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Chatham Lodging Trust Announces 7.8 Percent First Quarter RevPAR Increase, Innkeepers Sale to Generate Nearly $3 per Share Profit
Signs Definitive Agreement to Acquire
First Quarter 2014 Highlights
-
Portfolio RevPAR – Increased hotel RevPAR 7.8 percent to
$105 for Chatham’s 25 wholly owned hotels. -
Comparable Hotel RevPAR – Grew hotel RevPAR 6.5 percent, excluding theResidence Inn Washington , D.C. hotel, which was without a brand for a portion of the 2013 first quarter. -
Adjusted EBITDA – Rose 41 percent to
$13.2 million . -
Adjusted FFO – Improved 66 percent to
$7.4 million . Adjusted FFO per diluted share rose 8 percent to$0.28 from$0.26 . - Operating Margins – Expanded hotel EBITDA margins 70 basis points to 34.9 percent. Gross Operating Profit margins rose 10 basis points to 42.2 percent.
-
Innkeepers Joint Venture – Reached agreement to sell the
Cerberus/Chatham joint venture for
$1.3 billion .-
Chatham will recognize a gain of approximately
$77 million or$2.90 per share on the transaction. -
Northstar Realty Finance (NYSE: NRF) and Chatham will acquire 47 of the 51 hotels in an 89.7/10.3 percent joint venture respectively for$958.5 million . -
Chatham will acquire four
Silicon Valley Residence Inn hotels for$341.5 million .
-
Chatham will recognize a gain of approximately
Consolidated Financial Results
The following is a summary of the consolidated financial results for the
first quarter. RevPAR, ADR and occupancy for 2014 and 2013 are based on
hotels owned as of
Three Months Ended | |||||
March 31, | |||||
2014 | 2013 | ||||
RevPAR | $105 | $97 | |||
ADR | $136 | $132 | |||
Occupancy | 77.3% | 74.0% | |||
Net loss | $(1.7) | $(1.6) | |||
Adjusted EBITDA | $13.2 | $9.4 | |||
AFFO | $7.4 | $4.5 | |||
AFFO per diluted share | $0.28 | $0.26 | |||
GOP Margin | 42.2% | 42.1% | |||
Hotel EBITDA Margin | 34.9% | 34.2% | |||
Dividends per share | $0.21 | $0.21 | |||
Top-Line Results Strong, Margins Continue Expanding
“It has been a great start to the year with RevPAR growth of 7.8 percent
driven by 11 of our 25, or 44 percent, of our hotels producing
double-digit improvements,” noted
“Growth was strong across the portfolio, including RevPAR at hotels
acquired in 2013 rising 7.0 percent and RevPAR at our recently rebranded
“Our best-in-class platform continues to deliver some of the industry’s best margins with first quarter hotel EBITDA margins expanding 70 basis points to 34.9 percent growth, despite margins being adversely impacted 30 basis points due to higher than expected utilities costs related to the unseasonably harsh winter conditions across the country,” Fisher pointed out. “Since our IPO in 2010, we have increased full-year hotel EBITDA margins from approximately 31 percent to 37.8 percent for 2013. We expect margins to continue improving in 2014, rising to nearly 40 percent, an estimated four-year improvement of approximately 900 basis points. This is especially gratifying given this significant improvement occurred during a major renovation program. With ADR over the next couple of years expected to comprise most of our RevPAR growth, we believe there is substantial room for continued upside in our margins.”
Innkeepers Joint Venture
During the 2014 first quarter, Chatham received distributions of
As announced in late January, the joint venture began marketing for sale
its 51-hotel, 6,848- room portfolio. The joint venture agreed to sell
the portfolio for a gross purchase price of
“The Cerberus/Chatham joint venture has been a great partnership and has
proven to be a highly successful investment, turning our initial
Northstar will acquire Cerberus’ 89.7 percent interest in the joint
venture, and Chatham will retain its 10.3 percent ownership stake. The
joint venture will acquire 47 of the 51 hotels for a gross purchase
price of
“We look forward to a successful partnership with Northstar in this joint venture,” Fisher emphasized. “We share similar outlooks regarding the health of the hotel industry and performance expectations for the portfolio. Our long-term interests are aligned with a solid capital structure that we believe will provide strong, risk-adjusted returns for our shareholders.”
As part of the transaction, Chatham will acquire four
Chatham plans to partially redevelop and expand all four
The purchase price for the
Capital Structure
As of
“Our balance sheet is in great condition, so we are willing to use
either borrowings under our line of credit or property-specific debt to
fund growth, such as the acquisition of the four
During the first quarter, Chatham instituted a
Two hotels continued their planned, major renovations during the first
quarter: the
Dividend
Chatham’s board of trustees approved in April a dividend increase of 14
percent to an annualized rate of
“With prudent leverage providing capital to externally grow the portfolio and high operating margins generating meaningful cash flow, we have increased our dividend every year since our IPO. The recent increase reflects management’s and the Board of Trustees’ confidence in Chatham and the outlook for the economy/hotel industry,” Craven stated.
Outlook and 2014 Guidance
“We expect 2014 to be an active and prosperous year for Chatham with
solid operating fundamentals in our existing portfolio, strong gains to
be recognized on the recapitalization of the Innkeepers joint venture
and significant external growth attributable to the acquisition of four,
great hotels in the heart of
The company provides guidance, but does not undertake to update it for
any developments in its business. Achievement of the results is subject
to the risks disclosed in the company’s filings with the
- Any acquisitions, debt or equity issuance.
- The Innkeepers transaction as the closing remains subject to certain conditions. The company will issue a separate release and hold an investor call when the Innkeepers transaction closes.
Q2 2014 | 2014 Forecast | ||||
RevPAR | $123-$124 | $115-$117 | |||
RevPAR growth | +7-8% | +5.5-6.5% | |||
Total hotel revenue | $42.6-$43.6 M | $161-$162.5 M | |||
Net income | $6.1-$6.7 M | $12.5-$14.0 M | |||
Net income per diluted share | $0.23-$0.26 | $0.47-$0.53 | |||
Adjusted EBITDA | $19.5-$20.1 M | $68.0-$69.5 M | |||
Adjusted funds from operation ("FFO") | $13.6-$14.2 M | $45.3-$46.8 M | |||
Adjusted FFO per diluted share | $0.51-$0.54 | $1.71-$1.77 | |||
Hotel EBITDA margins | 42.5-43% | 39.8-40.3% | |||
Corporate cash administrative expenses | $1.8 M | $6.7 M | |||
Corporate non-cash administrative expenses | $0.6 M | $2.4 M | |||
Interest expense | $3.3 M | $13.0 M | |||
Non-cash amortization of deferred fees | $0.4 M | $1.6 M | |||
Income taxes | $0.1 M | $0.2 M | |||
Chatham’s share of JV EBITDA | $3.1 M | $10.6 M | |||
Chatham’s share of JV FFO | $1.7 M | $4.9 M | |||
Weighted average shares outstanding | 26.5 M | 26.5 M |
Funds from operations (FFO), Adjusted FFO (AFFO), EBITDA and Adjusted
EBITDA are non-GAAP financial measures within the meaning of the rules
of the
Earnings Call
The company will hold its first quarter 2014 conference later today,
About
Included in this press release are certain “non-GAAP financial
measures,” within the meaning of
FFO As Defined by NAREIT and Adjusted FFO
The company calculates FFO in accordance with standards established
by the
The company further adjusts FFO for certain additional items that are not in NAREIT’s definition of FFO, including acquisition transaction costs and other charges, losses on the early extinguishment of debt and adjustments for unconsolidated partnerships and joint ventures. The company believes that Adjusted FFO provides investors with another financial measure that may facilitate comparisons of operating performance between periods and between REITs that make similar adjustments to FFO.
EBITDA and Adjusted EBITDA
The company calculates EBITDA as net income or loss excluding interest expense; provision for income taxes, including income taxes applicable to sale of assets; depreciation and amortization; and after adjustments for unconsolidated partnerships and joint ventures. The company believes EBITDA is useful to investors in evaluating its operating performance because it helps investors compare the company’s operating performance between periods and between REITs that report similar measures by removing the impact of its capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from its operating results. In addition, the company uses EBITDA as one measure in determining the value of hotel acquisitions and dispositions.
The company further adjusts EBITDA for certain additional items, including acquisition transaction costs and other charges, losses on the early extinguishment of debt, non-cash share-based compensation and adjustments for unconsolidated partnerships and joint ventures, which it believes are not indicative of the performance of its underlying hotel properties. The company believes that Adjusted EBITDA provides investors with another financial measure that may facilitate comparisons of operating performance between periods and between REITs.
Although the company presents FFO, Adjusted FFO, EBITDA and Adjusted EBITDA because it believes they are useful to investors in comparing the company’s operating performance between periods and between REITs, these measures have limitations as analytical tools. Some of these limitations are:
- FFO, Adjusted FFO, EBITDA and Adjusted EBITDA do not reflect the company’s cash expenditures, or future requirements, for capital expenditures or contractual commitments;
- FFO, Adjusted FFO, EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, the company’s working capital needs;
- FFO, Adjusted FFO, EBITDA and Adjusted EBITDA do not reflect funds available to make cash distributions;
- EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the company’s debts;
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may need to be replaced in the future, and FFO, Adjusted FFO, EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
- Non-cash compensation is and will remain a key element of the company’s overall long-term incentive compensation package, although the company excludes it as an expense when evaluating its operating performance for a particular period using adjusted EBITDA;
- Adjusted FFO and Adjusted EBITDA do not reflect the impact of certain cash charges (including acquisition transaction costs) that result from matters the company considers not to be indicative of the underlying performance of its hotel properties; and
- Other companies in the company’s industry may calculate FFO, Adjusted FFO, EBITDA and Adjusted EBITDA differently than the company does, limiting their usefulness as a comparative measure.
The company’s reconciliation of FFO, Adjusted FFO, EBITDA and Adjusted EBITDA to net income (loss) attributable to common shareholders, as determined under GAAP, is set forth below.
Forward-Looking Statement Safe Harbor
Note: This press release contains forward-looking statements within
the meaning of federal securities regulations. These forward-looking
statements are identified by their use of terms and phrases such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "may,"
"should," "plan," "predict," "project," "will," "continue" and other
similar terms and phrases, including references to assumption and
forecasts of future results. Forward-looking statements are not
guarantees of future performance and involve known and unknown risks,
uncertainties and other factors which may cause the actual results to
differ materially from those anticipated at the time the forward-looking
statements are made. These risks include, but are not limited to:
national and local economic and business conditions, including the
effect on travel of potential terrorist attacks, that will affect
occupancy rates at the company’s hotels and the demand for hotel
products and services; operating risks associated with the hotel
business; risks associated with the level of the company’s indebtedness
and its ability to meet covenants in its debt agreements; relationships
with property managers; the company’s ability to maintain its properties
in a first-class manner, including meeting capital expenditure
requirements; the company’s ability to compete effectively in areas such
as access, location, quality of accommodations and room rate structures;
changes in travel patterns, taxes and government regulations which
influence or determine wages, prices, construction procedures and costs;
the company’s ability to complete acquisitions and dispositions; and the
company’s ability to continue to satisfy complex rules in order for the
company to remain a REIT for federal income tax purposes and other risks
and uncertainties associated with the company’s business described in
the company's filings with the
CHATHAM LODGING TRUST | ||||||||
Consolidated Balance Sheets | ||||||||
(In thousands, except share and per share data) | ||||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
(unaudited) | ||||||||
Assets: | ||||||||
Investment in hotel properties, net | $ | 650,428 | $ | 652,877 | ||||
Cash and cash equivalents | 5,821 | 4,221 | ||||||
Restricted cash | 5,286 | 4,605 | ||||||
Investment in unconsolidated real estate entities | 764 | 774 | ||||||
Hotel receivables (net of allowance for doubtful accounts of $53 and $30, respectively). | 2,205 | 2,455 | ||||||
Deferred costs, net | 6,763 | 7,113 | ||||||
Prepaid expenses and other assets | 3,091 | 1,879 | ||||||
Total assets | $ | 674,358 | $ | 673,924 | ||||
Liabilities and Equity: | ||||||||
Mortgage debt | $ | 223,158 | $ | 222,063 | ||||
Revolving credit facility | 55,000 | 50,000 | ||||||
Accounts payable and accrued expenses | 12,944 | 12,799 | ||||||
Distributions and losses in excess of investments of unconsolidated real estate entities | 2,331 | 1,576 | ||||||
Distributions payable | 1,934 | 1,950 | ||||||
Total liabilities | 295,367 | 288,388 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Shareholders' Equity: | ||||||||
Preferred shares, $0.01 par value, 100,000,000 shares | ||||||||
authorized and unissued at March 31, 2014 and December 31, 2013 | - | - | ||||||
Common shares, $0.01 par value, 500,000,000 shares authorized; | ||||||||
26,390,788 and 26,295,558 shares issued and outstanding | ||||||||
at March 31, 2014 and December 31, 2013, respectively | 261 | 261 | ||||||
Additional paid-in capital | 434,505 | 433,900 | ||||||
Accumulated deficit | (58,084 | ) | (50,792 | ) | ||||
Total shareholders' equity | 376,682 | 383,369 | ||||||
Noncontrolling Interests: | ||||||||
Noncontrolling Interest in Operating Partnership | 2,309 | 2,167 | ||||||
Total equity | 378,991 | 385,536 | ||||||
Total liabilities and equity | $ | 674,358 | $ | 673,924 | ||||
CHATHAM LODGING TRUST | |||||||||
Consolidated Statements of Operations | |||||||||
(In thousands, except share and per share data) | |||||||||
