Hotel REIT Chatham Lodging Trust CLDT recently announced the acquisition of the Residence Inn by Marriott Charleston Summerville, S.C. This 96-room hotel, located in Nexton, has been acquired for $20.8 million, or around $217,000 per room. It also marks the company’s second hotel in Nexton after it acquired Courtyard by Marriott Charleston Summerville last year.
The company used available cash and borrowings on its unsecured credit facility. Island Hospitality Management will manage the property. The company estimates that this property has been purchased at a year two net operating income capitalization rate of around 8%.
The expansion of Chatham Lodging’s portfolio in Nexton seems a strategic fit given that it is a rapidly growing area near Charleston. It is anticipated to become a thriving place over the next decade, with a projection of around 10,000 homes, eight million commercial square feet of area, and a medical campus.
Also, a lot of impressive development is taking place around Nexton. Volvo has completed the construction of its first American factory nearby Nexton. Over the next few months, this 2.3-million-square-foot facility of Volvo on approximately 3,000 acres is likely to see the first cars coming off the production line.
Further, Volvo has opted for an expansion of the facility with a second production line that is estimated to be completed in 2020. In addition, other major companies like Daimler and Boeing have their facilities in the area, as well as have made land acquisitions for further expansions. As such, the two above-mentioned hotels, situated nearby, are likely to witness solid top-line growth backed by corporate demand.
In fact, with corporate investment and expansion moves, along with relocation of reputed companies over the recent years, South Carolina has emerged as one of the fastest growing states in the nation. Specifically, the greater Charleston area enjoys presence of companies belonging to aerospace, automotive, bioscience, marine and distribution industries. Also, there is significant presence of technology companies. This makes the corporate demand not only high but also well diversified in this region.
This Zacks Rank #3 (Hold) company has outperformed its industry in the past year. Chatham Lodging’s shares have gained 8.7%, while the industry has edged down 0.7% during this time frame.
Stocks to Consider
Better-ranked stocks in the REIT space include Condor Hospitality Trust, Inc. CDOR, Park Hotels and Resorts, Inc. PK and Life Storage, Inc. LSI. All three stocks carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Condor Hospitality Trust’s Zacks Consensus Estimate for 2018 FFO per share has been revised 0.9% upward over the past 30 days.
Park Hotels and Resorts’ FFO per share estimates for 2018 inched up 1.4% in 30 days’ time.
Life Storage’s FFO per share estimates for the current year moved 1.5% north in the past 30 days to $5.45.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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