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Chatham Lodging Trust Exceeds Expectations on Strong RevPAR Growth
Industry Leading Margins Surge 580 Basis Points
First Quarter 2015 Highlights
-
Portfolio RevPAR – Increased hotel RevPAR 6.9 percent to
$118 for Chatham’s 35, wholly owned hotels. -
Adjusted FFO – Rose 102 percent to
$15.0 million . Adjusted FFO per diluted share advanced 43 percent to$0.40 from$0.28 , exceeding consensus estimates. - Operating Margins – Improved hotel EBITDA margins 580 basis points to an industry leading 40.7 percent. Year-over-year comparable hotel EBITDA margins advanced 130 basis points for the quarter (includes all hotels regardless of ownership).
-
Acquisitions – Invested
$90 million to acquire the 240-suiteResidence Inn San Diego Downtown-Gaslamp District with an estimated year one capitalization rate of 7.6 percent. -
Dividend – Raised the monthly dividend 25 percent to
$0.10 .
Consolidated Financial Results
The following is a summary of the consolidated financial results for the
first quarter ended
Three Months Ended | ||||
March 31, | ||||
2015 | 2014 | |||
Net income (loss) | $1.4 | $(1.7) | ||
Net income (loss) per diluted share to common shareholders |
$0.04 |
$(0.07) |
||
RevPAR | $118 | $110 | ||
ADR | $156 | $143 | ||
Occupancy | 76% | 77% | ||
Adjusted EBITDA | $24.4 | $13.2 | ||
GOP Margin | 47.7% | 42.2% | ||
Hotel EBITDA Margin | 40.7% | 34.9% | ||
AFFO | $15.0 | $7.4 | ||
AFFO per diluted share | $0.40 | $0.28 | ||
Dividends per share | $0.30 | $0.21 | ||
High Quality Infill Portfolio Generates Strong Top-Line Growth as Margin Expansion Continues
“Our portfolio continues to demonstrate its superior quality with top-line results above our expectations and strong profit flow-through driving adjusted FFO per share above our estimates,” said Jeffrey H. Fisher, Chatham’s chairman, president and chief executive officer.
Additional data points on the portfolio’s first quarter RevPAR performance include:
-
Portfolio RevPAR increased 7.9 percent if not for the Homewood Suites
Orlando -Maitland hotel’s 33.6 percent RevPAR decrease due to the previously disclosed water supply line replacement - Twelve hotels produced double digit RevPAR increases
-
Four
Silicon Valley hotels produced an overall RevPAR increase of 19.0 percent -
RevPAR at the recently acquired
San Diego Gaslamp Residence Inn rose 3.5 percent while transitioning management during the quarter - RevPAR at the four hotels acquired from the Inland portfolio rose 6.6 percent
-
Four
Houston medical center area hotels saw RevPAR increase 1.0 percent, adversely impacted by softness in the overallHouston market -
RevPAR at the
Residence Inn Washington D.C . rose 7.0 percent
“Silicon Valley remains an excellent market. Our four Residence Inn
hotels carry the best brands for the lodging consumer in the Valley and
are located in close proximity to some of the world’s strongest
technology companies which are investing heavily in expansion and
growth,” Fisher noted. “In addition to
“I was particularly pleased with the improvement in the performance of
the four hotels we acquired out of the Inland portfolio which produced
first quarter RevPAR growth of 6.6 percent, despite the weakness in the
“We have assembled an extremely high quality, select-service and upscale, extended-stay hotel portfolio where daily rates are comparable to a number of full-service brands, and through aggressive management, we are able to produce the highest margins among all public lodging REITs with operating margins of 48 percent and hotel EBITDA margins of 41 percent,” Fisher highlighted. “Year-over-year, our operating margins were up 550 basis points, and our hotel EBITDA margins were up 580 basis points, a reflection of the quality of the hotels acquired in the past 12 months. Comparable operating margins were up 150 basis points, and hotel EBITDA margins were up 130 basis points for the quarter. With our near-term RevPAR growth expected to be entirely attributable to increased rates, we remain bullish about our ability to continue margin expansion in 2015 and beyond.”
