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Chatham Lodging Trust Announces Second Quarter 2015 Results
Portfolio RevPAR and Earnings Growth Remain Strong, Reported Earnings within Guidance
Second Quarter 2015 Highlights
-
Portfolio RevPAR – Increased hotel RevPAR 6.4 percent to
$139 for Chatham’s 35, wholly owned hotels, within the company’s guidance range of 6-8 percent. Portfolio RevPAR increased 7.0 percent, excluding the Homewood Suites Orlando-Maitland. -
Adjusted FFO – Rose 84 percent to
$27.2 million . Adjusted FFO per diluted share advanced 27 percent to$0.71 from$0.56 , within the company’s guidance range of$0.69-$0.74 per share. - Operating Margins – Improved hotel EBITDA margins 240 basis points to an industry leading 46.0 percent. Year-over-year comparable hotel EBITDA margins advanced 60 basis points for the quarter (includes all hotels regardless of ownership).
-
Acquisitions – No acquisitions were closed during the second
quarter. Subsequent to quarter end, the company announced that it has
acquired the 81-room
Residence Inn Boston (Dedham ), Mass., and is under contract to purchase the 105-roomResidence Inn Fort Lauderdale Intracoastal/ Il Lugano . TheFort Lauderdale transaction is expected to close in late August, following customary due diligence. The company is acquiring the two hotels for$55.5 million , or approximately$298,000 per room.
Consolidated Financial Results
The following is a summary of the consolidated financial results for the
three and six months ended
Three Months Ended | Six Months Ended | |||||||
June 30, | June 30, | |||||||
2015 | 2014 | 2015 | 2014 | |||||
Net income | $12.8 | $65.3 | $14.3 | $63.6 | ||||
Net income per diluted share to common shareholders |
$0.33 |
$2.44 |
$0.37 |
$2.38 |
||||
RevPAR | $139 | $131 | $128 | $120 | ||||
ADR | $162 | $151 | $159 | $147 | ||||
Occupancy | 86% | 86% | 81% | 82% | ||||
Adjusted EBITDA | $36.7 | $21.5 | $61.1 | $34.7 | ||||
GOP Margin | 51.9% | 49.6% | 50.0% | 46.3% | ||||
Hotel EBITDA Margin | 46.0% | 43.6% | 43.6% | 39.7% | ||||
AFFO | $27.2 | $14.8 | $42.2 | $22.3 | ||||
AFFO per diluted share | $0.71 | $0.56 | $1.11 | $0.84 | ||||
Dividends per share | $0.30 | $0.24 | $0.60 | $0.45 | ||||
High Quality Infill Portfolio Generates Strong Top-Line Growth as Margin Expansion Continues
“Our portfolio continues to demonstrate its superior quality, generating
strong top-line growth compared to most other lodging REITs and
achieving the highest operating margins of all lodging REITs,” said
Additional data points on the portfolio’s second quarter RevPAR performance include:
- Ten hotels produced double digit RevPAR increases.
-
Four
Silicon Valley hotels produced an overall RevPAR increase of 10.1 percent. -
RevPAR at the
Washington D.C. area hotels continues to show signs of strength with RevPAR rising 9.9 percent and 9.4 percent at the Residence Inn hotels inTysons Corner, Va. andWashington D.C. , respectively. - RevPAR at the four hotels acquired from the Inland portfolio rose 5.0 percent.
-
Four
Houston medical center area hotels saw RevPAR increase 1.9 percent, up from 1.0 percent in the 2015 first quarter. The medical center area hotels continue to outperform the overallHouston market.
“We delivered RevPAR and FFO per share for the second quarter in line
with the guidance we provided, and our outlook for the duration of 2015
is positive,” Fisher noted. “We have built this high quality hotel
portfolio carefully, acquiring our hotels based on a targeted approach
focusing on particular markets. Our portfolio performance remains
strong.
“We were able to produce the highest margins among all public lodging REITs with operating margins of 52 percent and hotel EBITDA margins of 46 percent, a testament yet again to both the quality of the hotels and the ability of Island Hospitality to continue to drive margins higher,” Fisher added. “Year-over-year, our operating margins were up 230 basis points, and our hotel EBITDA margins were up 240 basis points. Comparable operating margins were up 80 basis points, and hotel EBITDA margins were up 60 basis points for the quarter.
“With our hotels producing solid RevPAR growth, outstanding margins and operating profits and demand continuing to far outpace supply growth, we remain bullish,” highlighted Fisher. “We certainly believe current market conditions support our long-term thesis that upscale, extended-stay hotels and premium-branded, select-service hotels in the right markets provide the best long-term risk adjusted returns.”
