Innkeepers USA Trust has emerged from Chapter 11 bankruptcy by completing the sale of 64 of its hotels to a joint venture between the private equity firm Cerberus Capital Management and the real estate investment trust Chatham Lodging Trust.
The transaction occurred for more than $1 billion. As part of the sale, creditors will yield an increase of approximately $75 million compared to the baseline bid established in a May auction.
The fixed-rate debt, serviced by Midland, will be modified to nearly $675 million for 45 of the hotels acquired by the joint venture. The other 19 hotels are unencumbered.
Lehman ALI Inc., an affiliate of Lehman Holdings Brothers, will receive a cash payment of $224 million as a secured creditor in connection with the sale of Innkeepers’ assets.
“This agreement provides a provides a significant cash premium to the original stalking horse bid and a meaningful return to our creditors,” said Marc Beilinson, chief restructuring officer at Palm Beach, Fla.-based Innkeepers. “Despite conventional wisdom, we have demonstrated that the myriad complex issues surrounding commercial mortgage-backed securities can be effectively resolved utilizing Chapter 11 process.”
Beilinson said the real estate investment trust continued to make renovations to its properties despite being in bankruptcy.
U.S. Bankruptcy Court in the Southern District of New York has approved the joint venture’s acquisition from Innkeepers.
Chatham Lodging Trust, Palm Beach, Fla., owns about a 10% interest in the joint venture and funded its $37 million investment in the joint venture with borrowings under its senior secured revolving credit facility. As part of the joint venture, the trust will provide certain asset management services and receive interest based on meeting certain return thresholds.
All but one of the 64 acquired hotels will continue to be managed by Island Hospitality Management, which is 90% owned by Jeffrey Fisher, the CEO of Chatham Lodging Trust.
“Chatham and Cerberus are excited about owning this valuable portfolio and look forward to creating significant value for their shareholders and investors,” Fisher said.