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Chatham Lodging Trust Announces Record Third Quarter Results
RevPAR Increases 10.5 Percent, Margins Gain 640 Basis Points to Industry Leading 46.5 Percent, Adjusted EBITDA Climbs 82 Percent, Adjusted FFO Expands 86 Percent
Third Quarter 2014 Highlights
-
Portfolio RevPAR – Increased hotel RevPAR 10.5 percent to
$142 for Chatham’s 29 comparable, wholly owned hotels, excluding theHyatt Place Denver/Cherry Creek which was closed for brand conversion during the 2013 third quarter. -
Adjusted EBITDA – Improved 82 percent to
$28.5 million . -
Adjusted FFO – Rose 86 percent to
$20.1 million . Adjusted FFO per diluted share advanced 52 percent to$0.73 from$0.48 , exceeding consensus estimates. - Operating Margins – Enhanced hotel EBITDA margins 640 basis points to an industry-leading 46.5 percent. Year-over-year comparable hotel EBITDA margins advanced 210 basis points for the quarter (includes all hotels regardless of ownership).
-
Expanded Strategic Joint Venture Relationship with NorthStar,
Boosted Acquisition Pipeline Through Joint Venture Deals – Created
Chatham/NorthStar joint venture which agreed to purchase a 52-hotel,
6,976-room portfolio of upscale, extended-stay and premium-branded,
select-service hotels for a cash purchase price of approximately
$1.1 billion fromInland American Real Estate Trust, Inc. Chatham will acquire four of the 52-hotels for$107 million . Closing is expected to occur in earlyNovember 2014 .
Consolidated Financial Results
The following is a summary of the consolidated financial results for the
three and nine months ended
Three Months Ended | Nine Months Ended | |||||||
September 30, | September 30, | |||||||
2014 | 2013 | 2014 | 2013 | |||||
Net income | $8.7 | $2.5 | $72.1 | $3.1 | ||||
Net income per diluted share to common shareholders | $0.31 | $0.11 | $2.67 | $0.15 | ||||
RevPAR | $142 | $128 | $129 | $118 | ||||
ADR | $161 | $150 | $154 | $145 | ||||
Occupancy | 88.1% | 85.7% | 84.3% | 81.4% | ||||
Adjusted EBITDA | $28.5 | $15.6 | $63.2 | $38.7 | ||||
GOP Margin | 51.9% | 46.7% | 48.7% | 45.4% | ||||
Hotel EBITDA Margin | 46.5% | 40.1% | 42.6% | 38.5% | ||||
AFFO | $20.1 | $10.8 | $42.4 | $24.1 | ||||
AFFO per diluted share | $0.73 | $0.48 | $1.57 | $1.23 | ||||
Dividends per share | $0.24 | $0.21 | $0.69 | $0.63 | ||||
Industry-Leading Top-Line Growth and
“Our third quarter set numerous records, with RevPAR surging 10.5
percent, well above industry growth of 9.2 percent, and our
industry-leading margins accelerating another 640 basis points to 46.5
percent,” highlighted
“Almost 90 percent of our portfolio is located in higher growth
“Our best-in-class platform combines a great hotel investment team at
Chatham with Island Hospitality, the best operator in this class at
generating unparalleled margins. Portfolio RevPAR was
“Island has a long track record of aggressively driving profits to the bottom line and generating strong internal profit growth as evidenced by the outstanding margins. Combining our high performance portfolio with a capital structure based on prudent leverage and well‐timed access to capital has enabled us to generate one of the highest values of adjusted FFO per share among all lodging REITs. Since 2010 when we completed our IPO, Adjusted FFO per share has grown at an average annual rate of 30 percent based on the midpoint of our 2014 guidance, and we expect to deliver a similar rate of growth in 2015.”