Joint Venture Investment Performance
The Innkeepers joint-venture portfolio produced 2015 first quarter
RevPAR growth of 3.6 percent to
For the Inland joint venture portfolio, RevPAR rose 1.6 percent to
“Our partnership with
Acquisitions
During the quarter, Chatham acquired the 240-suite
Capital Markets & Capital Structure
During the first quarter, the company completed several capital transactions, including:
-
In January, Chatham issued 4,025,000 shares in an underwritten public
offering at a price of
$30.00 per share, raising gross proceeds of$120.8 million . Chatham invested$90 million of the offering to acquire theResidence Inn San Diego Gaslamp . - Chatham issued 1,193 shares under its Dividend Reinvestment and Direct Share Purchase Plan and did not issue any shares under the company’s At the Market Equity Offering Plan.
-
In March, Chatham repaid the
$4.8 million loan outstanding on the SpringHill Suites inWashington, Pa. , using borrowings on its credit facility.
As of
“Over the past several years, we have maintained leverage between the
mid-30s and the low 50s to fund our significant growth and at the same
time used long-term debt at very attractive rates,” explained
During the first quarter, Chatham substantially completed the full
renovation of the Residence Inn by Marriott
Chatham expects to initiate the expansion of its
“We are excited to get the first of these projects under way, and we are
in the process of finalizing the total costs for the
Dividend
On
Outlook and 2015 Guidance
“We have successfully created significant, long-term value for our
shareholders by making disciplined acquisitions at very attractive
pricing and funding that growth with reasonable leverage. Adding
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
-
Renovations at the company’s Residence Inn in
Houston, Texas during the second quarter and the SpringHill SuitesSavannah, Ga. , during the fourth quarter. - No additional acquisitions, dispositions, debt or equity issuance.
Q2 2015 | 2015 Forecast | |||||
RevPAR | $138-$140 | $129-$131 | ||||
RevPAR growth | +6.0-8.0% | +5.5-7.0% | ||||
Total hotel revenue | $70.8-$72.3 M | $265.5-$269.5 M | ||||
Net income | $12.8-$14.5 M | $33.0-$37.6 M | ||||
Net income per diluted share | $0.33-$0.38 | $0.86-$0.97 | ||||
Adjusted EBITDA | $36.0-$37.7 M | $126.4-$131.1 M | ||||
Adjusted funds from operation ("FFO") | $26.6-$28.3 M | $88.7-$93.4 M | ||||
Adjusted FFO per diluted share | $0.69-$0.74 | $2.33-$2.46 | ||||
Hotel EBITDA margins | 46.3-47.5% | 44.2-45.0% | ||||
Corporate cash administrative expenses | $2.0 M | $8.6 M | ||||
Corporate non-cash administrative expenses | $0.7 M | $2.6 M | ||||
Interest expense | $6.3 M | $25.4 M | ||||
Non-cash amortization of deferred fees | $0.4 M | $1.8 M | ||||
Income taxes | $0.1 M | $0.2 M | ||||
Chatham’s share of JV EBITDA | $5.2-$5.4 M | $17.5-$18.3 M | ||||
Chatham’s share of JV FFO | $3.3-$3.5 M | $10.0-$10.8 M | ||||
Weighted average shares outstanding | 38.3 M | 38.0 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 Securities and Exchange Commission. See the discussion included in this press release for information regarding these non-GAAP financial measures. |
Earnings Call
The company will hold its first quarter 2015 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) | ||||||||
March 31, |
December 31, |
|||||||
(unaudited) | ||||||||
