News Release
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Chatham Lodging Trust Announces First Quarter 2020 Results
First Quarter 2020 Operating Results
-
Portfolio Revenue per
Available Room (RevPAR) – Declined 21.8 percent to$96 , compared to the 2019 first quarter. Average daily rate (ADR) decreased 5.2 percent to$153 , and occupancy dropped 17.5 percent to 63 percent.
-
Net income (loss) – Declined
$29.7 million to a loss of$(28.1) million for the 2020 first quarter compared to the 2019 first quarter, due primarily to a$15.3 million impairment on its investment in the Inland joint venture. Net loss per diluted share was$0.59 versus net income per diluted share of$0.03 last year.
-
Adjusted EBITDA – Decreased
$10.5 million to$16.5 million .
-
Adjusted FFO – Declined
$9.9 million to$6.3 million . Adjusted FFO per diluted share was$0.13 , compared to$0.34 in the 2019 first quarter.
-
Operating Margins – Comparable hotel gross operating profit margins weakened 590 basis points to 38.0 percent.
Comparable Hotel EBITDA margins were down 800 basis points to 27.6 percent.
The following chart summarizes the consolidated financial results for the three months ended
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Three Months Ended |
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2020 |
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2019 |
Net income (loss) |
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Diluted net income (loss) per common share |
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GOP Margin |
38.0% |
|
43.6% |
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27.6% |
|
35.3% |
Adjusted EBITDA |
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AFFO |
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AFFO per diluted share |
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Dividends per share |
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The below chart summarizes key hotel financial statistics for the 40 comparable operating hotels owned as of
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Three Months Ended |
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2020 |
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2019 |
RevPAR |
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ADR |
|
|
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Occupancy |
62.7% |
|
76.0% |
GOP Margin |
38.0% |
|
43.9% |
|
27.6% |
|
35.6% |
2020 RevPAR performance for Chatham’s six largest markets include:
- Silicon Valley RevPAR declined 30.8 percent with one hotel under renovation.
-
RevPAR at its two
San Diego hotels decreased 22.0 percent. -
Washington, D.C. RevPAR weakened 15.5 percent. -
RevPAR at its three coastal hotels in
Maine andNew Hampshire declined 18.0 percent. -
At its four
Houston hotels, RevPAR decreased 23.2 percent. -
Two
Los Angeles -area hotels experienced a 25.6 percent RevPAR decline.
During the 2020 first quarter, the company completed the renovations of the
Other than the Warner Center development, the company also has suspended all remaining capital projects, other than projects required by local fire and life safety regulations or expenditures for emergency purposes.
Chatham is developing and constructing a hotel in the Warner Center submarket of
Capital Markets & Capital Structure
As of
Chatham’s leverage ratio was approximately 35.6 percent on
On
-
Waiver of key financial covenants through
March 31, 2021 . -
Allows for full utilization of entire
$250 million credit facility. -
Applicable margin on borrowings set at LIBOR plus 250 basis points if borrowings on the credit facility are under
$200 million and LIBOR plus 300 basis points if borrowings are over$200 million . LIBOR floor is set at 50 basis points.- The applicable margin was set to increase to 225 basis points.
- Equity pledges on the 18 borrowing base assets.
-
Must maintain minimum liquidity of
$25 million whether in cash or available capacity under the credit facility. - Certain limitations on the incurrence of additional indebtedness.
- Common share dividends are allowed but limited to 100 percent of REIT taxable income, and any dividends paid would include a cash component no greater than the minimum percentage allowed under the Internal Revenue Code.
Joint Venture Investments
During the 2020 first quarter, the Innkeepers and Inland joint ventures contributed Adjusted EBITDA and Adjusted FFO of approximately
RevPAR for the two joint ventures was down approximately 18 percent in the 2020 first quarter and Chatham received no distributions from its joint venture investments during the quarter.