Innkeepers Joint Venture Investment
The Innkeepers joint-venture portfolio produced 2014 third quarter
RevPAR growth of 10.3 percent to
Inland Joint Venture Investment
As previously announced, Chatham and
A new joint venture between NorthStar and Chatham will acquire 48 of the
52 hotels for approximately
“This is our second joint-venture investment with NorthStar. Combined,
the two joint ventures provide Chatham with an ownership investment in
approximately
Concurrent with the closing of the transaction, which is expected to
close in early November, Chatham will acquire four of the Inland
portfolio hotels, comprising an aggregate of 575 rooms, for a gross
purchase price of approximately
-
120-room
Residence Inn by Marriott West UniversityHouston, Texas -
100-room Courtyard by Marriott West University
Houston, Texas -
179-room
Hilton Garden Inn Burlington , Mass. -
176-room Courtyard by
Marriott Addison (suburbanDallas ),Texas
Acquisitions
During the quarter, Chatham acquired the 194-room
“Through the first three quarters of 2014, Denver RevPAR grew 16.2
percent, second highest among the top 25 markets in
Capital Markets
During the third quarter, the company completed several capital
transactions with proceeds utilized to acquire the
-
On
July 2, 2014 , the company issued a$30 million loan on its SpringHill SuitesSavannah, Ga. The 10-year loan carries an interest rate of 4.62 percent and is interest-only for the first five years. -
On
September 24, 2014 , the company completed a follow-on offering of 6,900,000 common shares at a price per share of$21.85 , resulting in gross proceeds of$150.8 million . -
During the third quarter, Chatham issued 219,000 shares at an average
price of
$23.26 through its At the Market Equity Offering Plan, generating proceeds of approximately$5.1 million , and also issued 925 shares through its Dividend Reinvestment and Direct Share Purchase Plan at a weighted average price of$22.25 , generating proceeds of$21 thousand .
“Equity is precious, and we take seriously our responsibility to be good stewards of capital dollars invested in Chatham,” Craven said. “We will maintain a proper balance of equity and debt to fund our acquisitions, expansion and reinvestment plans. With long-term interest rates still at historically low levels, we will continue to issue long-term debt and push our maturities further out on the curve. We remain comfortable operating at higher than current leverage levels given the low borrowing costs and the outlook for the hotel industry.”
Chatham will fund its Inland investments of
Capital Structure
As of
There were no major renovations during the third quarter, and none
planned for the remainder of the year. Chatham expects to commence the
expansion of its
Dividend
Chatham currently pays a monthly dividend of
2014 Guidance
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
Q4 2014 | 2014 Forecast | |||
RevPAR | $112-$114 | $122-$123 | ||
RevPAR growth | +5.5-7.5% | +8.2-8.7% | ||
Total hotel revenue | $52.0-$53.0 M | $195.0-$196.0 M | ||
Net income (loss) | $(0.4)-$0.4 M | $71.4-$72.2 M | ||
Net income per diluted share | $(0.02)-$0.01 | $2.48-$2.51 | ||
Adjusted EBITDA | $21.2-$22.0 M | $84.6-$85.4 M | ||
Adjusted funds from operation ("FFO") | $12.4-$13.2 M | $55.0-$55.8 M | ||
Adjusted FFO per diluted share | $0.36-$0.39 | $1.91-$1.94 | ||
Hotel EBITDA margins | 40.0-40.5% | 41.9-42.0% | ||
Corporate cash administrative expenses | $2.0 M | $7.8 M | ||
Corporate non-cash administrative expenses | $0.6 M | $2.4 M | ||
Interest expense | $6.2 M | $19.8 M | ||
Non-cash amortization of deferred fees | $0.4 M | $1.7 M | ||
Income taxes | $0.1 M | $0.2 M | ||
Chatham’s share of JV EBITDA | $2.4-$2.5 M | $10.9-$11.0 M | ||
Chatham’s share of JV FFO | $0.9-$1.0 M | $5.3-$5.4 M | ||
Weighted average shares outstanding | 34.0 M | 28.8 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 third 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 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) | |||||||
September 30, | December 31, | ||||||
2014 | 2013 | ||||||
(unaudited) | |||||||
Assets: | |||||||
Investment in hotel properties, net | $ | 994,848 | $ | 652,877 | |||
Cash and cash equivalents | 67,056 | 4,221 | |||||
Restricted cash | 15,301 | 4,605 | |||||
Investment in unconsolidated real estate entities | 3,692 | 774 | |||||
Hotel receivables (net of allowance for doubtful accounts of $65 and $30, respectively) |
4,203 | 2,455 | |||||
Deferred costs, net | 7,202 | 7,113 | |||||
Prepaid expenses and other assets | 2,870 | 1,879 | |||||
Total assets | $ | 1,095,172 | $ | 673,924 | |||
Liabilities and Equity: | |||||||
Mortgage debt | $ | 473,904 | $ | 222,063 | |||
Revolving credit facility | - | 50,000 | |||||
Accounts payable and accrued expenses | 17,818 | 12,799 | |||||
Distributions and losses in excess of investments of unconsolidated real estate entities | - | 1,576 | |||||
Distributions payable | 2,850 | 1,950 | |||||
Total liabilities | 494,572 | 288,388 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Shareholders' Equity: | |||||||
Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at September 30, 2014 and December 31, 2013 |
- | - | |||||
Common shares, $0.01 par value, 500,000,000 shares authorized; 33,997,682 and 26,295,558 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively |
337 | 261 | |||||
Additional paid-in capital | 594,528 | 433,900 | |||||
Retained earnings (distributions in excess of retained earnings) | 2,389 | (50,792 | ) | ||||
Total shareholders' equity | 597,254 | 383,369 | |||||
Noncontrolling Interests: | |||||||
Noncontrolling Interest in Operating Partnership | 3,346 | 2,167 | |||||
Total equity | 600,600 | 385,536 | |||||
Total liabilities and equity | $ | 1,095,172 | $ | 673,924 | |||
CHATHAM LODGING TRUST | ||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
(unaudited) | ||||||||||||||||
For the three months ended | For the nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenue: | ||||||||||||||||
Room | $ | 57,482 | $ | 33,182 | $ | 135,417 | $ | 86,377 | ||||||||
Food and beverage | 666 | 368 | 1,879 | 717 | ||||||||||||
Other | 2,098 | 1,362 | 5,727 | 3,575 | ||||||||||||
Cost reimbursements from unconsolidated real estate entities | 416 | 458 | 1,581 | 1,226 | ||||||||||||
Total revenue | 60,662 | 35,370 | 144,604 | 91,895 | ||||||||||||
Expenses: | ||||||||||||||||
Hotel operating expenses: | ||||||||||||||||
Room | 10,672 | 6,845 | 27,229 | 18,460 | ||||||||||||
Food and beverage | 487 | 189 | 1,386 | 506 | ||||||||||||
Telephone | 356 | 236 | 929 | 643 | ||||||||||||
Other hotel operating | 609 | 430 | 1,559 | 1,157 | ||||||||||||
General and administrative | 4,439 | 3,159 | 11,712 | 8,493 | ||||||||||||
Franchise and marketing fees | 4,694 | 2,663 | 11,088 | 6,807 | ||||||||||||
Advertising and promotions | 1,059 | 738 | 2,749 | 2,046 | ||||||||||||
Utilities | 2,148 | 1,492 | 5,250 | 3,675 | ||||||||||||
Repairs and maintenance | 2,363 | 1,710 | 6,419 | 4,711 | ||||||||||||
Management fees | 1,883 | 947 | 4,373 | 2,430 | ||||||||||||
Insurance | 273 | 192 | 706 | 540 | ||||||||||||
Total hotel operating expenses | 28,983 | 18,601 | 73,400 | 49,468 | ||||||||||||
Depreciation and amortization | 10,273 | 4,748 | 23,953 | 12,526 | ||||||||||||
Property taxes and insurance | 3,254 | 2,297 | 8,712 | 6,329 | ||||||||||||
General and administrative | 2,718 | 1,910 | 7,403 | 5,956 | ||||||||||||
Hotel property acquisition costs and other charges | 335 | 1,345 | 7,376 | 2,581 | ||||||||||||
Reimbursed costs from unconsolidated real estate entities | 416 | 458 | 1,581 | 1,226 | ||||||||||||
Total operating expenses | 45,979 | 29,359 | 122,425 | 78,086 | ||||||||||||
Operating income | 14,683 | 6,011 | 22,179 | 13,809 | ||||||||||||
Interest and other income | 62 | 9 | 89 | 124 | ||||||||||||
Interest expense, including amortization of deferred fees | (6,714 | ) | (2,775 | ) | (14,815 | ) | (8,433 | ) | ||||||||
Loss on early extinguishment of debt | - | - | (184 | ) | (933 | ) | ||||||||||
Income (loss) from unconsolidated real estate entities | 845 | (674 | ) | (1,471 | ) | (1,394 | ) | |||||||||
Net gain from remeasurement and sale of investment in unconsolidated real estate entities | - | - | 66,701 | - | ||||||||||||
Income before income tax expense | 8,876 | 2,571 | 72,499 | 3,173 | ||||||||||||
Income tax expense | (44 | ) | (30 | ) | (85 | ) | (75 | ) | ||||||||
Net income | 8,832 | 2,541 | 72,414 | 3,098 | ||||||||||||
Net income attributable to noncontrolling interests | (132 | ) | - | (240 | ) | - | ||||||||||