(unaudited) | |||||||||
For the three months ended | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
Revenue: | |||||||||
Room | $ | 33,958 | $ | 24,235 | |||||
Food and beverage | 628 | 150 | |||||||
Other | 1,608 | 1,011 | |||||||
Cost reimbursements from unconsolidated real estate entities | 672 | 383 | |||||||
Total revenue | 36,866 | 25,779 | |||||||
Expenses: | |||||||||
Hotel operating expenses: | |||||||||
Room | 7,755 | 5,551 | |||||||
Food and beverage expense | 466 | 134 | |||||||
Telephone expense | 287 | 191 | |||||||
Other hotel operating expense | 443 | 348 | |||||||
General and administrative | 3,426 | 2,578 | |||||||
Franchise and marketing fees | 2,793 | 1,901 | |||||||
Advertising and promotions | 831 | 657 | |||||||
Utilities | 1,620 | 1,065 | |||||||
Repairs and maintenance | 1,999 | 1,445 | |||||||
Management fees | 1,094 | 671 | |||||||
Insurance | 215 | 171 | |||||||
Total hotel operating expenses | 20,929 | 14,712 | |||||||
Depreciation and amortization | 6,316 | 3,756 | |||||||
Property taxes and insurance | 2,650 | 1,987 | |||||||
General and administrative | 2,321 | 1,982 | |||||||
Hotel property acquisition costs and other charges | 1,482 | 177 | |||||||
Reimbursed costs from unconsolidated real estate entities | 672 | 383 | |||||||
Total operating expenses | 34,370 | 22,997 | |||||||
Operating income | 2,496 | 2,782 | |||||||
Interest and other income | 13 | 5 | |||||||
Interest expense, including amortization of deferred fees | (3,738 | ) | (2,841 | ) | |||||
Loss on early extinguishment of debt | (184 | ) | (933 | ) | |||||
Loss from unconsolidated real estate entities | (316 | ) | (631 | ) | |||||
Loss before income tax expense |
(1,729 | ) | (1,618 | ) | |||||
Income tax expense | (3 | ) | - | ||||||
Net loss | $ | (1,732 | ) | $ | (1,618 | ) | |||
Loss per Common Share - Basic: | |||||||||
Net loss attributable to common shareholders | $ | (0.07 | ) | $ | (0.10 | ) | |||
Loss per Common Share - Diluted: | |||||||||
Net loss attributable to common shareholders | $ | (0.07 | ) | $ | (0.10 | ) | |||
Weighted average number of common shares outstanding: | |||||||||
Basic | 26,271,678 | 17,212,124 | |||||||
Diluted | 26,271,678 | 17,212,124 | |||||||
Distributions per common share | $ | 0.21 | $ | 0.21 |
CHATHAM LODGING TRUST | ||||||||
FFO and EBITDA | ||||||||
(In thousands, except share and per share data) | ||||||||
For the three months ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Funds From Operations ("FFO"): | ||||||||
Net loss | $ | (1,732 | ) | $ | (1,618 | ) | ||
Loss on the sale of assets within the unconsolidated real estate entity | 1 | 15 | ||||||
Depreciation | 6,288 | 3,737 | ||||||
Adjustments for unconsolidated real estate entity items | 1,205 | 1,241 | ||||||
FFO | 5,762 | 3,375 | ||||||
Hotel property acquisition costs and other charges | 1,482 | 177 | ||||||
Loss on early extinguishment of debt | 184 | 933 | ||||||
Adjustments for unconsolidated real estate entity items | 2 | 3 | ||||||
Adjusted FFO | $ | 7,430 | $ | 4,488 | ||||
Weighted average number of common shares | ||||||||
Basic | 26,271,678 | 17,212,124 | ||||||
Diluted | 26,536,763 | 17,408,275 | ||||||
For the three months ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Earnings Before Interest, Taxes, | ||||||||
Depreciation and Amortization ("EBITDA"): | ||||||||
Net loss | $ | (1,732 | ) | $ | (1,618 | ) | ||
Interest expense | 3,738 | 2,841 | ||||||
Income tax expense | 3 | - | ||||||
Depreciation and amortization | 6,316 | 3,756 | ||||||
Adjustments for unconsolidated real estate entity items | 2,624 | 2,736 | ||||||
EBITDA | 10,949 | 7,715 | ||||||
Hotel property acquisition costs and other charges | 1,482 | 177 | ||||||
Loss on early extinguishment of debt | 184 | 933 | ||||||
Adjustments for unconsolidated real estate entity items | 2 | 3 | ||||||
Loss on the sale of assets within the unconsolidated real estate entity | 1 | 15 | ||||||
Share based compensation | 585 | 548 | ||||||
Adjusted EBITDA | $ | 13,203 | $ | 9,391 |
Source:
Chatham Lodging Trust
Dennis Craven, 561-227-1386
Chief
Financial Officer
or
Media:
Daly Gray, Inc.
Chris
Daly, 703-435-6293