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Chatham Lodging Trust Announces First Quarter 2018 Results
Delivers RevPAR at Upper End of
First Quarter 2018 Key Metrics
- Portfolio Revenue per
Available Room (RevPAR) - Decreased 2.4 percent to$122 , compared to the 2017 first quarter, for Chatham’s 40, wholly owned hotels. Average daily rate (ADR) lessened 1.2 percent to$162 , and occupancy declined 1.2 percent to 76 percent. - Net Income - Declined
$1.7 million to $2.9 million . Net income per diluted share was$0.06 versus$0.12 in the 2017 first quarter. - Adjusted EBITDA - Decreased
$1.7 million to $26.4 million , slightly above the upper end its guidance. - Adjusted FFO - Lessened
$1.6 million , to$16.5 million versus$18.1 million in the 2017 first quarter. Adjusted FFO per diluted share was$0.36 , above consensus and compared to guidance of$0.33-$0.35 per share. - Operating Margins - Gross operating profit margins declined 260
basis points to 44.4 percent.
Hotel EBITDA margins were off 360 basis points to 36.3 percent, 30 basis points better than the upper end of its guidance. - Balance Sheet - Solidified the balance sheet, successfully refinancing its unsecured revolving credit facility, extending the maturity to 2023 and reducing its borrowing costs.
Consolidated Financial Results
The following is a summary of the consolidated financial results for the
three months ended
| Three Months Ended | ||||
| March 31, | ||||
| 2018 | 2017 | |||
| Net income | $2.9 | $4.6 | ||
| Diluted net income per common share | $0.06 | $0.12 | ||
| RevPAR | $122 | $125 | ||
| ADR | $162 | $164 | ||
| Occupancy | 76% | 77% | ||
| Adjusted EBITDA | $26.4 | $28.1 | ||
| GOP Margin | 44.4% | 47.0% | ||
| Hotel EBITDA Margin | 36.3% | 39.9% | ||
| AFFO | $16.5 | $18.1 | ||
| AFFO per diluted share | $0.36 | $0.47 | ||
| Dividends per share | $0.33 | $0.33 | ||
Operating Results
“We were facing tough RevPAR comparisons in several of our key markets
versus last year, and our guidance reflected that,” stated Jeffrey H.
Fisher, Chatham’s president and chief executive officer. “In the 2017
first quarter, our four
First quarter RevPAR performance for certain key markets:
Florida hotels saw RevPAR rise 6.6 percent, benefitting from a combination of hurricane-related demand and increased inbound travelers favoringFlorida .-
Silicon Valley RevPAR declined 5.1 percent to
$177 . -
Two
Los Angeles -area hotels experienced a RevPAR increase of 4.3 percent. -
RevPAR declined 7.0 percent at its four
Houston hotels (2017 Super Bowl). -
RevPAR at the company’s three
Washington D.C. hotels decreased 3.5 percent (2017 inauguration).
“Unlike prior cycles, new supply this cycle has been focused in directly
competitive brands in harder-to-build locations in the top-25 markets,
where many of our hotels are located, but as we have previously
commented, demand growth also been strong, minimizing the impact,”
Fisher commented. “As we fully absorb this new supply in the near
future, our hotels are poised to perform well. In markets where the
impact of new supply is waning, such as
Gross operating profit margins were down 260 basis points compared to the 2017 first quarter. Key measures impacting margins at our 36 comparable hotels were:
- Payroll and benefit costs increased 7.4 percent and reduced margins by 170 basis points.
- Weather related increases for utilities, snow removal and maintenance costs reduced margins by 60 basis points.