Assets: | ||||||||
Investment in hotel properties, net | $ | 1,180,031 | $ | 1,096,425 | ||||
Cash and cash equivalents | 16,798 | 15,077 | ||||||
Restricted cash | 14,684 | 12,030 | ||||||
Investment in unconsolidated real estate entities | 26,604 | 28,152 | ||||||
Hotel receivables (net of allowance for doubtful accounts of $76 and $71, respectively) |
5,186 | 3,601 | ||||||
Deferred costs, net | 7,461 | 7,514 | ||||||
Prepaid expenses and other assets | 3,852 | 2,300 | ||||||
Total assets |
|
$ | 1,254,616 | $ | 1,165,099 | |||
Liabilities and Equity: | ||||||||
Mortgage debt | $ | 522,151 | $ | 527,721 | ||||
Revolving credit facility | 5,000 | 22,500 | ||||||
Accounts payable and accrued expenses | 21,952 | 20,042 | ||||||
Distributions payable | 3,926 | 2,884 | ||||||
Total liabilities |
|
553,029 | 573,147 | |||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Shareholders' Equity: | ||||||||
Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at March 31, 2015 and December 31, 2013 |
- | - | ||||||
Common shares, $0.01 par value, 500,000,000 shares authorized; 38,297,522 shares issued and outstanding at March 31, 2015 and 34,173,691 shares issued and outstanding at December 31, 2014, respectively |
379 | 339 | ||||||
Additional paid-in capital | 718,696 | 599,318 | ||||||
Retained earnings (distributions in excess of retained earnings) | (21,221 | ) | (11,120 | ) | ||||
Total shareholders' equity |
|
697,854 | 588,537 | |||||
Noncontrolling Interests: | ||||||||
Noncontrolling Interest in Operating Partnership | 3,733 | 3,415 | ||||||
Total equity |
|
701,587 | 591,952 | |||||
Total liabilities and equity |
|
$ | 1,254,616 | $ | 1,165,099 | |||
CHATHAM LODGING TRUST | ||||||||
Consolidated Statements of Operations | ||||||||
(In thousands, except share and per share data) | ||||||||
(unaudited) | ||||||||
For the three months ended |
||||||||
2015 | 2014 | |||||||
Revenue: | ||||||||
Room | $ | 55,032 | $ | 33,958 | ||||
Food and beverage | 1,167 | 628 | ||||||
Other | 1,869 | 1,608 | ||||||
Cost reimbursements from unconsolidated real estate entities | 848 | 672 | ||||||
Total revenue | 58,916 | 36,866 | ||||||
Expenses: | ||||||||
Hotel operating expenses: | ||||||||
Room | 10,941 | 7,755 | ||||||
Food and beverage expense | 847 | 466 | ||||||
Telephone expense | 409 | 287 | ||||||
Other hotel operating expense | 527 | 443 | ||||||
General and administrative | 4,642 | 3,426 | ||||||
Franchise and marketing fees | 4,494 | 2,793 | ||||||
Advertising and promotions | 1,220 | 831 | ||||||
Utilities | 2,326 | 1,620 | ||||||
Repairs and maintenance | 2,821 | 1,999 | ||||||
Management fees | 1,816 | 1,094 | ||||||
Insurance | 301 | 215 | ||||||
Total hotel operating expenses | 30,344 | 20,929 | ||||||
Depreciation and amortization | 11,523 | 6,316 | ||||||
Property taxes and insurance | 4,085 | 2,650 | ||||||
General and administrative | 3,427 | 2,321 | ||||||
Hotel property acquisition costs and other charges | 260 | 1,482 | ||||||
Reimbursed costs from unconsolidated real estate entities | 848 | 672 | ||||||
Total operating expenses | 50,487 | 34,370 | ||||||
Operating income | 8,429 | 2,496 | ||||||
Interest and other income | 59 | 13 | ||||||
Interest expense, including amortization of deferred fees | (6,813 | ) | (3,738 | ) | ||||
Loss on early extinguishment of debt | - | (184 | ) | |||||
Loss from unconsolidated real estate entities | (256 | ) | (316 | ) | ||||
Income (loss) before income tax expense | 1,419 | (1,729 | ) | |||||
Income tax expense | - | (3 | ) | |||||
Net income (loss) | 1,419 | (1,732 | ) | |||||
Net income (loss) attributable to noncontrolling interests | (8 | ) | - | |||||
Net income (loss) attributable to common shareholders | $ | 1,411 | $ | (1,732 | ) | |||
Income (loss) per Common Share - Basic: | ||||||||
Net income (loss) attributable to common shareholders | $ | 0.04 | $ | (0.07 | ) | |||
Income (loss) per Common Share - Diluted: | ||||||||
Net income (loss) attributable to common shareholders | $ | 0.04 | $ | (0.07 | ) | |||
Weighted average number of common shares outstanding: | ||||||||
Basic | 37,018,039 | 26,271,678 | ||||||
Diluted | 37,329,763 | 26,271,678 | ||||||
Distributions per common share | $ | 0.30 | $ | 0.21 | ||||
CHATHAM LODGING TRUST | ||||||||
FFO and EBITDA | ||||||||
(In thousands, except share and per share data) | ||||||||
For the three months ended |
||||||||
2015 | 2014 | |||||||
Funds From Operations ("FFO"): | ||||||||
Net income (loss) | $ | 1,419 | $ | (1,732 | ) | |||
Noncontrolling interests | (8 | ) | - | |||||
Loss on the sale of assets within the unconsolidated real estate entity | - | 1 | ||||||
Depreciation | 11,477 | 6,288 | ||||||
Adjustments for unconsolidated real estate entity items | 1,812 | 1,205 | ||||||
FFO attributable to common shareholders | 14,700 | 5,762 | ||||||
Hotel property acquisition costs and other charges | 260 | 1,482 | ||||||
Loss on early extinguishment of debt | - | 184 | ||||||
Adjustments for unconsolidated real estate entity items | 12 | 2 | ||||||
Adjusted FFO | $ | 14,972 | $ | 7,430 | ||||
Weighted average number of common shares | ||||||||
Basic | 37,018,039 | 26,271,678 | ||||||
Diluted | 37,329,763 | 26,536,763 | ||||||
For the three months ended |
||||||||
2015 | 2014 | |||||||
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"): |
||||||||
Net income (loss) | $ | 1,419 | $ | (1,732 | ) | |||
Interest expense | 6,813 | 3,738 | ||||||
Income tax expense | - | 3 | ||||||
Depreciation and amortization | 11,523 | 6,316 | ||||||
Adjustments for unconsolidated real estate entity items | 3,663 | 2,624 | ||||||
Noncontrolling interests | (8 | ) | - | |||||
EBITDA | 23,410 | 10,949 | ||||||
Hotel property acquisition costs and other charges | 260 | 1,482 | ||||||
Loss on early extinguishment of debt | - | 184 | ||||||
Adjustments for unconsolidated real estate entity items | 36 | 2 | ||||||
Loss on the sale of assets within the unconsolidated real estate entity | - | 1 | ||||||
Share based compensation | 704 | 585 | ||||||
Adjusted EBITDA | $ | 24,410 | $ | 13,203 | ||||
CHATHAM LODGING TRUST | ||||||
Hotel EBITDA | ||||||
(In thousands, except share and per share data) | ||||||
For the three months ended |
||||||
2015 | 2014 | |||||
Total revenue | $ | 58,916 | $ | 36,866 | ||
Less: Total hotel operating expenses | 30,344 | 20,929 | ||||
Less: Reimbursed costs from unconsolidated real estate entities | 848 | 672 | ||||
Gross operating income | 27,724 | 15,265 | ||||
Less: property taxes and insurance | 4,085 | 2,650 | ||||
Hotel EBITDA | $ | 23,639 | $ | 12,615 | ||
Source:
Chatham Lodging Trust
Dennis Craven (Company)
Chief Operating
Officer
561-227-1386
or
Daly Gray, Inc.
Chris Daly
(Media)
703-435-6293