Chesapeake Refinances Term Loan - Analyst Blog

Chesapeake Lodging Trust (CHSP) has accomplished the refinancing of $130.0 million term loan (due on Jul 8, 2014) with 2 individual fixed-rate mortgage loans totaling $185.5 million. The move has helped the company lock in the long-term, fixed-rate debt at a favorable weighted-average interest rate of 3.88% amid the rise in U.S. treasuries and interest rates.

The first is a 7-year, $92.5 million mortgage loan, carrying a fixed interest rate of 3.50% per annum. Secured by Le Meridien San Francisco, this loan was provided by PNC Bank, N.A. of The PNC Financial Services Group Inc. (PNC).

The other is a 10-year, $93.0 million mortgage loan bearing a fixed interest rate of 4.25% per annum. Secured by W Chicago – City Center, the loan was provided by Goldman Sachs Mortgage Company. For both the loans, principal and interest payments are based on a 25-year principal amortization.

Chesapeake Lodging owns luxury and upper-upscale hotels in some of the most desirable locations in the United States. The company specifically focuses on owning and acquiring hotels at prices below replacement cost, with attractive return on investments and significant upside potential.

Currently, the company owns 20 hotels with an aggregate of 5,932 rooms in 8 states and the District of Columbia. Notably, the company is experiencing a value appreciation in hotels acquired in 2010 and 2011.

Chesapeake Lodging is scheduled to report its second-quarter results after the market closes on Aug 5, 2013. The Zacks Consensus Estimate for FFO (funds from operations) per share for the upcoming quarter is pegged at 54 cents per share.

The earnings ESP (Read: Zacks Earnings ESP: A Better Method) for Chesapeake Lodging is 0.00% for the second quarter. This, along with its Zacks Rank #2 (Buy), reduces the chances of a positive earnings surprise.

Other stocks that are also worth a look with a Zacks Rank #1 (Strong Buy) include Sunstone Hotel Investors Inc. (SHO) and Diamondrock Hospitality Co. (DRH).
 

Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.