability to work with Innkeepers founder and former CEO Jeff Fisher, now CEO at Chatham, is great news for the company and for its employees,” Tim Price, managing director at Cerberus, said in a statement. “No one knows Innkeepers better than Jeff, and we are excited about the company’s future prospects with a new capital structure in place.”
Barclays Capital, a unit of London-based Barclays Plc, was Chatham’s financial adviser on the bid. The purchase still needs approval from a bankruptcy judge.
Apollo Investment Corp. paid $1.5 billion for Innkeepers in 2007 as travel rose, getting 74 hotels. Three years later, Innkeepers said it missed some monthly interest payments as it tried to hold onto money.
Innkeepers was led from its start in 1994 until the sale to Apollo by Fisher. Investors made 316 percent on their money in those years, before real estate prices tumbled. Chatham Lodging sold $150 million in shares to the public in 2010.
Lehman Ali helped Apollo finance the buyout of Palm Beach, Florida-based Innkeepers with a $1.2 billion loan.
The case is In re Innkeepers USA Trust, 10-13800, U.S. Bankruptcy Court, Southern District of New York (Manhattan).