I would recommend researching the previous Innkeepers deal for some insight into what Jeff Fisher believes is a good deal.
The big different is that Innkeepers was leveraged up to the hilt with a 99% equity to debt ratio.
Chatham is close to 50%, which is extremely better when it comes to valuation.
The price Innkeepers went for was $17.75 and the book value was close to $10 per share.
Based on FFO multiple it was at 14X.
If CLDT gets a 14X multiple with an estimate at 1.6 it would be at 22.4.
Chatham will earn more next year, so a 20% increase in FFO would mean a roughly 1.9 multiple.
1.9X14 = $26.6.
I estimate the fair value based on future earnings and expectations to be around $27 to $28 a share in a leveraged buyout. The new company can take on more debt and increase FFO by purchasing new assets that are on sale right now.