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Chatham Lodging Trust Announces First Quarter 2017 Results
RevPAR Outperformance and Higher Margins Drive Results
First Quarter 2017 Key Metrics
-
Portfolio Revenue per
Available Room (RevPAR) – Rose 1.2 percent, above the guidance range of 0-1 percent, to$125 , compared to the 2016 first quarter, for Chatham’s 38, wholly owned hotels. Average daily rate (ADR) improved 2.5 percent to$163 , while occupancy declined 1.3 percent occupancy to 77 percent. -
Net Income - Improved
$1.3 million to $4.6 million . Net income per diluted share improved to$0.12 versus$0.08 in the 2016 first quarter. -
Adjusted EBITDA – Advanced
$0.5 million , or 1.8 percent, to$28.1 million . -
Adjusted FFO – Rose
$0.4 million to $18.1 million . Adjusted FFO per diluted share was$0.47 , up 2 percent versus last year at the upper end of the company’s guidance of$0.44-$0.47 per share. - Operating Margins – Advanced hotel gross operating profit margins (total revenue less total hotel operating expenses) 40 basis points to a strong 47.0 percent. Comparable hotel EBITDA margins improved further, up 70 basis points to 39.9 percent.
Consolidated Financial Results
The following is a summary of the consolidated financial results for the
three months ended
Three Months Ended | ||||
March 31, | ||||
2017 | 2016 | |||
Net income | $4.6 | $3.3 | ||
Diluted net income per common share | $0.12 | $0.08 | ||
RevPAR | $125 | $124 | ||
ADR | $163 | $159 | ||
Occupancy | 77% | 78% | ||
Adjusted EBITDA | $28.1 | $27.6 | ||
GOP Margin | 47.0% | 46.6% | ||
Hotel EBITDA Margin | 39.9% | 39.2% | ||
AFFO | $18.1 | $17.7 | ||
AFFO per diluted share | $0.47 | $0.46 | ||
Dividends per share | $0.33 | $0.31 | ||
Operating Results
“Our first quarter results exceeded our guidance expectations for the
quarter, driven by a combination of better than expected RevPAR and
operating margin performance,” said
First quarter RevPAR performance for certain key markets:
-
Enhanced by the inauguration, two
Washington D.C. -area hotels saw RevPAR jump 8.4 percent. -
Silicon Valley RevPAR rose 0.2 percent with a 1.0 percent increase in
ADR to
$230 . -
RevPAR at its three
San Diego hotels advanced 3.4 percent. -
Four
Houston hotels experienced a RevPAR decline of 3.6 percent. The city benefited from hosting the Super Bowl in February, and the company’s hotels maximized revenues around the game. In the last two quarters of 2016, RevPAR declined 22.0 percent and 21.9 percent, respectively. -
Two
Los Angeles area hotels experienced a RevPAR decline of 3.8 percent due to the impact of newResidence Inn supply not far from itsResidence Inn inAnaheim, Ca as well as tough comparisons related to thePorter Ranch gas leak displacement.
“Our ability to control expenses in a modest RevPAR growth environment
was key to our success in the quarter. Considering that RevPAR rose 1.2
percent, we grew hotel EBITDA by 2.7 percent and hotel EBITDA margins by
a meaningful 70 basis points,” highlighted
Joint Venture Investment Performance
During the quarter, the Innkeepers and Inland joint ventures contributed
Adjusted EBITDA and Adjusted FFO of approximately
No distributions were made during the 2017 first quarter. Chatham and
“We have worked diligently with
Capital Markets & Capital Structure
As of
Chatham’s leverage ratio was approximately 40 percent at
On
Dividend
Chatham currently pays a monthly dividend of
During the quarter, the company began the renovations of the
Chatham continues to pursue the redevelopment and expansion of its two
Residence Inns in
2017 Guidance
The company is providing its initial guidance for the 2017 second quarter and raising the lower end of its full year guidance to account for the company’s performance in the first quarter. The guidance also reflects the following:
- Industrywide RevPAR growth of 0 to 3 percent in 2017
-
Renovations at the following hotels:
-
Residence Inn San Diego Gaslamp and Courtyard byMarriott Houston Medical Center commenced in the first quarter with an expected completion date in May -
Homewood Suites
Maitland, Fla. , beginning in the second quarter -
Homewood Suites in
Bloomington, Minn. , andBrentwood, Tenn. , starting in the third quarter -
Residence Inn San Diego Mission Valley in the fourth quarter and a completion date in the first quarter, 2018
-
- No additional acquisitions, dispositions, debt or equity issuance
Q2 2017 | 2017 Forecast | ||||||||
RevPAR | $139-$141 | $130-$132 | |||||||
RevPAR growth | -1.5%-0.0% | -1.0%-1.0% | |||||||
Total hotel revenue | $76.4-$77.5 M | $287.8-$293.2 M | |||||||
Net income | $9.7-$11.7 M | $26.1-$30.6 M | |||||||
Net income per diluted share | $0.25-$0.30 | $0.67-$0.79 | |||||||
Adjusted EBITDA | $33.5-$35.5 M | $122.0-$126.5 M | |||||||
Adjusted funds from operation ("FFO") | $23.5-$25.5 M | $81.4-$85.9 M | |||||||
Adjusted FFO per diluted share | $0.60-$0.65 | $2.09-$2.20 | |||||||
Hotel EBITDA margins | 40.5%-42.3% | 39.8-40.4% | |||||||
Corporate cash administrative expenses | $2.2 M | $8.9 M | |||||||
Corporate non-cash administrative expenses | $1.0 M | $3.8 M | |||||||
Interest expense (excluding fee amortization) | $6.8 M | $27.3 M | |||||||
Non-cash amortization of deferred fees | $0.1 M | $1.1 M | |||||||
Income taxes | $0.0 M | $0.4 M | |||||||
Chatham’s share of JV EBITDA | $4.8-$5.0 M | $16.4-$16.9 M | |||||||
Chatham’s share of JV FFO | $2.7-$2.9 M | $8.4-$8.9 M | |||||||
Weighted average shares/units outstanding | 39.0 M | 39.0 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
Earnings Call
The company will hold its first quarter 2017 conference later today at
About
Non-GAAP Financial Measures
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 calculates Adjusted FFO by further adjusting FFO for certain additional items that are not addressed in NAREIT’s definition of FFO, including hotel property acquisition costs and other charges, losses on the early extinguishment of debt and similar items related to its unconsolidated real estate entities that it believes do not represent costs related to hotel operations. 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, Adjusted EBITDA and
The company calculates EBITDA for purposes of the credit facility debt as net income or loss excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; (3) depreciation and amortization; and (4) unconsolidated real estate entity items including interest, depreciation and amortization excluding gains and losses from sales of real estate. 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 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 calculates Adjusted EBITDA by further adjusting EBITDA for certain additional items, including hotel property acquisition costs and other charges, gains or losses on the sale of real estate, losses on the early extinguishment of debt, amortization of non-cash share-based compensation and similar items related to its unconsolidated real estate entities, which it believes are not indicative of the performance of its underlying hotel properties entities. The company believes that Adjusted EBITDA provides investors with another financial measure that may facilitate comparisons of operating performance between periods and between REITs that report similar measures.
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 that report similar measures, these measures have limitations as analytical tools. Some of these limitations are:
-
FFO, Adjusted FFO, EBITDA,
Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect the company’s cash expenditures, or future requirements, for capital expenditures or contractual commitments; -
FFO, Adjusted FFO, EBITDA,
Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect changes in, or cash requirements for, the company’s working capital needs; -
FFO, Adjusted FFO, EBITDA,
Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect funds available to make cash distributions; -
EBITDA, Adjusted EBITDA and
Adjusted Hotel 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, Adjusted EBITDA and
Adjusted Hotel 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 ongoing operating performance for a particular period using adjusted EBITDA;
-
Adjusted FFO, Adjusted EBITDA and
Adjusted Hotel 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, Adjusted EBITDA and
Adjusted Hotel EBITDA differently than the company does, limiting their usefulness as a comparative measure.
In addition, FFO, Adjusted FFO, EBITDA, Adjusted EBITDA and
The company’s reconciliation of FFO, Adjusted FFO, EBITDA, Adjusted
EBITDA and
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, | |||||||
2017 | 2016 | |||||||
Assets: | ||||||||
Investment in hotel properties, net | $ | 1,226,264 | $ | 1,233,094 | ||||
Cash and cash equivalents | 12,769 | 12,118 | ||||||
Restricted cash | 24,116 | 25,083 | ||||||
Investment in unconsolidated real estate entities | 20,120 | 20,424 | ||||||
Hotel receivables (net of allowance for doubtful accounts of $155 and $95, respectively) |
6,694 | 4,389 | ||||||
Deferred costs, net | 4,455 | 4,642 | ||||||
Prepaid expenses and other assets | 5,200 | 2,778 | ||||||
Deferred tax asset, net | - | 426 | ||||||
Total assets | $ | 1,299,618 | $ | 1,302,954 | ||||
Liabilities and Equity: | ||||||||
Mortgage debt, net | $ | 529,367 | $ | 530,323 | ||||
Revolving credit facility | 56,500 | 52,500 | ||||||
Accounts payable and accrued expenses | 28,680 | 27,782 | ||||||
Distributions and losses in excess of investments of unconsolidated real estate entities | 5,800 | 6,017 | ||||||
Distributions payable | 4,831 | 4,742 | ||||||
Total liabilities | 625,178 | 621,364 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Shareholders' Equity: | ||||||||
Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at March 31, 2017 and December 31, 2016 |
- | - | ||||||
Common shares, $0.01 par value, 500,000,000 shares authorized; 38,402,659 and 38,367,014 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively |
380 | 380 | ||||||
Additional paid-in capital | 722,844 | 722,019 | ||||||
Retained earnings (distributions in excess of retained earnings) | (53,730 | ) | (45,657 | ) | ||||
Total shareholders' equity | 669,494 | 676,742 | ||||||
Noncontrolling Interests: | ||||||||
Noncontrolling interest in Operating Partnership | 4,946 | 4,848 | ||||||
Total equity | 674,440 | 681,590 | ||||||
Total liabilities and equity | $ | 1,299,618 | $ | 1,302,954 |
CHATHAM LODGING TRUST | ||||||||
Consolidated Statements of Operations | ||||||||
(In thousands, except share and per share data) | ||||||||
For the three months ended | ||||||||
March 31, | ||||||||
2017 | 2016 | |||||||
Revenue: | ||||||||
Room | $ | 64,393 | $ | 63,934 | ||||
Food and beverage | 1,502 | 1,508 | ||||||
Other | 2,446 | 2,354 | ||||||
Cost reimbursements from unconsolidated real estate entities | 881 | 1,054 | ||||||
Total revenue | 69,222 | 68,850 | ||||||
Expenses: | ||||||||
Hotel operating expenses: | ||||||||
Room | 13,505 | 13,812 | ||||||
Food and beverage | 1,252 | 1,178 | ||||||
Telephone | 409 | 421 | ||||||
Other hotel operating | 599 | 589 | ||||||
General and administrative | 5,654 | 5,497 | ||||||
Franchise and marketing fees | 5,302 | 5,187 | ||||||
Advertising and promotions | 1,331 | 1,352 | ||||||
Utilities | 2,370 | 2,382 | ||||||
Repairs and maintenance | 3,252 | 3,201 | ||||||
Management fees | 2,247 | 2,229 | ||||||
Insurance | 333 | 337 | ||||||
Total hotel operating expenses | 36,254 | 36,185 | ||||||
Depreciation and amortization | 12,004 | 12,475 | ||||||
Property taxes, ground rent and insurance | 4,788 | 5,023 | ||||||
General and administrative | 3,268 | 3,112 | ||||||
Hotel property acquisition costs and other charges | - | 12 | ||||||
Reimbursed costs from unconsolidated real estate entities | 881 | 1,054 | ||||||
Total operating expenses | 57,195 | 57,861 | ||||||
Operating income | 12,027 | 10,989 | ||||||
Interest and other income | 12 | 21 | ||||||
Interest expense, including amortization of deferred fees | (6,993 | ) | (7,037 | ) | ||||
Loss on early extinguishment of debt | - | (4 | ) | |||||
Loss from unconsolidated real estate entities | (85 | ) | (647 | ) | ||||
Income before income tax expense | 4,961 | 3,322 | ||||||
Income tax expense | (317 | ) | - | |||||
Net income | 4,644 | 3,322 | ||||||
Net income attributable to non-controlling interests | (31 | ) | (22 | ) | ||||
Net income attributable to common shareholders | $ | 4,613 | $ | 3,300 | ||||
Income per Common Share - Basic: | ||||||||
Net income attributable to common shareholders | $ | 0.12 | $ | 0.09 | ||||
Income per Common Share - Diluted: | ||||||||
Net income attributable to common shareholders | $ | 0.12 | $ | 0.08 | ||||
Weighted average number of common shares outstanding: | ||||||||
Basic | 38,361,113 | 38,274,448 | ||||||
Diluted | 38,573,928 | 38,413,354 | ||||||
Distributions paid per common share | $ | 0.33 | $ | 0.31 |
CHATHAM LODGING TRUST | ||||||
FFO and EBITDA | ||||||
(In thousands, except share and per share data) | ||||||
For the three months ended | ||||||
March 31, | ||||||
2017 | 2016 | |||||
Funds From Operations ("FFO"): | ||||||
Net income | $ | 4,644 | $ | 3,322 | ||
Depreciation | 11,950 | 12,421 | ||||
Adjustments for unconsolidated real estate entity items | 1,471 | 1,962 | ||||
FFO attributable to common share and unit holders | 18,065 | 17,705 | ||||
Hotel property acquisition costs and other charges | - | 12 | ||||
Loss on early extinguishment of debt | - | 4 | ||||
Adjustments for unconsolidated real estate entity items | 7 | 10 | ||||
Adjusted FFO attributable to common share and unit holders | $ | 18,072 | $ | 17,731 | ||
Weighted average number of common shares and units | ||||||
Basic | 38,618,888 | 38,532,223 | ||||
Diluted | 38,831,703 | 38,671,129 | ||||
For the three months ended | ||||||
March 31, | ||||||
|
2017 | 2016 | ||||
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"): |
||||||
Net income | $ | 4,644 | $ | 3,322 | ||
Interest expense | 6,993 | 7,037 | ||||
Income tax expense | 317 | - | ||||
Depreciation and amortization | 12,004 | 12,475 | ||||
Adjustments for unconsolidated real estate entity items | 3,313 | 3,983 | ||||
EBITDA | 27,271 | 26,817 | ||||
Hotel property acquisition costs and other charges | - | 12 | ||||
Loss on early extinguishment of debt | - | 4 | ||||
Adjustments for unconsolidated real estate entity items | 15 | 10 | ||||
Share based compensation | 787 | 735 | ||||
Adjusted EBITDA | $ | 28,073 | $ | 27,578 |
CHATHAM LODGING TRUST | ||||||||||
ADJUSTED HOTEL EBITDA | ||||||||||
(In thousands, except share and per share data) | ||||||||||
For the three months ended | ||||||||||
March 31, | ||||||||||
2017 | 2016 | |||||||||
Net Income | $ | 4,644 | $ | 3,322 | ||||||
Add: | Interest expense | 6,993 | 7,037 | |||||||
Income tax expense | 317 | - | ||||||||
Depreciation and amortization | 12,004 | 12,475 | ||||||||
Corporate general and administrative | 3,268 | 3,112 | ||||||||
Hotel property acquisition costs and other charges | - | 12 | ||||||||
Loss from unconsolidated real estate entities | 85 | 647 | ||||||||
Loss on early extinguishment of debt | - | 4 | ||||||||
Less: | Interest and other income | (12 | ) | (21 | ) | |||||
Adjusted Hotel EBITDA | $ | 27,299 | $ | 26,588 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170509005535/en/
Source:
Chatham Lodging Trust
Dennis Craven (Company)
Chief Operating
Officer
561-227-1386
or
Daly Gray, Inc.
Chris Daly
(Media)
703-435-6293