Both joint ventures have not made their respective debt service payments in April and May. Colony and Chatham are in active negotiations with the respective servicers to seek various relief, including interest forbearance, temporary use of capital expenditure reserves to fund interest payments and hotel operations. The debt of the joint ventures is non-recourse to Chatham except for customary non-recourse carveout provisions such as fraud, material and intentional misrepresentations and misapplication of funds, and defaults under the joint venture debt do not trigger cross-defaults under any Chatham debt.
Dividend
Chatham paid 2020 dividends of
The below chart summarizes monthly RevPAR statistics by month during 2020 for the company’s 40 comparable hotels:
|
January |
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February |
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March |
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April |
RevPAR - 2020 |
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|
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RevPAR – 2019 |
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% Change in RevPAR |
(0.8)% |
|
0.5% |
|
(55.6)% |
|
(82.7)% |
RevPAR Index |
119 |
|
120 |
|
127 |
|
~ 155 |
Chatham began to see accelerating declines in nightly room revenue during the second week of March. Chatham’s nightly portfolio occupancy fell below 60 percent on
“Our teams at Chatham and Island Hospitality are working vigorously to maximize revenue, and we have aggressively cut operating costs and deferred all non-essential capital expenditures to minimize the adverse effects on cash flow,” commented
Chatham and Island Hospitality have taken dramatic actions at its hotels, including:
- Laid off or furloughed almost 70 percent of its employees beginning in mid-March.
- Reduced service levels at hotels (less frequent room cleaning, reduced or eliminated breakfast offerings and hospitality hours).
- Reduced staffing at low occupancy hotels to absolute minimum levels.
-
Consolidated key operations of nearby hotels (
Silicon Valley ,Houston Medical Center ,Houston West University ,Dallas ,Denver and Summerville) to gain greater economies of scale. - Successfully secured unique sources of demand for many of Chatham’s hotels through exhaustive direct sales efforts.
Over 70 percent of Chatham’s 2019 hotel EBITDA was generated from extended-stay brands, with Residence Inn and Homewood Suites comprising approximately 66 percent of its hotel EBITDA. Additionally, more than 96 percent of Chatham’s rooms are characterized as limited-service rooms, the highest percentage among public lodging REITs.
“These attributes position us well for current demand as evidenced by our ability to sharply increase RevPAR index in March and April. As markets reopen, we are situated to capture more of the forthcoming demand and better bridge the gap to recovery. Our hotels are benefitting from the closure of many other (mostly full-service) hotels in our markets, and since our hotels are open, there will be minimal costs related to ramping up our hotels when the economic recovery begins. We are able to generate more revenue, retain more employees, lose less money and better our overall cash position by remaining open,” Fisher noted.
COVID-19 Corporate Update
Chatham has taken aggressive corporate actions to mitigate the operating and financial impact of the COVID-19 (coronavirus) pandemic. Some of the major steps include:
-
Suspended its monthly dividend entirely, preserving approximately
$5.3 million per month and approximately$64 million on an annualized basis. -
Reduced its 2020 capital expenditures budget by approximately
$10 million or 45 percent. -
Drew down cash on its credit facility, increasing its cash liquidity position to approximately
$58 million as ofMarch 31, 2020 . -
Amended its credit facility on
May 6, 2020 to provide covenant relief and full access to its entire$250 million capacity. - Chatham currently has 6 unencumbered hotels available as collateral to source additional liquidity.
-
Negotiated three-month deferral of interest, principal amortization and capital expenditure reserve contributions for its
Residence Inn New Rochelle mortgage loan. -
Temporarily reduced compensation for its executive officers and employees. Fisher and
Dennis Craven , executive vice president and chief operating officer, have both volunteered to reduce their salaries by 50 percent.Jeremy Wegner , chief financial officer, and all other corporate employees have temporarily reduced their salary by 25 percent. -
Lessened compensation for its
Board of Trustees who voluntarily agreed to temporarily reduce their proposed 2020 base compensation by approximately 25 percent.