“We outperformed our EBITDA and FFO expectations as same-store hotel
EBITDA margins beat the upper-end of our guidance range by 30 basis
points,” stated
Strategic Capital Recycling Program and
In
During the first quarter, the company substantially completed the
renovations of the
Capital Markets & Capital Structure
As of
Chatham’s leverage ratio was approximately 33.6 percent on
On
Chatham successfully refinanced its
“This refinancing improves our earnings through reduced borrowing costs,
provides us with incremental capacity and flexibility to pursue
accretive growth opportunities and adds security to our balance sheet
since we now have only
During the first quarter, Chatham sold 0.5 million shares under its
at-the-market (“ATM”) and direct stock purchase (“DSPP”) programs at a
weighted average price of
Joint Venture Investments
During the 2018 first quarter, the Innkeepers and Inland joint ventures
contributed Adjusted EBITDA and Adjusted FFO of approximately
Chatham received distributions from its joint venture investments of
Dividend
Chatham currently pays a monthly dividend of
2018 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
The company’s 2018 guidance reflects the following assumptions:
-
Industrywide RevPAR growth of 0 to 3 percent in 2018
Marriott International forecast North American RevPAR growth of 1 to 2 percent; Hilton Hotels & Resorts estimated North American RevPAR growth of 1 to 3 percent- STR projected industry RevPAR growth of 2.7 percent
-
Acquisition of the 96-room Residence Inn by
Marriott Charleston Summerville, S.C. , onJuly 1, 2018 for$21.0 million -
Renovations commencing at the following hotels:
Residence Inn Mountain View , Calif., andResidence Inn Tysons Corner , Va., during the second quarter-
Homewood Suites
Dallas, Texas , during the third quarter Residence Inn Sunnyvale , Calif., #1, and the Homewood SuitesFarmington, Conn. , in the fourth quarter
- No additional acquisitions, dispositions, debt or equity issuance
Fisher concluded, “Our guidance has been updated to account for our outperformance in the first quarter and does not reflect any future acquisitions, developments or reinvestment of any asset sale proceeds or additional leverage capacity. Although sourcing attractive acquisitions is difficult, we expect to be a net acquirer of assets in 2018. GDP growth remains strong which should boost lodging demand and as the impact of new supply across our portfolio lessens, we should outperform on both the top and bottom lines.”
| Q2 2018 | 2018 Forecast | |||||
| RevPAR | $142 to $144 | $131 to $134 | ||||
| RevPAR growth | 0.0% to 1.5% | -1.5% to 0.5% | ||||
| Total hotel revenue | $83.1 to $84.2 M | $310.8 to $316.6 M | ||||
| Net income | $11.9 to $13.3 M | $26.5 to $32.5 M | ||||
| Net income per diluted share | $0.26 to $0.29 | $0.57 to $0.70 | ||||
| Adjusted EBITDA | $36.6 to $38.0 M | $126.3 to $132.3 M | ||||
| Adjusted FFO | $26.3 to $27.7 M | $84.7 to $90.7 M | ||||
| Adjusted FFO per diluted share | $0.56 to $0.59 | $1.82 to $1.95 | ||||
| Hotel EBITDA margins | 41.4% to 42.1% | 38.7% to 39.7% | ||||
| Corporate cash administrative expenses | $2.4 M | $9.8 M | ||||
| Corporate non-cash administrative expenses | $1.1 M | $4.3 M | ||||
| Interest expense (excluding fee amortization) | $6.5 M | $26.3 M | ||||
| Non-cash amortization of deferred fees | $0.3 M | $1.4M | ||||
| Income taxes | $0.0 M | $0.0 M | ||||
| Chatham’s share of JV EBITDA | $4.6 to $4.9 M | $15.8 to $16.4 M | ||||
| Chatham’s share of JV FFO | $2.2 to $2.5 M | $6.2 to $6.8 M | ||||
| Weighted average shares/units outstanding | 46.6 M | 46.6 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 2018 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 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 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 second-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, | |||||||
| 2018 | 2017 | |||||||
| (unaudited) | ||||||||
| Assets: | ||||||||
| Investment in hotel properties, net | $ | 1,314,504 | $ | 1,320,082 | ||||
| Cash and cash equivalents | 13,403 | 9,333 | ||||||
| Restricted cash | 25,398 | 27,166 | ||||||
| Investment in unconsolidated real estate entities | 23,491 | 24,389 | ||||||
| Hotel receivables (net of allowance for doubtful accounts of $215 and $200, respectively) | 5,293 | 4,047 | ||||||
| Deferred costs, net | 5,486 | 4,646 | ||||||
| Prepaid expenses and other assets | 5,555 | 2,523 | ||||||
| Deferred tax asset, net | 30 | 30 | ||||||
| Total assets | $ | 1,393,160 | $ | 1,392,216 | ||||
| Liabilities and Equity: | ||||||||
| Mortgage debt, net | $ | 505,179 | $ | 506,316 | ||||
| Revolving credit facility | 34,000 | 32,000 | ||||||
| Accounts payable and accrued expenses | 31,775 | 31,692 | ||||||
| Distributions and losses in excess of investments of unconsolidated real estate entities | 7,458 | 6,582 | ||||||
| Distributions payable | 5,950 | 5,846 | ||||||
| Total liabilities | 584,362 | 582,436 | ||||||
| Commitments and contingencies | ||||||||
| Equity: | ||||||||
| Shareholders’ Equity: | ||||||||
| Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at March 31, 2018 and December 31, 2017 | — | — | ||||||
| Common shares, $0.01 par value, 500,000,000 shares authorized; 45,869,600 and 45,375,266 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively | 459 | 450 | ||||||
| Additional paid-in capital | 882,586 | 871,730 | ||||||
| Retained earnings (distributions in excess of retained earnings) | (81,311 | ) | (69,018 | ) | ||||
| Total shareholders’ equity | 801,734 | 803,162 | ||||||
| Noncontrolling interests: | ||||||||
| Noncontrolling interest in Operating Partnership | 7,064 | 6,618 | ||||||
| Total equity | 808,798 | 809,780 | ||||||
| Total liabilities and equity | $ | 1,393,160 | $ | 1,392,216 | ||||
| CHATHAM LODGING TRUST | ||||||||
| Consolidated Statements of Operations | ||||||||
| (In thousands, except share and per share data) | ||||||||
| (unaudited) | ||||||||
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2018 | 2017 | |||||||
| Revenue: | ||||||||
| Room | $ | 66,251 | $ | 64,393 | ||||
| Food and beverage | 2,098 | 1,502 | ||||||
| Other | 3,027 | 2,446 | ||||||
| Cost reimbursements from unconsolidated real estate entities | 2,657 | 2,494 | ||||||
| Total revenue | 74,033 | 70,835 | ||||||
| Expenses: | ||||||||
| Hotel operating expenses: | ||||||||
| Room | 14,553 | 13,505 | ||||||
| Food and beverage | 1,740 | 1,252 | ||||||
| Telephone | 459 | 409 | ||||||
| Other hotel operating | 721 | 599 | ||||||
| General and administrative | 6,033 | 5,654 | ||||||
| Franchise and marketing fees | 5,525 | 5,302 | ||||||
| Advertising and promotions | 1,565 | 1,331 | ||||||
| Utilities | 2,699 | 2,370 | ||||||
| Repairs and maintenance | 3,624 | 3,252 | ||||||
| Management fees | 2,437 | 2,247 | ||||||
| Insurance | 333 | 333 | ||||||
| Total hotel operating expenses | 39,689 | 36,254 | ||||||
| Depreciation and amortization | 12,036 | 12,004 | ||||||
| Property taxes, ground rent and insurance | 5,775 | 4,788 | ||||||
| General and administrative | 3,622 | 3,268 | ||||||
| Other charges | (14 | ) | — | |||||
| Reimbursed costs from unconsolidated real estate entities | 2,657 | 2,494 | ||||||
| Total operating expenses | 63,765 | 58,808 | ||||||
| Operating income | 10,268 | 12,027 | ||||||
| Interest and other income | 2 | 12 | ||||||
| Interest expense, including amortization of deferred fees | (6,631 | ) | (6,993 | ) | ||||
| Loss on sale of hotel property | (17 | ) | — | |||||
| Loss from unconsolidated real estate entities | (754 | ) | (85 | ) | ||||
| Income before income tax expense | 2,868 | 4,961 | ||||||
| Income tax expense | — | (317 | ) | |||||
| Net income | 2,868 | 4,644 | ||||||
| Net income attributable to noncontrolling interests | (20 | ) | (31 | ) | ||||
| Net income attributable to common shareholders | $ | 2,848 | $ | 4,613 | ||||
| Income per Common Share - Basic: | ||||||||
| Net income attributable to common shareholders | $ | 0.06 | $ | 0.12 | ||||
| Income per Common Share - Diluted: | ||||||||
| Net income attributable to common shareholders | $ | 0.06 | 0.12 | |||||
| Weighted average number of common shares outstanding: | ||||||||
| Basic | 45,753,792 | 38,361,113 | ||||||
| Diluted | 46,022,690 | 38,573,928 | ||||||
| Distributions paid per common share: | $ | 0.33 | $ | 0.33 | ||||
| CHATHAM LODGING TRUST | ||||||||
| FFO and EBITDA | ||||||||
| (In thousands, except share and per share data) | ||||||||
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2018 | 2017 | |||||||
| Funds From Operations (“FFO”): | ||||||||
| Net income | $ | 2,868 | $ | 4,644 | ||||
| Loss on sale of hotel property | 17 | — | ||||||
| Depreciation | 11,978 | 11,950 | ||||||
| Adjustments for unconsolidated real estate entity items | 1,678 | 1,471 | ||||||
| FFO attributable to common share and unit holders | 16,541 | 18,065 | ||||||
| Other charges | (14 | ) | — | |||||
| Adjustments for unconsolidated real estate entity items | 12 | 7 | ||||||
| Adjusted FFO attributable to common share and unit holders | $ | 16,539 | $ | 18,072 | ||||
| Weighted average number of common shares and units | ||||||||
| Basic | 46,085,461 | 38,618,888 | ||||||
| Diluted | 46,354,359 | 38,813,703 | ||||||
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2018 | 2017 | |||||||
| Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”): | ||||||||
| Net income | $ | 2,868 | $ | 4,644 | ||||
| Interest expense | 6,631 | 6,993 | ||||||
| Income tax expense | — | 317 | ||||||
| Depreciation and amortization | 12,036 | 12,004 | ||||||
| Adjustments for unconsolidated real estate entity items | 3,908 | 3,313 | ||||||
| EBITDA | 25,443 | 27,271 | ||||||
| Other charges | (14 | ) | — | |||||
| Adjustments for unconsolidated real estate entity items | (11 | ) | 15 | |||||
| Loss on sale of hotel property | 17 | — | ||||||
| Share based compensation | 918 | 787 | ||||||
| Adjusted EBITDA | $ | 26,353 | $ | 28,073 | ||||
| CHATHAM LODGING TRUST | |||||||||
| ADJUSTED HOTEL EBITDA | |||||||||
| (In thousands, except share and per share data) | |||||||||
| For the three months ended | |||||||||
| March 31, | |||||||||
| 2018 | 2017 | ||||||||
| Net Income | $ | 2,868 | $ | 4,644 | |||||
| Add: | Interest expense | 6,631 | 6,993 | ||||||
| Income tax expense | — | 317 | |||||||
| Depreciation and amortization | 12,036 | 12,004 | |||||||
| Corporate general and administrative | 3,622 | 3,268 | |||||||
| Loss from unconsolidated real estate entities | 754 | 85 | |||||||
| Loss on sale of hotel property | 17 | — | |||||||
| Less: | Interest and other income | (2 | ) | (12 | ) | ||||
| Other charges | (14 | ) | — | ||||||
| Adjusted Hotel EBITDA | $ | 25,912 | $ | 27,299 | |||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20180501005544/en/
Source:
Chatham Lodging Trust
Dennis Craven (Company), 561-227-1386
Chief
Operating Officer
or
Daly Gray, Inc.
Chris Daly (Media),
703-435-6293