Chesapeake Lodging Trust (CHSP), a real estate investment trust (:REIT), has recently announced its decision to offer $5.5 million shares to enhance its liquidity. The company has also decided to grant the underwriters a 30-day option to purchase up to an additional 0.8 million shares.
Chesapeake intends to use the net proceeds from the offering to fund developments as well as future acquisitions of hotels, to repay debt under its revolving credit facility, and for general working capital purposes.
J.P. Morgan Securities LLC, part of J.P Morgan Chase & Co. (JPM); Wells Fargo Securities LLC, part of Wells Fargo & Company (WFC); and Deutsche Bank Securities Inc, part of Deutsche Bank AG (DB) are the joint book running managers for the offering.
Subsequent to the end of second quarter 2012, Chesapeake closed on $130 million of secured financings to reduce its interest burden. Also the company completed $125 million worth of preferred share offering. With the additional capital raised from this preferred share offering, the company expects the total investment in hotel real estate to reach approximately $1.25 billion.
Chesapeake owns luxury and upper-upscale hotels in some of the most desirable locations in the United States. The company is specifically focused on ownership and acquisition of hotels at prices below replacement cost, with attractive return on investments and significant upside potential. Currently the company owns 14 hotels with an aggregate of 4,465 rooms in 6 states and the District of Columbia.
Chesapeake currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also have a long-term Neutral recommendation on the stock. One of its competitors, Host Hotels & Resorts Inc (HST) also holds a Zacks #2 Rank, which translates into a short term Buy rating.
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