“We have taken meaningful short-term measures to protect long-term value for our shareholders and employees, preserving as much cash flow as possible and making additional liquidity available should the need arise if the recovery is slower than expected,” stated
The company withdrew its original guidance for the remainder of 2020 on
Chatham has estimated liquidity of
Chatham’s current estimate of monthly cash flow after debt service and before capital expenditures is projected based on certain revenue per available room (RevPAR) levels (April RevPAR was approximately
|
Portfolio RevPAR |
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Cash (used) / retained |
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Capital expenditures for the remainder of the year are estimated to be
Earnings Call
The company will hold its first quarter 2020 conference call 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 (2018 includes expenses related to the previously planned
EBITDA, EBITDAre, 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 and facilitating comparisons of 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 EBITDAre in accordance with NAREIT guidelines, which defines EBITDAre as net income or loss excluding interest expense, income tax expense, depreciation and amortization expense, gains or losses from sales of real estate, impairment, and adjustments for unconsolidated joint ventures. We believe that the presentation of EBITDAre provides useful information to investors regarding the Company's operating performance and can facilitate comparisons of operating performance between periods and between REITs.
The company calculates Adjusted EBITDA by further adjusting EBITDA for certain additional items, including other charges (2018 includes expenses related to the previously planned
Although the company presents FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and
-
FFO, Adjusted FFO, EBITDA, EBITDAre, 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, EBITDAre, 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, EBITDAre, Adjusted EBITDA and
Adjusted Hotel EBITDA do not reflect funds available to make cash distributions; -
EBITDA, EBITDAre, 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, EBITDAre, 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, EBITDAre, Adjusted EBITDA and
Adjusted Hotel EBITDA differently than the company does, limiting their usefulness as a comparative measure.
In addition, FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and
The company’s reconciliation of FFO, Adjusted FFO, EBITDA, EBITDAre, 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 include those with regard to the potential future impact of the COVID-19 pandemic, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include information about possible or assumed future results of the lodging industry and our business, financial condition, liquidity, results of operations, cash flow and plans and objectives. These statements generally are characterized by the use of the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements. Important factors that we think could cause our actual results to differ materially from expected results are summarized below.
One of the most significant factors, however, is the ongoing impact of the current outbreak of the COVID-19 pandemic on
Other 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
Consolidated Balance Sheets (In thousands, except share and per share data) |
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(unaudited) |
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Assets: |
|
|
|
||||
Investment in hotel properties, net |
$ |
1,339,778 |
|
|
$ |
1,347,116 |
|
Investment in hotel properties under development |
26,693 |
|
|
20,496 |
|
||
Cash and cash equivalents |
57,972 |
|
|
6,620 |
|
||
Restricted cash |
11,599 |
|
|
13,562 |
|
||
Investment in unconsolidated real estate entities |
— |
|
|
17,969 |
|
||
Right of use asset, net |
21,115 |
|
|
21,270 |
|
||
Hotel receivables (net of allowance for doubtful accounts of |
2,801 |
|
|
4,626 |
|
||
Deferred costs, net |
4,094 |
|
|
4,271 |
|
||
Prepaid expenses and other assets |
6,011 |
|
|
2,615 |
|
||
Deferred tax asset, net |
29 |
|
|
29 |
|
