Chesapeake Lodging Trust IPO: Upscale Hotel Opportunity

Dec. 7.09 | About: Chesapeake Lodging (CHSP)

Chesapeake Lodging Trust (NYSE:CHSP), a specialty REIT planning to acquire upscale hotel properties, is expected to float its IPO this week.

Business Overview (from prospectus)

We are a self-advised hotel investment company organized in June 2009. We intend to focus our investments primarily in upper upscale hotels in major business, airport and convention markets and, on a selective basis, in premium select-service hotels in urban settings or unique locations in the United States. We believe current industry dynamics will create attractive opportunities to acquire high quality hotel properties, at prices well below replacement costs, with attractive yields on investment and significant upside potential.

Offering: 12.5 million shares at $20 per share. Net proceeds will be used to pay off debt and investment in hotel properties.

Lead Underwriters: J.P. Morgan (NYSE:JPM), Deutsche Bank (NYSE:DB), FBR Capital Markets (FBCM)

Financial Highlights:

As of the date of this prospectus, we have not commenced any operations and will not commence any operations until we have completed the offering and the concurrent private placements.

Competitors:

We believe that competition for the acquisition of hotels is highly fragmented. We face competition from institutional pension funds, private equity investors, other REITs and numerous local, regional and national owners, including franchisors, in each of our markets. Some of these entities may have substantially greater financial resources than we do and may be able and willing to accept more risk than we can prudently manage. Competition generally may increase the bargaining power of property owners seeking to sell and reduce the number of suitable investment opportunities offered to us.

The hotel industry is highly competitive. Upon the acquisition of hotel properties, our hotels will compete with other hotels for guests in each market in which we will operate. Competitive advantage is based on a number of factors, including location, convenience, brand affiliation, room rates, range of services and guest amenities or accommodations offered and quality of customer service. Competition will often be specific to the individual markets in which our hotels will be located and includes competition from existing and new hotels operated under brands in the relevant segments. Increased competition could harm our occupancy, ADR and RevPAR, or may require us to provide additional amenities or make capital improvements that we otherwise would not have to make, which may reduce our profitability.

Additional Resources: