CHATHAM LODGING TRUST (Form: 8-K)  

 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

     
Date of Report (Date of Earliest Event Reported):   June 29, 2011

CHATHAM LODGING TRUST
__________________________________________
(Exact name of registrant as specified in its charter)

     
Maryland 001-34693 27-1200777
_____________________
(State or other jurisdiction
_____________
(Commission
______________
(I.R.S. Employer
of incorporation) File Number) Identification No.)
      
50 Cocoanut Row, Suite 216, Palm Beach, Florida   33480
_________________________________
(Address of principal executive offices)
  ___________
(Zip Code)
     
Registrant’s telephone number, including area code:   (561) 802-4477

Not Applicable
______________________________________________
Former name or former address, if changed since last report

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Top of the Form

Item 7.01 Regulation FD Disclosure.

On June 29, 2011, Chatham Lodging Trust (the "Company") issued a press release announcing that the US Bankruptcy Court had approved the Plan of Reorganization of Innkeepers USA Trust and its affiliates. The Company is acquiring five hotels direct from Innkeepers USA Trust and is parthering in a joint venture with affiliates of Cerberus Capital Managment, L.P. to acquire 64 hotels from Innkeepers USA Trust.

The press release is attached hereto as Exhibit 99.1





Item 9.01 Financial Statements and Exhibits.

Press Release of the Company, dated June 29, 2011, furnished under Item 7.01, announcing that the US Bankruptcy Court had approved the Plan of Reorganization of Innkeepers USA Trust.






Top of the Form

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         
    CHATHAM LODGING TRUST
          
June 30, 2011   By:   Dennis M. Craven
       
        Name: Dennis M. Craven
        Title: Chief Financial Officer


Top of the Form

Exhibit Index


     
Exhibit No.   Description

 
99.1
  Press Release dated June 29, 2011
EX-99.1

Press Release For Immediate Release

CHATHAM’S ACQUISITIONS TO DELIVER STELLAR GROWTH
REIT to Acquire Interests in 69 Premium-Branded Hotels, Doubling Its Investment Portfolio
Chatham Revises 2011 Guidance; Issues 2012 Outlook

PALM BEACH, Fla. (June 29, 2011) – Chatham Lodging Trust (NYSE: CLDT), a hotel real estate investment trust (REIT) focused on investing in premium-branded, select-service hotels, today announced a major, strategic milestone that will enhance the company’s growth. Following the U.S. Bankruptcy Court’s approval today of the Plan of Reorganization for Innkeepers USA Trust and its affiliates (“Innkeepers”), Chatham will acquire from Innkeepers interests in 69 premium-branded hotels, the vast majority of which were recently renovated.

Chatham will invest a total of approximately $232 million in the transactions, consisting of $195 million in an outright purchase of five of the hotels and a $37 million acquisition of a 9.2 percent interest in a joint venture with affiliates of Cerberus Capital Management, L.P., that will acquire 64 of the hotels for approximately $1.125 billion.

Upon completion of these acquisitions, which is expected in July 2011, Chatham will own interests in 83 hotels that were acquired for $1.5 billion, 19 of which will be wholly-owned, premium-branded hotels with 2,588 rooms located in the country’s leading hotel markets.

Outlook for 2011 and 2012; June 30 Conference Call
Acquiring interests in 69 hotels will have a significant impact on Chatham’s outlook for 2011 and 2012. Chatham’s management will discuss the transactions and their impact on Chatham’s outlook during a conference call on June 30, 2011, at 10:00 a.m., EDT. (Details can be found later in this release.)

The hospitality industry is forecast to continue to improve in 2011 and 2012 based on economic growth, lack of new supply growth and increased business travel spending. The updated guidance reflects the acquisition of the Innkeepers assets on July 31, 2011, and the previously announced acquisition of the Residence Inn Pittsburgh, which will occur by September 30, 2011.

