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Chatham Lodging Trust Announces Record Second Quarter Results, Raises Guidance
RevPAR Jumps 9.6 Percent, Margins Rise 350 Basis Points to Industry-Leading 43.6 Percent, Adjusted EBITDA Climbs 58 Percent, Adjusted FFO Rises 71 Percent
Second Quarter 2014 Highlights
-
Portfolio RevPAR – Increased hotel RevPAR 9.6 percent to
$133 for Chatham’s 29 wholly owned hotels. -
Comparable Hotel RevPAR – Grew hotel RevPAR 8.0 percent, excluding theResidence Inn Washington , D.C. hotel, which was without a brand for the entire 2013 first quarter. -
Adjusted EBITDA – Rose 58 percent to
$21.7 million . -
Adjusted FFO – Advanced 71 percent to
$15.0 million . Adjusted FFO per diluted share rose 17 percent to$0.56 from$0.48 , exceeding consensus estimates. - Operating Margins – Expanded hotel EBITDA margins 350 basis points to an industry-leading 43.6 percent. Gross Operating Profit margins improved 280 basis points to 49.6 percent.
-
Monthly Dividend – Boosted the dividend by 14 percent in April
to
$0.08 per share,$0.96 per share on an annualized basis.
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, | |||||||
2014 | 2013 | 2014 | 2013 | |||||
RevPAR | $133 | $122 | $123 | $113 | ||||
ADR | $154 | $145 | $150 | $143 | ||||
Occupancy | 86.8% | 83.7% | 82.3% | 79.2% | ||||
Adjusted EBITDA | $21.7 | $13.7 | $34.9 | $23.1 | ||||
GOP Margin | 49.6% | 46.8% | 46.3% | 44.6% | ||||
Hotel EBITDA Margin | 43.6% | 40.1% | 39.7% | 37.4% | ||||
Net income | $64.9 | $2.2 | $63.2 | $0.6 | ||||
AFFO | $15.0 | $8.8 | $22.4 | $13.3 | ||||
AFFO per diluted share | $0.56 | $0.48 | $0.84 | $0.74 | ||||
Dividends per share | $0.24 | $0.21 | $0.45 | $0.42 | ||||
Industry-Leading Top-Line Growth and
“2014 is shaping up to be a terrific year for Chatham as we followed up
a great first quarter with a phenomenal second quarter which produced
industry-leading RevPAR growth of 9.6 percent, further driving expansion
of our already industry leading margins by 350 basis points to 43.6
percent,” emphasized
“Corporate demand continues to strengthen in our markets, whether it is the individual or group traveler, and since our hotel portfolio is predominantly reliant on corporate business, we continue to see strong occupancy growth in our hotels and in our markets. In fact, 40 percent of our RevPAR growth was attributable to occupancy gains as we saw occupancy rise to an exceptional 87 percent in the 2014 second quarter,” Fisher commented. “This bodes well for our portfolio as the cycle matures and a greater proportion of RevPAR growth is expected to be attributable to rate increases, which Chatham has a long track record of aggressively driving to the bottom line given our industry leading margins. Our portfolio is in great physical shape, and we are well-positioned to benefit greatly as these metrics improve further. We continue to see on-going RevPAR growth above historical averages in our markets and remain very bullish with respect to the prospects for meaningful top-line growth in 2014 and 2015.
“Our best-in-class platform pairs a great ownership team at Chatham with Island Hospitality, the best operator in this class in generating unparalleled margins. Through both strategic acquisitions and aggressive management, this relationship continues to deliver the industry’s best margins, with second quarter hotel EBITDA margins surging 350 basis points to 43.6 percent growth, up almost 1,300 basis points since our 2010 IPO,” Fisher highlighted. “Our business strategy is intensely focused on driving hotel profits and ultimately distributable cash flow. We have achieved exceptional results on this front since our IPO. Adjusted EBITDA has grown at an average annual growth rate of 21 percent, and adjusted FFO per share has grown at an average annual rate of 30 percent, based on the midpoint of our 2014 guidance.”