Net income attributable to common shareholders | $ | 8,700 | $ | 2,541 | $ | 72,174 | $ | 3,098 | ||||||||
Income per Common Share - Basic: | ||||||||||||||||
Net income attributable to common shareholders | $ | 0.32 | $ | 0.11 | $ | 2.70 | $ | 0.15 | ||||||||
Income per Common Share - Diluted: | ||||||||||||||||
Net income attributable to common shareholders | $ | 0.31 | $ | 0.11 | $ | 2.67 | $ | 0.15 | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 27,370,815 | 22,508,988 | 26,697,483 | 19,308,809 | ||||||||||||
Diluted | 27,695,347 | 22,769,282 | 26,994,657 | 19,539,941 | ||||||||||||
Distributions per common share | $ | 0.24 | $ | 0.21 | $ | 0.69 | $ | 0.63 | ||||||||
CHATHAM LODGING TRUST | |||||||||||||||
FFO and EBITDA | |||||||||||||||
(In thousands, except share and per share data) | |||||||||||||||
For the three months ended | For the nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Funds From Operations ("FFO"): | |||||||||||||||
Net income | $ | 8,832 | $ | 2,541 | $ | 72,414 | $ | 3,098 | |||||||
Noncontrolling interests | (132 | ) | - | (240 | ) | - | |||||||||
Net gain from remeasurement and sale of investment in unconsolidated real estate entities | - | - | (66,701 | ) | - | ||||||||||
Loss (gain) on the sale of assets within the unconsolidated real estate entity | - | (35 | ) | 1 | 238 | ||||||||||
Depreciation | 10,238 | 4,726 | 23,862 | 12,466 | |||||||||||
Adjustments for unconsolidated real estate entity items | 1,038 | 1,305 | 3,472 | 3,832 | |||||||||||
FFO attributable to common shareholders | 19,976 | 8,537 | 32,808 | 19,634 | |||||||||||
Hotel property acquisition costs and other charges | 335 | 1,345 | 7,376 | 2,581 | |||||||||||
Loss on early extinguishment of debt | - | - | 184 | 933 | |||||||||||
Adjustments for unconsolidated real estate entity items | (190 | ) | 954 | 2,031 | 962 | ||||||||||
Adjusted FFO | $ | 20,121 | $ | 10,836 | $ | 42,399 | $ | 24,110 | |||||||
Weighted average number of common shares | |||||||||||||||
Basic | 27,370,815 | 22,508,988 | 26,697,483 | 19,308,809 | |||||||||||
Diluted | 27,695,347 | 22,769,282 | 26,994,657 | 19,539,941 | |||||||||||
For the three months ended | For the nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"): |
|||||||||||||||
Net income | $ | 8,832 | $ | 2,541 | $ | 72,414 | $ | 3,098 | |||||||
Interest expense | 6,714 | 2,775 | 14,815 | 8,433 | |||||||||||
Income tax expense | 44 | 30 | 85 | 75 | |||||||||||
Depreciation and amortization | 10,273 | 4,748 | 23,953 | 12,526 | |||||||||||
Adjustments for unconsolidated real estate entity items | 1,981 | 2,775 | 7,369 | 8,279 | |||||||||||
Noncontrolling interests | (132 | ) | - | (240 | ) | - | |||||||||
EBITDA | 27,712 | 12,869 | 118,396 | 32,411 | |||||||||||
Hotel property acquisition costs and other charges | 335 | 1,345 | 7,376 | 2,581 | |||||||||||
Loss on early extinguishment of debt | - | - | 184 | 933 | |||||||||||
Adjustments for unconsolidated real estate entity items | (168 | ) | 954 | 2,130 | 960 | ||||||||||
Net gain from remeasurement and sale of investment in unconsolidated real estate entities | - | - | (66,701 | ) | - | ||||||||||
Loss (gain) on the sale of assets within the unconsolidated real estate entity | - | (35 | ) | 1 | 240 | ||||||||||
Share based compensation | 627 | 509 | 1,840 | 1,589 | |||||||||||
Adjusted EBITDA | $ | 28,506 | $ | 15,642 | $ | 63,226 | $ | 38,714 | |||||||
CHATHAM LODGING TRUST | ||||||||||||
Hotel EBITDA | ||||||||||||
(In thousands, except share and per share data) | ||||||||||||
For the three months ended | For the nine months ended | |||||||||||
September 30, | September 30, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
Total revenue, excluding cost reimbursements | $ | 60,246 | $ | 34,912 | $ | 143,023 | $ | 90,669 | ||||
Total hotel operating expenses | 28,983 | 18,601 | 73,400 | 49,468 | ||||||||
Gross operating income | 31,263 | 16,311 | 69,623 | 41,201 | ||||||||
Less property taxes and insurance |
3,254 | 2,297 | 8,712 | 6,329 | ||||||||
Hotel EBITDA | $ | 28,009 | $ | 14,014 | $ | 60,911 | $ | 34,872 | ||||
Source:
Company:
Chatham Lodging Trust
Dennis Craven
Chief
Financial Officer
561-227-1386
or
Media
Daly Gray,
Inc.
Chris Daly
703-435-6293