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1

                         
    Initial   Updated    
    2011 Guidance   2011 Guidance   2012 Forecast
RevPAR (pro forma for the 19 wholly-owned hotels)
  $ 91-$93     $ 97-$99     $ 104-$106  
RevPAR growth (pro forma for the 19 wholly-owned hotels)
    +3-5 %     +3-5 %     +6-8 %
Net income
  $ 5.5-$6.5 M     $ 2.0-$3.0 M     $ 9-$11 M  
Net income per diluted share
  $ 0.41-$0.48     $ 0.15-$0.22     $ 0.65-$0.80  
Adjusted EBITDA
  $ 16.5-$17.5 M     $ 26-$27 M     $ 42-$45 M  
Adjusted funds from operation (“FFO”)
  $ 11.5-$12.5 M     $ 12.5-$13.5 M     $ 20-$23 M  
Adjusted FFO per diluted share
  $ 0.86-$0.93     $ 0.93-$1.00     $ 1.45-$1.66  
Hotel EBITDA margins
    34-35 %     36-37 %     38-40 %
Corporate cash administrative expenses
  $ 4.2 M     $ 4.2 M     $ 5.2 M  
Corporate non-cash administrative expenses
  $ 1.6 M     $ 1.6 M     $ 1.6 M  
Interest expense
  $ 1.7 M     $ 6.7 M     $ 14.4 M  
Non-cash amortization of deferred financing fees
  $ 1.3 M     $ 1.5 M     $ 1.7 M  
Weighted average shares outstanding
    13.35 M       13.35 M       13.82 M  

“This is an accretive transaction that can produce shareholder value precisely because the portfolio of hotels we are acquiring aligns with our investment and growth strategies,” said Jeffrey H. Fisher, Chatham’s chairman, chief executive officer and president. “Plus, our management team knows the ins and outs of these hotels and their markets, so, while these hotels are performing well and our going-in returns are expected to be healthy, we anticipate being able to generate even stronger returns on these investments with the continued improvement in industry fundamentals.”

Investment in Joint Venture
Specifics of the joint-venture transaction that align with Chatham’s hotel acquisition strategy include:

    Focus on undervalued properties: The price paid by the joint venture, $1.125 billion for the 64 hotels, equates to $135,000 per room, which represents a substantial discount to estimated replacement costs.

    Focus on select-service hotels: Select-service hotels have a lower cost structure than that of full-service hotels. The vast majority of the acquired portfolio (rooms) consists of select-service brands: 52 percent Residence Inn, 17 percent Hampton Inn, eight percent Summerfield Suites and six percent Courtyard by Marriott.

    Focus on premium brands: Premium-branded hotels typically demand higher rates and enjoy higher occupancy than do non-premium-branded hotels. Ninety-three percent of the portfolio (rooms) consists of hotels operating under the Marriott, Hilton, Hyatt and Starwood brands.

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2

    Focus on major, coastal MSA locations: The top lodging MSAs have the benefit of more demand from business travel, tourism and other factors leading to higher RevPAR. Seventy-seven percent of the portfolio (rooms) is located in top 25 lodging MSAs that have a high barrier to entry.

“Another key factor in evaluating this deal,” continued Mr. Fisher, “is that the vast majority of the premium-branded properties in this portfolio were renovated in the past three years. This means we will have little-to-no revenue displacement due to rooms’ being unavailable during renovations.”

The joint venture between Chatham and Cerberus will acquire the 64 hotels (described on the Fact Sheet accompanying this release) with 8,329 rooms for a total purchase price of approximately $1.125 billion, or approximately $135,000 per room, including the assumption of approximately $725 million of mortgage debt on 45 of the hotels, with a weighted average interest rate of 6.71 percent and maturing in 2017. The other 19 hotels are unencumbered. All costs of operating the joint venture will be paid by the joint venture. The joint venture also may sell a selected group of non-core assets.

Chatham will own an approximate 9.2 percent interest in the joint venture and will fund its approximate $37 million investment in the joint venture with borrowings under its senior secured revolving credit facility. Chatham will provide certain management services to the joint venture and will receive a promote interest based on meeting certain return thresholds.

Chatham also gains the option, during the 120 days following the closing of the joint venture’s purchase of the 64 Innkeepers hotels, to purchase certain additional hotels from a subset of the joint venture’s pool of Innkeepers hotels, which have already been determined by Cerberus and Chatham, for an aggregate purchase price of approximately $100 million, subject to increase upon agreement between Chatham and Cerberus.

“Among our strengths are our relationships within the industry that keep us in front of prospective acquisitions and our lodging expertise that helps us zero in on undervalued assets that can perform better under our management,” continued Mr. Fisher.

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3

Outright Acquisition of Five Hotels
In addition to the joint-venture investment, Chatham will acquire the five Innkeepers hotels listed below, which comprise a total of 764 rooms, for a total purchase price of $195 million, or approximately $255,000 per room. This is based upon a projected 2011 net operating income (NOI) cap rate of seven (7) percent and an EBITDA multiple of 13.2x, strong metrics considering that two of the five hotels were under renovation during 2011. Driving the metrics for these five hotels are a premium RevPAR projected to be approximately $110 in 2011 and gross operating profit margins of approximately 50 percent, which translate into a strong EBITDA flow through of 108% expected in 2011.

                 
Hotel   Location   Rooms
Residence Inn Anaheim   Garden Grove, CA   200
Residence Inn San Diego   Mission Valley, CA   192
Residence Inn Tysons Corner   Tysons Corner, VA   121
Doubletree Guest Suites Washington, D.C.  
Washington, D.C.
    105  
       
 
       
Homewood Suites on the Riverwalk  
San Antonio, TX
    146  
       
 
       
Total:     764  
         

Chatham will fund the acquisition through the assumption of five individual mortgage loans, secured by the hotels, totaling $134.2 million, with a weighted average interest rate of six (6) percent and maturing in 2016, and with available cash and borrowings under its senior secured revolving credit facility. The five loans will amortize based on a 30-year amortization period, other than the loan related to the hotel in Garden Grove, California, which will be interest-only for the first two years after closing. The five loans are prepayable in whole at any time without prepayment premiums or defeasance.

Following completion of these acquisitions, the five hotels that Chatham acquires from Innkeepers and all but one of the 64 hotels that the joint venture acquires from Innkeepers will continue to be managed by Island Hospitality Management, a hotel management company that is 90-percent owned by Mr. Fisher.

Tim Price, managing director at Cerberus, said, “We are pleased to be working with Chatham on this joint venture. No one knows the Innkeepers hotels better than Jeff Fisher, and we look forward to working closely together with Jeff and his knowledgeable team to ensure the future success of the joint venture.”

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4

“This deal is happening at the right time and with the right partner. Our industry saw a 17 percent decline in revenue per available room (RevPAR) between 2007 and 2009. With the ongoing recovery in RevPAR, coupled with our success gaining market share, we believe there is significant upside to go,” added Mr. Fisher. “Of course, Cerberus adds strong financial backing and its own real estate expertise. We are happy to have the confidence and insight of Cerberus in this joint venture.”

Conference Call
Chatham management will hold a conference call to discuss the topics addressed in this press release on June 30, 2011, at 10:00 a.m., EDT. Shareholders and other interested parties may participate in the conference call by calling 866.788.0544 from within the U.S. or +1 857.350.1682 from outside the U.S., reference number 47697398. They also may listen to a simultaneous webcast of the conference call on the Internet by logging onto either Chatham’s web site, www.chathamlodgingtrust.com, or www.streetevents.com. A recording of the call will be available by telephone until July 7, 2011, by dialing (888) 286-8010 from within the U.S. or +1 (617) 801-6888 from outside the U.S., reference number 71982540. A replay of the conference call also will be posted on Chatham’s website.

About Chatham Lodging Trust
Chatham Lodging Trust is a self-advised REIT that was organized to invest in upscale extended-stay hotels and premium-branded, select-service hotels. The company currently owns 13 hotels with an aggregate of 1,650 rooms/suites in nine states, has six additional hotels comprising 938 rooms/suites under contract and holds a minority investment in a joint venture that will acquire 64 hotels in the third quarter of 2011. Additional information about Chatham may be found at www.chathamlodgingtrust.com.