Joint Venture Investment Performance
The Innkeepers joint-venture portfolio produced 2015 second quarter
RevPAR growth of 7.7 percent to
“We invested
For the Inland joint venture portfolio, RevPAR rose 3.1 percent to
“The difference between the Innkeepers and the Inland portfolios at this
point is underlying market performance where RevPAR growth in the Inland
markets underperformed the Innkeepers portfolio by approximately 360
basis points,” Craven said. “The lower than expected growth in the
Inland portfolio adversely impacted our earnings by approximately one
penny of FFO in the quarter and our full year guidance by approximately
Acquisitions
Subsequent to quarter end, the company announced that it acquired the
81-room
“These hotels are in two of the fastest growing markets in the country with revenue per available room within the Boston Dedham and Ft. Lauderdale Intracoastal hotels’ markets up 17 percent and 11 percent, respectively, year-to-date through June 2015,” highlighted Craven.
Capital Markets & Capital Structure
As of
“We have a solid balance sheet that provides us capacity to continue
making high-quality acquisitions while maintaining reasonable leverage,”
explained
During the second quarter, Chatham completed the emergency replacement
of the copper supply lines in the Homewood Suites by Hilton
The 32-room expansion of the
“Our experience getting approvals to begin construction in
Dividend
In January, Chatham’s board of trustees approved a 25 percent dividend
increase to an annualized rate of
Outlook and 2015 Guidance
“We remain bullish on our prospects for continued internal and external
growth in 2015 and 2016 as we build Chatham into the premier,
select-service and upscale, extended-stay lodging REIT,” Fisher
concluded. “We continue to find high quality hotels to acquire that
match our strict criteria, such as the San Diego Gaslamp,
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 third quarter and the SpringHill SuitesSavannah, Ga. , during the fourth quarter. -
The acquisition of the 81-room
Residence Inn Boston (Dedham ), Mass., in July and the pending acquisition of the 105-roomResidence Inn Fort Lauderdale Intracoastal/Il Lugano inAugust 2015 . -
Implementation of a long-term incentive outperformance plan in
June 2015 . - No additional acquisitions, dispositions, debt or equity issuance.
Q3 2015 | 2015 Forecast | |||
RevPAR | $144-$146 | $129-$131 | ||
RevPAR growth | +5.0-6.0% | +5.5-6.5% | ||
Total hotel revenue | $76.7-$77.5 M | $270.5-$272.0 M | ||
Net income | $15.0-$16.3 M | $33.2-$35.4 M | ||
Net income per diluted share | $0.39-$0.42 | $0.87-$0.92 | ||
Adjusted EBITDA | $38.7-$40.0 M | $127.8-$130.0 M | ||
Adjusted funds from operation ("FFO") | $28.9-$30.2 M | $89.1-$91.3 M | ||
Adjusted FFO per diluted share | $0.75-$0.78 | $2.33-$2.38 | ||
Hotel EBITDA margins | 46.5-47.5% | 43.9-44.4% | ||
Corporate cash administrative expenses | $2.2 M | $8.6 M | ||
Corporate non-cash administrative expenses | $0.8 M | $2.9 M | ||
Cash Interest expense | $6.6 M | $26.1 M | ||
Non-cash amortization of deferred fees | $0.5 M | $1.9 M | ||
Income taxes | $0.1 M | $0.1 M | ||
Chatham’s share of JV EBITDA | $5.2-$5.4 M | $17.2-$17.6 M | ||
Chatham’s share of JV FFO | $3.3-$3.5 M | $9.5-$9.9 M | ||
Weighted average shares outstanding | 38.6 M | 38.3 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 second 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) | ||||||||
June 30, | December 31, | |||||||
2015 | 2014 | |||||||
(unaudited) | ||||||||
Assets: | ||||||||
Investment in hotel properties, net | $ | 1,172,798 | $ | 1,096,425 | ||||
Cash and cash equivalents | 18,075 | 15,077 | ||||||
Restricted cash | 18,545 | 12,030 | ||||||
Investment in unconsolidated real estate entities | 25,602 | 28,152 | ||||||
Hotel receivables (net of allowance for doubtful accounts of $82 and $71, respectively). | 5,030 | 3,601 | ||||||
Deferred costs, net | 7,547 | 7,514 | ||||||
Prepaid expenses and other assets | 3,665 | 2,300 | ||||||
Total assets | $ | 1,251,262 | $ | 1,165,099 | ||||
Liabilities and Equity: | ||||||||
Mortgage debt |
$ | 521,379 | $ | 527,721 | ||||
Revolving credit facility | - | 22,500 | ||||||
Accounts payable and accrued expenses | 22,332 | 20,042 | ||||||
Distributions and losses in excess of investments of unconsolidated real estate entities | 306 | - | ||||||
Distributions payable | 3,968 | 2,884 | ||||||
Total liabilities | 547,985 | 573,147 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Shareholders' Equity: | ||||||||
Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at June 30, 2015 and December 31, 2013 |
- | - | ||||||
Common shares, $0.01 par value, 500,000,000 shares authorized; 38,306,743 and 34,173,691 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively |
379 | 339 | ||||||
Additional paid-in capital | 718,905 | 599,318 | ||||||
Retained earnings (distributions in excess of retained earnings) | (19,970 | ) | (11,120 | ) | ||||
Total shareholders' equity | 699,314 | 588,537 | ||||||
Noncontrolling Interests: | ||||||||
Noncontrolling Interest in Operating Partnership | 3,963 | 3,415 | ||||||
Total equity | 703,277 | 591,952 | ||||||
Total liabilities and equity | $ | 1,251,262 | $ | 1,165,099 |
CHATHAM LODGING TRUST | ||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
(unaudited) | ||||||||||||||||
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenue: | ||||||||||||||||
Room | $ | 67,698 | $ | 43,978 | $ | 122,729 | $ | 77,935 | ||||||||
Food and beverage | 1,355 | 585 | 2,522 | 1,213 | ||||||||||||
Other | 2,335 | 2,021 | 4,204 | 3,629 | ||||||||||||
Cost reimbursements from unconsolidated real estate entities | 869 | 493 | 1,717 | 1,165 | ||||||||||||
Total revenue | 72,257 | 47,077 | 131,172 | 83,942 | ||||||||||||
Expenses: | ||||||||||||||||
Hotel operating expenses: | ||||||||||||||||
Room | 12,755 | 8,802 | 23,696 | 16,557 | ||||||||||||
Food and beverage | 973 | 432 | 1,820 | 899 | ||||||||||||
Telephone | 416 | 285 | 825 | 572 | ||||||||||||
Other hotel operating | 661 | 507 | 1,188 | 950 | ||||||||||||
General and administrative | 5,330 | 3,847 | 9,971 | 7,274 | ||||||||||||
Franchise and marketing fees | 5,560 | 3,602 | 10,055 | 6,394 | ||||||||||||
Advertising and promotions | 1,192 | 859 | 2,411 | 1,689 | ||||||||||||
Utilities | 2,100 | 1,482 | 4,426 | 3,102 | ||||||||||||
Repairs and maintenance | 2,856 | 2,057 | 5,677 | 4,056 | ||||||||||||
Management fees | 2,197 | 1,396 | 4,013 | 2,490 | ||||||||||||
Insurance | 285 | 217 | 586 | 433 | ||||||||||||
Total hotel operating expenses | 34,325 | 23,486 | 64,668 | 44,416 | ||||||||||||
Depreciation and amortization | 12,063 | 7,365 | 23,586 | 13,680 | ||||||||||||
Property taxes and insurance | 4,254 | 2,809 | 8,339 | 5,458 | ||||||||||||
General and administrative | 2,156 | 2,364 | 5,583 | 4,686 | ||||||||||||
Hotel property acquisition costs and other charges | 524 | 5,559 | 784 | 7,041 | ||||||||||||
Reimbursed costs from unconsolidated real estate entities | 869 | 493 | 1,717 | 1,165 | ||||||||||||
Total operating expenses | 54,191 | 42,076 | 104,677 | 76,446 | ||||||||||||
Operating income | 18,066 | 5,001 | 26,495 | 7,496 | ||||||||||||
Interest and other income | 323 | 12 | 383 | 26 | ||||||||||||
Interest expense, including amortization of deferred fees | (6,852 | ) | (4,362 | ) | (13,665 | ) | (8,100 | ) | ||||||||
Loss on early extinguishment of debt | - | - | - | (184 | ) | |||||||||||
Income (loss) from unconsolidated real estate entities | 1,333 | (2,000 | ) | 1,077 | (2,316 | ) | ||||||||||
Net gain from reimbursement and sale of investment in unconsolidated real estate entities |
- |
|
66,701 | - | 66,701 | |||||||||||
Income before income tax expense | 12,870 | 65,352 | 14,290 | 63,623 | ||||||||||||
Income tax expense | (25 | ) | (38 | ) | (25 | ) | (41 | ) | ||||||||
Net income | 12,845 | 65,314 | 14,265 | 63,582 | ||||||||||||
Net income attributable to noncontrolling interests | (82 | ) | (108 | ) | (90 | ) | (108 | ) | ||||||||
Net income attributable to common shareholders | $ | 12,763 | $ | 65,206 | $ | 14,175 | $ | 63,474 | ||||||||
Income per Common Share - Basic: | ||||||||||||||||
Net income attributable to common shareholders | $ | 0.33 | $ | 2.46 | $ | 0.37 | $ | 2.40 | ||||||||
Income per Common Share - Diluted: | ||||||||||||||||
Net income attributable to common shareholders | $ | 0.33 | $ | 2.44 | $ | 0.37 | $ | 2.38 | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 38,211,833 | 26,437,878 | 37,618,234 | 26,355,237 | ||||||||||||
Diluted | 38,618,824 | 26,734,919 | 38,022,675 | 26,637,261 | ||||||||||||
Distributions per common share | $ | 0.30 | $ | 0.24 | $ | 0.60 | $ | 0.45 |
CHATHAM LODGING TRUST | ||||||||||||||||
FFO and EBITDA | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Funds From Operations ("FFO"): | ||||||||||||||||
Net income | $ | 12,845 | $ | 65,314 | $ | 14,265 | $ | 63,582 | ||||||||
Noncontrolling interests | (82 | ) | (108 | ) | (90 | ) | (108 | ) | ||||||||
Net gain from remeasurement and sale of investment in unconsolidated real estate entity | - | (66,701 | ) | - | (66,701 | ) | ||||||||||
Loss on the sale of assets within the unconsolidated real estate entity | - | - | - | 1 | ||||||||||||
Depreciation | 12,016 | 7,335 | 23,493 | 13,623 | ||||||||||||
Adjustments for unconsolidated real estate entity items | 1,853 | 1,229 | 3,664 | 2,435 | ||||||||||||
FFO attributable to common shareholders | 26,632 | 7,069 | 41,332 | 12,832 | ||||||||||||
Hotel property acquisition costs and other charges | 524 | 5,559 | 784 | 7,041 | ||||||||||||
Loss on early extinguishment of debt | - | - | - | 184 | ||||||||||||
Adjustments for unconsolidated real estate entity items | 80 | 2,218 | 92 | 2,220 | ||||||||||||
Adjusted FFO | $ | 27,236 | $ | 14,846 | $ | 42,208 | $ | 22,277 | ||||||||
Weighted average number of common shares | ||||||||||||||||
Basic | 38,211,833 | 26,437,878 | 37,618,234 | 26,355,237 | ||||||||||||
Diluted | 38,618,824 | 26,734,919 | 38,022,675 | 26,637,261 | ||||||||||||
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"): |
||||||||||||||||
Net income | $ | 12,845 | $ | 65,314 | $ | 14,265 | $ | 63,582 | ||||||||
Interest expense | 6,852 | 4,362 | 13,665 | 8,100 | ||||||||||||
Income tax expense | 25 | 38 | 25 | 41 | ||||||||||||
Depreciation and amortization | 12,063 | 7,365 | 23,586 | 13,680 | ||||||||||||
Adjustments for unconsolidated real estate entity items | 3,750 | 2,765 | 7,414 | 5,389 | ||||||||||||
Noncontrolling interests | (82 | ) | (108 | ) | (90 | ) | (108 | ) | ||||||||
EBITDA | 35,453 | 79,736 | 58,865 | 90,684 | ||||||||||||
Hotel property acquisition costs and other charges | 524 | 5,559 | 784 | 7,041 | ||||||||||||
Loss on early extinguishment of debt | - | - | - | 184 | ||||||||||||
Adjustments for unconsolidated real estate entity items | 86 | 2,296 | 121 | 2,298 | ||||||||||||
Net gain from remeasurement and sale of investment in unconsolidated real estate entity | - | (66,701 | ) | - | (66,701 | ) | ||||||||||
Loss on the sale of assets within the unconsolidated real estate entity | - | - | - | 1 | ||||||||||||
Share based compensation | 651 | 628 | 1,355 | 1,213 | ||||||||||||
Adjusted EBITDA | $ | 36,714 | $ | 21,518 | $ | 61,125 | $ | 34,720 |
CHATHAM LODGING TRUST | ||||||||||||||||
Hotel EBITDA | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Total revenue | $ | 72,257 | $ | 47,077 | $ | 131,172 | $ | 83,942 | ||||||||
Less: Total hotel operating expenses | 34,325 | 23,486 | 64,668 | 44,416 | ||||||||||||
Less: Reimbursed costs from unconsolidated real estate entities | 869 | 493 | 1,717 | 1,165 | ||||||||||||
Gross operating income | 37,063 | 23,098 | 64,787 | 38,361 | ||||||||||||
Less: Property taxes and insurance | 4,254 | 2,809 | 8,339 | 5,458 | ||||||||||||
Hotel EBITDA | $ | 32,809 | $ | 20,289 | $ | 56,448 | $ | 32,903 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20150805005263/en/
Source:
Chatham Lodging Trust
Dennis Craven (Company)
Chief Operating
Officer
561-227-1386
or
Daly Gray, Inc.
Chris Daly
(Media)
703-435-6293