Innkeepers Joint Venture & Silicon Valley Acquisitions
The Innkeepers joint venture produced 2014 second quarter RevPAR growth
of 8.5 percent to
In June, a joint venture comprised of
“The Cerberus/Chatham joint venture was a great partnership and proved
to be a highly successful investment, turning our initial
Chatham acquired four Residence Inns by
Chatham plans to partially redevelop and expand all four
The remaining 47 hotels in the 51-hotel portfolio were purchased by a
joint venture comprised of NorthStar and Chatham for a gross purchase
price of
“We look forward to a successful partnership with NorthStar in this joint venture,” Fisher stated. “We share similar outlooks regarding the health of the hotel industry and performance expectations for the portfolio. Our long-term interests are aligned with a solid capital structure that we believe will provide strong, risk-adjusted returns for our shareholders, and Chatham and Island will continue to explore other joint venture opportunities with NorthStar. The hotels are in excellent physical condition with only minimal brand-mandated upgrades required. All the hotels will continue their current brand affiliations under long-term agreements.”
Capital Structure
As of
During the first quarter, Chatham instituted a
“In 2011, we leveraged our balance sheet to make the initial Innkeepers
investments which consisted of the
Two hotels completed their planned, major renovations during the second
quarter: the
Dividend
In April, Chatham’s board of trustees approved a 14 percent dividend
increase to an annualized rate of
“We have increased our dividend every year since our IPO, and we will continue to grow our dividend in tandem with growth in adjusted FFO per share. Our 2014 dividend is well covered at approximately 48 percent of adjusted FFO per share. The increase reflects management’s and the Board of Trustees’ confidence in Chatham and our positive outlook, and we look forward to future dividend growth,” Craven stated.
Outlook and 2014 Guidance
“We expect solid operating fundamentals for the balance of 2014 which is
reflected in our higher guidance. We believe there is still plenty of
running room in this cycle,” Fisher said. “We expect 2015 to bring
further earnings improvement as the significant, external growth
attributable to the acquisition of the four, great hotels in the heart
of
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
Q3 2014 | 2014 Forecast | |||||
RevPAR | $137-$138 | $123-$125 | ||||
RevPAR growth | +7-8% | +6.5-7.5% | ||||
Total hotel revenue | $57.3-$57.8 M | $187.6-$189.0 M | ||||
Net income | $6.6-$7.4 M | $68.7-$70.0 M | ||||
Net income per diluted share | $0.24-$0.27 | $2.56-$2.61 | ||||
Adjusted EBITDA | $27.0-$27.8 M | $80.5-$82.0 M | ||||
Adjusted funds from operation ("FFO") | $18.4-$19.2 M | $51.1-$52.6 M | ||||
Adjusted FFO per diluted share | $0.68-$0.71 | $1.91-$1.96 | ||||
Hotel EBITDA margins | 46.0-47.0% | 41.5-42.0% | ||||
Corporate cash administrative expenses | $1.7 M | $7.2 M | ||||
Corporate non-cash administrative expenses | $0.6 M | $2.4 M | ||||
Interest expense | $6.4 M | $20.0 M | ||||
Non-cash amortization of deferred fees | $0.5 M | $1.8 M | ||||
Income taxes | $0.1 M | $0.2 M | ||||
Chatham’s share of JV EBITDA | $2.4 M | $9.8 M | ||||
Chatham’s share of JV FFO | $1.4 M | $4.8 M | ||||
Weighted average shares outstanding | 27.0 M | 26.8 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 second quarter 2014 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, | ||||||
2014 | 2013 | ||||||
(unaudited) | |||||||
Assets: | |||||||
Investment in hotel properties, net | $ | 970,954 | $ | 652,877 | |||
Cash and cash equivalents | 11,935 | 4,221 | |||||
Restricted cash | 8,060 | 4,605 | |||||
Investment in unconsolidated real estate entities | 3,218 | 774 | |||||
Hotel receivables (net of allowance for doubtful accounts of $59 and $30, respectively) |
3,803 | 2,455 | |||||
Deferred costs, net | 6,840 | 7,113 | |||||
Prepaid expenses and other assets | 2,760 | 1,879 | |||||
Total assets |
|
$ | 1,007,570 | $ | 673,924 | ||
Liabilities and Equity: | |||||||
Mortgage debt | $ | 444,535 | $ | 222,063 | |||
Revolving credit facility | 98,000 | 50,000 | |||||
Accounts payable and accrued expenses | 14,267 | 12,799 | |||||
Distributions and losses in excess of investments of unconsolidated real estate entities | - | 1,576 | |||||
Distributions payable | 2,260 | 1,950 | |||||
Total liabilities |
|
559,062 | 288,388 | ||||
Commitments and contingencies | |||||||
Equity: | |||||||
Shareholders' Equity: | |||||||
Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at June 30, 2014 and December 31, 2013 |
- | - | |||||
Common shares, $0.01 par value, 500,000,000 shares authorized; 26,877,757 and 26,295,558 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
266 | 261 | |||||
Additional paid-in capital | 445,427 | 433,900 | |||||
Accumulated deficit | 351 | (50,792 | ) | ||||
Total shareholders' equity |
|
446,044 | 383,369 | ||||
Noncontrolling Interests: | |||||||
Noncontrolling Interest in Operating Partnership | 2,464 | 2,167 | |||||
Total equity |
|
448,508 | 385,536 | ||||
Total liabilities and equity |
|
$ | 1,007,570 | $ | 673,924 | ||
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, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenue: | ||||||||||||||||
Room | $ | 43,978 | $ | 28,960 | $ | 77,935 | $ | 53,195 | ||||||||
Food and beverage | 585 | 199 | 1,213 | 349 | ||||||||||||
Other | 2,021 | 1,202 | 3,629 | 2,213 | ||||||||||||
Cost reimbursements from unconsolidated real estate entities | 493 | 385 | 1,165 | 768 | ||||||||||||
Total revenue | 47,077 | 30,746 | 83,942 | 56,525 | ||||||||||||
Expenses: | ||||||||||||||||
Hotel operating expenses: | ||||||||||||||||
Room | 8,802 | 6,065 | 16,557 | 11,615 | ||||||||||||
Food and beverage | 432 | 182 | 899 | 317 | ||||||||||||
Telephone | 285 | 216 | 572 | 407 | ||||||||||||
Other hotel operating | 507 | 378 | 950 | 727 | ||||||||||||
General and administrative | 3,847 | 2,680 | 7,274 | 5,186 | ||||||||||||
Franchise and marketing fees | 3,602 | 2,243 | 6,394 | 4,144 | ||||||||||||
Advertising and promotions | 859 | 651 | 1,689 | 1,308 | ||||||||||||
Utilities | 1,482 | 1,117 | 3,102 | 2,183 | ||||||||||||
Repairs and maintenance | 2,057 | 1,556 | 4,056 | 3,001 | ||||||||||||
Management fees | 1,396 | 887 | 2,490 | 1,631 | ||||||||||||
Insurance | 217 | 176 | 433 | 348 | ||||||||||||
Total hotel operating expenses | 23,486 | 16,151 | 44,416 | 30,867 | ||||||||||||
Depreciation and amortization | 7,365 | 4,026 | 13,680 | 7,778 | ||||||||||||
Property taxes and insurance | 2,809 | 2,045 | 5,458 | 4,032 | ||||||||||||
General and administrative | 2,639 | 2,064 | 4,961 | 4,046 | ||||||||||||
Hotel property acquisition costs and other charges | 5,559 | 1,059 | 7,041 | 1,236 | ||||||||||||
Reimbursed costs from unconsolidated real estate entities | 493 | 385 | 1,165 | 768 | ||||||||||||
Total operating expenses | 42,351 | 25,730 | 76,721 | 48,727 | ||||||||||||
Operating income | 4,726 | 5,016 | 7,221 | 7,798 | ||||||||||||
Interest and other income | 12 | 111 | 26 | 115 | ||||||||||||
Interest expense, including amortization of deferred fees | (4,362 | ) | (2,817 | ) | (8,100 | ) | (5,658 | ) | ||||||||
Loss on early extinguishment of debt | - | - | (184 | ) | (933 | ) | ||||||||||
Loss from unconsolidated real estate entities | (1,576 | ) | (89 | ) | (1,892 | ) | (720 | ) | ||||||||