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 are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, and 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 SEC. Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of June 29, 2011, and the company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

Included in this press release are certain “non-GAAP financial measures,” within the meaning of Securities and Exchange Commission (SEC) rules and regulations, that are different from measures calculated and presented in accordance with GAAP (generally accepted accounting principles). The company considers the following non-GAAP financial measures useful to investors as key supplemental measures of its operating performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, and (4) Adjusted EBITDA. These non-GAAP financial measures could be considered along with, but not as alternatives to, net income or loss, cash flows from operations or any other measures of the company’s operating performance prescribed by GAAP.

FFO As Defined by NAREIT and Adjusted FFO
The company calculates FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which defines FFO as net income or loss (calculated in accordance with GAAP), excluding gains or losses from sales of real estate, items classified by GAAP as extraordinary, the cumulative effect of changes in accounting principles, plus depreciation and amortization (excluding amortization of deferred financing costs), and after adjustments for unconsolidated partnerships and joint ventures. The company believes that the presentation of FFO provides useful information to investors regarding its operating performance because it measures performance without regard to specified non-cash items such as real estate depreciation and amortization, gain or loss on sale of real estate assets and certain other items that the company believes are not indicative of the performance of its underlying hotel properties. The company believes that these items are more representative of its asset base and its acquisition and disposition activities than its ongoing operations, and that by excluding the effects of the items, FFO is useful to investors in comparing its operating performance between periods and between REITs that also report FFO in accordance with the NAREIT definition.

 

The company further adjusts FFO for certain additional items that are not in NAREIT’s definition of FFO, including acquisition transaction costs and costs associated with the departure of the company’s former CFO. 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.

5

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; and depreciation and amortization. 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 non-cash share-based compensation, 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 ongoing 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.

– end –

Fact Sheet
Hotels Acquired by Cerberus-Chatham Lodging Trust Joint Venture

                                             
#   Hotel   Location   State   Rooms                
1  
Boston Bulfinch
  Boston
  MA   79                
       
 
                                   
2  
Courtyard by Marriott
  Ft. Lauderdale
  FL   136                
       
 
                                   
3  
Courtyard by Marriott
  Atlantic City
  NJ   206                
       
 
                                   
4  
Courtyard by Marriott
  Montvale
  NJ   184                
       
 
                                   
5  
Embassy Suites
  Santa Clarita
  CA   156                
       
 
                                   
6  
Gatehouse Suites
  Indianapolis
  IN   88                
       
 
                                   
7  
Gatehouse Suites
  East Lansing
  MI   60                
       
 
                                   
8  
Gatehouse Suites
  Grand Rapids
  MI   96                
       
 
                                   
9  
Gatehouse Suites
  Troy
  MI   152                
       
 
                                   
10  
Hampton Inn
  Naples
  FL   107                
       
 
                                   
11  
Hampton Inn
  Westchester
  IL   112                
       
 
                                   
12  
Hampton Inn
  Louisville
  KY   173                
       
 
                                   
13  
Hampton Inn
  Woburn
  MA   99                
       
 
                                   
14  
Hampton Inn
  Columbia
  MD   83                
       
 
                                   
15  
Hampton Inn
  Germantown
  MD   178                
       
 
                                   
16  
Hampton Inn
  Islandia
  NY   120                
       
 
                                   
17  
Hampton Inn
  Willow Grove
  PA   150                
       
 
                                   
18  
Hyatt Summerfield Suites
  Belmont (Silicon Valley)
  CA   132                
       
 
                                   
19  
Hyatt Summerfield Suites
  El Segundo
  CA   122                
       
 
                                   
20  
Hyatt Summerfield Suites
  Mt. Laurel
  NJ   116                
       
 
                                   
21  
Hyatt Summerfield Suites
  Dallas (Addison )
  TX   132                
       
 
                                   
22  
Hyatt Summerfield Suites
  Dallas (Las Colinas)
  TX   148                
       
 
                                   
23  
Residence Inn by Marriott
  Fremont (Silicon Valley)
  CA   80                
       
 
                                   
       
 
  Mountain View (Silicon
                           
24  
Residence Inn by Marriott
  Valley)
  CA   112                
       
 
                                   
25  
Residence Inn by Marriott
  Ontario
  CA   200                
       
 
                                   
26  
Residence Inn by Marriott
  San Jose (Silicon Valley)
  CA   80                
       
 
                                   
27  
Residence Inn by Marriott
  San Jose (Silicon Valley)
  CA   150                
       
 
                                   
28  
Residence Inn by Marriott
  San Mateo (Silicon Valley)
  CA   160                
       
 
                                   
29  
Residence Inn by Marriott
  Sunnyvale (Silicon Valley)
  CA   231                
       
 
                                   
30  
Residence Inn by Marriott
  Sunnyvale (Silicon Valley)
  CA   247                
       
 
                                   
31  
Residence Inn by Marriott
  Denver
  CO   159                
       
 
                                   
32  
Residence Inn by Marriott
  Denver (Englewood)
  CO   128                
       
 
                                   
33  
Residence Inn by Marriott
  Shelton
  CT   96                
       
 
                                   
34  
Residence Inn by Marriott
  Windsor
  CT   96                
       
 
                                   
35  
Residence Inn by Marriott
  Altamonte Springs
  FL   128                
       
 
                                   
36  
Residence Inn by Marriott
  Atlanta
  GA   160                
       
 
                                   
37  
Residence Inn by Marriott
  Atlanta (Norcross)
  GA   120                
       
 
                                   
38  
Residence Inn by Marriott
  Chicago (O'Hare)
  IL   192                
       
 
                                   
39  
Residence Inn by Marriott
  Lexington
  KY   80                
       
 
                                   
40  
Residence Inn by Marriott
  Louisville
  KY   96                
       
 
                                   
41  
Residence Inn by Marriott
  Gaithersburg
  MD   132                
       
 
                                   
42  
Residence Inn by Marriott
  Portland
  ME   78                
       
 
                                   
43  
Residence Inn by Marriott
  Detroit (Livonia)
  MI   112                
       
 
                                   
44  
Residence Inn by Marriott
  Troy (Madison Heights)
  MI   96                
       
 
                                   
45  
Residence Inn by Marriott
  Cherry Hill
  NJ   96                
       
 
                                   
46  
Residence Inn by Marriott
  Saddle River
  NJ   174                
       
 
                                   
47  
Residence Inn by Marriott
  Binghamton
  NY   72                
       
 
                                   
48  
Residence Inn by Marriott
  Harrisburg
  PA   122                
       
 
                                   
49  
Residence Inn by Marriott
  Dallas (Addison )
  TX   150                
       
 
                                   
50  
Residence Inn by Marriott
  Dallas (Arlington)
  TX   114                
       
 
                                   
51  
Residence Inn by Marriott
  Richmond
  VA   104                
       
 
                                   
52  
Residence Inn by Marriott
  Richmond
  VA   80                
       
 
                                   
53  
Residence Inn by Marriott
  Bellevue
  WA   120                
       
 
                                   
54  
Residence Inn by Marriott
  Bothell
  WA   120                
       
 
                                   
55  
Residence Inn by Marriott
  Lynnwood
  WA   120                
       
 
                                   
56  
Residence Inn by Marriott
  Seattle
  WA   144                
       
 
                                   
57  
Sheraton
  Rockville
  MD   154                
       
 
                                   
58  
Sheraton Four Points
  Ft. Walton Beach
  FL   216                
       
 
                                   
59  
Stay Inn
  Lombard
  IL   128                
       
 
                                   
60  
Stay Inn
  Schaumburg
  IL   128                
       
 
                                   
61  
Stay Inn
  Ft. Wayne
  IN   80                
       
 
                                   
62  
Stay Inn
  Albany
  NY   126                
       
 
                                   
       
Towne Place Suites by
  63  
Marriott
  Horsham
  PA
  95
       
 
                                   
64  
Westin
  Morristown
  NJ   224                
       
 
                                   
Total     8,329                  
                         

June 29, 2011

6