||
Total assets |
$ |
1,470,092 |
|
|
$ |
1,438,574 |
|
Liabilities and Equity: |
|
|
|
||||
Mortgage debt, net |
$ |
493,265 |
|
|
$ |
495,465 |
|
Revolving credit facility |
173,000 |
|
|
90,000 |
|
||
Accounts payable and accrued expenses |
25,285 |
|
|
33,012 |
|
||
Distributions and losses in excess of investments in unconsolidated real estate entities |
16,200 |
|
|
15,214 |
|
||
Lease liability, net |
23,603 |
|
|
23,717 |
|
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Distributions payable |
469 |
|
|
6,142 |
|
||
Total liabilities |
731,822 |
|
|
663,550 |
|
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Commitments and contingencies |
|
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Equity: |
|
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Shareholders’ Equity: |
|
|
|
||||
Preferred shares, |
— |
|
|
— |
|
||
Common shares, |
469 |
|
|
469 |
|
||
Additional paid-in capital |
905,936 |
|
|
904,273 |
|
||
Retained earnings (distributions in excess of retained earnings) |
(180,479) |
|
|
(142,365) |
|
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Total shareholders’ equity |
725,926 |
|
|
762,377 |
|
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Noncontrolling interests: |
|
|
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Noncontrolling interest in |
12,344 |
|
|
12,647 |
|
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Total equity |
738,270 |
|
|
775,024 |
|
||
Total liabilities and equity |
$ |
1,470,092 |
|
|
$ |
1,438,574 |
|
Consolidated Statements of Operations (In thousands, except share and per share data) (unaudited) |
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For the three months ended |
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2020 |
|
2019 |
||||
Revenue: |
|
|
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Room |
$ |
53,048 |
|
|
$ |
68,085 |
|
Food and beverage |
2,063 |
|
|
2,427 |
|
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Other |
3,518 |
|
|
3,676 |
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Reimbursable costs from unconsolidated real estate entities |
1,580 |
|
|
1,491 |
|
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Total revenue |
60,209 |
|
|
75,679 |
|
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Expenses: |
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Hotel operating expenses: |
|
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Room |
13,394 |
|
|
15,570 |
|
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Food and beverage |
1,889 |
|
|
2,009 |
|
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Telephone |
378 |
|
|
433 |
|
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Other hotel operating |
810 |
|
|
939 |
|
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General and administrative |
5,278 |
|
|
6,167 |
|
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Franchise and marketing fees |
4,720 |
|
|
5,932 |
|
||
Advertising and promotions |
1,510 |
|
|
1,533 |
|
||
Utilities |
2,516 |
|
|
2,750 |
|
||
Repairs and maintenance |
3,462 |
|
|
3,611 |
|
||
Management fees |
2,024 |
|
|
2,544 |
|
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Insurance |
360 |
|
|
338 |
|
||
Total hotel operating expenses |
36,341 |
|
|
41,826 |
|
||
Depreciation and amortization |
13,061 |
|
|
12,772 |
|
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Impairment loss on investment in unconsolidated real estate entities |
15,282 |
|
|
— |
|
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Property taxes, ground rent and insurance |
6,099 |
|
|
6,166 |
|
||
General and administrative |
2,765 |
|
|
3,514 |
|
||
Other charges |
2,768 |
|
|
17 |
|
||
Reimbursable costs from unconsolidated real estate entities |
1,580 |
|
|
1,491 |
|
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Total operating expenses |
77,896 |
|
|
65,786 |
|
||
Operating (loss) income before gain on sale of hotel property |
(17,687) |
|
|
9,893 |
|
||
Gain on sale of hotel property |
1 |
|
|
— |
|
||
Operating (loss) income |
(17,686) |
|
|
9,893 |
|
||
Interest and other income |
81 |
|
|
55 |
|
||
Interest expense, including amortization of deferred fees |
(6,833) |
|
|
(7,197) |
|