Net gain from remeasurement and sale of investment in unconsolidated real estate entities | 66,174 | - | 66,174 | - | ||||||||||||
Income before income tax expense | 64,974 | 2,221 | 63,245 | 602 | ||||||||||||
Income tax expense | (38 | ) | (45 | ) | (41 | ) | (45 | ) | ||||||||
Net income | 64,936 | 2,176 | 63,204 | 557 | ||||||||||||
Net income attributable to noncontrolling interests | (108 | ) | - | (108 | ) | - | ||||||||||
Net income attributable to common shareholders | $ | 64,828 | $ | 2,176 | $ | 63,096 | $ | 557 | ||||||||
Income per Common Share - Basic: | ||||||||||||||||
Net income attributable to common shareholders | $ | 2.45 | $ | 0.12 | $ | 2.39 | $ | 0.02 | ||||||||
Income per Common Share - Diluted: | ||||||||||||||||
Net income attributable to common shareholders | $ | 2.42 | $ | 0.11 | $ | 2.37 | $ | 0.02 | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 26,437,878 | 18,147,108 | 26,355,237 | 17,682,199 | ||||||||||||
Diluted | 26,734,919 | 18,383,626 | 26,637,261 | 17,897,255 | ||||||||||||
Distributions per common share | $ | 0.24 | $ | 0.21 | $ | 0.45 | $ | 0.42 | ||||||||
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, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Funds From Operations ("FFO"): | ||||||||||||||
Net income | $ | 64,936 | $ | 2,176 | $ | 63,204 | $ | 557 | ||||||
Noncontrolling interests | (108 | ) | - | (108 | ) | - | ||||||||
Gain on the sale of assets due to remeasurement | (66,174 | ) | - | (66,174 | ) | - | ||||||||
Loss on the sale of assets within the unconsolidated real estate entity | - | 259 | 1 | 273 | ||||||||||
Depreciation | 7,335 | 4,003 | 13,623 | 7,739 | ||||||||||
Adjustments for unconsolidated real estate entity items | 1,229 | 1,285 | 2,435 | 2,526 | ||||||||||
FFO | 7,218 | 7,723 | 12,981 | 11,095 | ||||||||||
Hotel property acquisition costs and other charges | 5,559 | 1,059 | 7,041 | 1,236 | ||||||||||
Loss on early extinguishment of debt | - | - | 184 | 933 | ||||||||||
Adjustments for unconsolidated real estate entity items | 2,218 | 5 | 2,220 | 8 | ||||||||||
Adjusted FFO | $ | 14,995 | $ | 8,787 | $ | 22,426 | $ | 13,272 | ||||||
Weighted average number of common shares | ||||||||||||||
Basic | 26,437,878 | 18,147,108 | 26,355,237 | 17,682,199 | ||||||||||
Diluted | 26,734,919 | 18,383,626 | 26,637,261 | 17,897,255 | ||||||||||
For the three months ended | For the six months ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"): |
||||||||||||||
Net income | $ | 64,936 | $ | 2,176 | $ | 63,204 | $ | 557 | ||||||
Interest expense | 4,362 | 2,817 | 8,100 | 5,658 | ||||||||||
Income tax expense | 38 | 45 | 41 | 45 | ||||||||||
Depreciation and amortization | 7,365 | 4,026 | 13,680 | 7,778 | ||||||||||
Adjustments for unconsolidated real estate entity items | 2,765 | 2,768 | 5,389 | 5,563 | ||||||||||
Noncontrolling interests | (108 | ) | - | (108 | ) | - | ||||||||
EBITDA | 79,358 | 11,832 | 90,306 | 19,601 | ||||||||||
Hotel property acquisition costs and other charges | 5,559 | 1,059 | 7,041 | 1,236 | ||||||||||
Loss on early extinguishment of debt | - | - | 184 | 933 | ||||||||||
Adjustments for unconsolidated real estate entity items | 2,296 | 5 | 2,298 | 8 | ||||||||||
Gain on the sale of assets due to remeasurement | (66,174 | ) | - | (66,174 | ) | - | ||||||||
Loss on the sale of assets within the unconsolidated real estate entity | - | 259 | 1 | 273 | ||||||||||
Share based compensation | 628 | 531 | 1,213 | 1,080 | ||||||||||
Adjusted EBITDA | $ | 21,667 | $ | 13,686 | $ | 34,869 | $ | 23,131 | ||||||
Source:
Company:
Chatham Lodging Trust
Dennis Craven
Chief
Financial Officer
561-227-1386
or
Media:
Daly Gray,
Inc.
Chris Daly
703-435-6293