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Loss from unconsolidated real estate entities |
(3,673) |
|
|
(1,123) |
|
||
(Loss) income before income tax expense |
(28,111) |
|
|
1,628 |
|
||
Income tax expense |
— |
|
|
— |
|
||
Net (loss) income |
(28,111) |
|
|
1,628 |
|
||
Net (loss) income attributable to noncontrolling interests |
328 |
|
|
(15) |
|
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Net (loss) income attributable to common shareholders |
$ |
(27,783) |
|
|
$ |
1,613 |
|
|
|
|
|
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(Loss) income per Common Share - Basic: |
|
|
|
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Net income attributable to common shareholders |
$ |
(0.59) |
|
|
$ |
0.03 |
|
(Loss) income per Common Share - Diluted: |
|
|
|
||||
Net income attributable to common shareholders |
$ |
(0.59) |
|
|
$ |
0.03 |
|
Weighted average number of common shares outstanding: |
|
|
|
||||
Basic |
46,948,533 |
|
|
46,556,710 |
|
||
Diluted |
46,948,533 |
|
|
46,734,958 |
|
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Distributions declared per common share: |
$ |
0.22 |
|
|
$ |
0.33 |
|
FFO and EBITDA (In thousands, except share and per share data) |
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For the three months ended |
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|
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|
2020 |
|
2019 |
||||
Funds From Operations (“FFO”): |
|
|
|
||||
Net (loss) income |
$ |
(28,111) |
|
|
$ |
1,628 |
|
Gain on sale of hotel property |
(1) |
|
|
— |
|
||
Loss on sale of assets within the unconsolidated real estate entities |
8 |
|
|
— |
|
||
Depreciation |
13,000 |
|
|
12,710 |
|
||
Impairment loss on investment in unconsolidated real estate entities |
15,282 |
|
|
— |
|
||
Impairment loss from unconsolidated real estate entities |
1,388 |
|
|
— |
|
||
Adjustments for unconsolidated real estate entity items |
1,926 |
|
|
1,818 |
|
||
FFO attributable to common share and unit holders |
3,492 |
|
|
16,156 |
|
||
Other charges |
2,768 |
|
|
17 |
|
||
Adjustments for unconsolidated real estate entity items |
2 |
|
|
— |
|
||
Adjusted FFO attributable to common share and unit holders |
$ |
6,262 |
|
|
$ |
16,173 |
|
Weighted average number of common shares and units |
|
|
|
||||
Basic |
47,496,006 |
|
|
46,966,901 |
|
||
Diluted |
47,607,096 |
|
|
47,145,149 |
|
|
For the three months ended |
||||||
|
|
||||||
|
2020 |
|
2019 |
||||
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”): |
|
|
|
||||
Net (loss) income |
$ |
(28,111) |
|
|
$ |
1,628 |
|
Interest expense |
6,833 |
|
|
7,197 |
|
||
Depreciation and amortization |
13,061 |
|
|
12,772 |
|
||
Adjustments for unconsolidated real estate entity items |
4,075 |
|
|
4,355 |
|
||
EBITDA |
(4,142) |
|
|
25,952 |
|
||
Impairment loss on investment in unconsolidated real estate entities |
15,282 |
|
|
— |
|
||
Impairment loss from unconsolidated real estate entities |
1,388 |
|
|
— |
|
||
Gain on sale of hotel property |
(1) |
|
|
— |
|
||
Loss on the sale of assets within unconsolidated real estate entities |
8 |
|
|
— |
|
||
EBITDAre |
12,535 |
|
|
25,952 |
|
||
Other charges |
2,768 |
|
|
17 |
|
||
Share based compensation |
1,206 |
|
|
1,059 |
|
||
Adjusted EBITDA |
$ |
16,509 |
|
|
$ |
27,028 |
|
ADJUSTED HOTEL EBITDA (In thousands, except share and per share data) |
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|
|
For the three months ended |
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|
|
|
||||||
|
|
2020 |
|
2019 |
||||
|
|
|
|
|
||||
Net (loss) income |
|
$ |
(28,111) |
|
|
$ |
1,628 |
|
Add: |
Interest expense |
6,833 |
|
|
7,197 |
|
||
|
Depreciation and amortization |
13,061 |
|
|
12,772 |
|
||
|
Corporate general and administrative |
2,765 |
|
|
3,514 |
|
||
|
Other charges |
2,768 |
|
|
17 |
|
||
|
Loss from unconsolidated real estate entities |
3,673 |
|
|
1,123 |
|
||
|
Impairment loss on investment in unconsolidated real estate entities |
15,282 |
|
|
— |
|
||
Less: |
Interest and other income |
(81) |
|
|
(55) |
|
||
|
Gain on sale of hotel property |
(1) |
|
|
— |
|
||
|
|
$ |
16,189 |
|
|
$ |
26,196 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20200511005175/en/
Chief Operating Officer
(561) 227-1386
(703) 435-6293
Source: