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Chatham Lodging Trust Closes Out Strong 2013
2014 RevPAR, EBITDA and FFO Performance Expectations Rise
Fourth Quarter 2013 Highlights
-
Comparable Hotel RevPAR – Grew hotel RevPAR 4.9 percent, excluding theWashington, D.C. hotel which was ramping up as a newly convertedResidence Inn byMarriott . -
Portfolio RevPAR - Rose 4.4 percent to
$103 for the 25 wholly owned hotels. -
Adjusted EBITDA – Increased 52 percent to
$12.7 million . -
Adjusted FFO – Improved 159 percent to
$7.6 million . Adjusted FFO per diluted share rose 38 percent to$0.29 from$0.21 . - Operating Margins Expand – Enhanced margins significantly with Gross Operating Profit margins rising 170 basis points to 43.6 percent and hotel EBITDA margins up 210 basis points to 36.0 percent.
-
Portfolio Growth Continues – Completed acquisitions of two,
high quality hotels comprising 391 rooms for
$111.6 million . -
Innkeepers Joint Venture – Received distributions of
$0.8 million in the quarter, bringing total distributions to 92.4 percent of original invested capital.
Consolidated Financial Results
The following is a summary of the consolidated financial results for the
comparable, respective fourth quarter and full-year periods. RevPAR, ADR
and occupancy for 2013 and 2012 are based on hotels owned as of
Three Months Ended | Year Ended | |||||||||||
December 31, | December 31, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
RevPAR | $103 | $98 | $109 | $104 | ||||||||
ADR | $139 | $136 | $137 | $132 | ||||||||
Occupancy | 77.0% | 74.3% | 79.5% | 78.8% | ||||||||
Net income (loss) | $(0.1) | $(2.4) | $3.0 | $(1.5) | ||||||||
Adjusted EBITDA | $12.7 | $8.4 | $51.4 | $40.9 | ||||||||
AFFO | $7.6 | $2.9 | $31.7 | $18.1 | ||||||||
AFFO per diluted share | $0.29 | $0.21 | $1.49 | $1.30 | ||||||||
GOP Margin | 43.6% | 41.9% | 44.9% | 44.3% | ||||||||
Hotel EBITDA Margin | 36.0% | 33.9% | 37.8% | 37.2% | ||||||||
Dividends per share | $0.21 | $0.20 | $0.84 | $0.775 | ||||||||
Operating Results and Acquisitions Build Momentum
“It has been an invigorating year with the Chatham and JV portfolios
producing strong operating results,” said
- generating a total shareholder return of almost 40 percent
- expanding equity market capitalization more than 150 percent
-
growing hotel investments by approximately
$260 million , or 50 percent - increasing EBITDA more than 50 percent
- improving adjusted FFO almost 160 percent and FFO per share nearly 40 percent
- reducing our leverage to approximately 36 percent from 50 percent a year ago and positioning our balance sheet for continued acquisitions in 2014
“Fourth quarter revenue outperformed our expectations with RevPAR growth
of 4.4 percent, exceeding our guidance of 2-3 percent,” Fisher noted.
“Top-line revenue growth was favorably impacted by hotels acquired since
“Our best-in-class platform, an aggressive owner and an experienced, highly focused management company, delivers some of the industry’s best margins. Fourth quarter hotel EBITDA margin growth was particularly impressive, rising 210 basis points to 36.0 percent,” Fisher pointed out. “With ADR expected to comprise most of our RevPAR growth in 2014 and 2015, we believe there is substantial room for upside in our margins and that we are ideally positioned to further drive margin growth. Additionally, upon acquiring a hotel together with Island Hospitality Management, we have a strong track record of aggressively managing the top-line revenue mix, as well as refining operating expense standards and lowering purchasing costs to improve margins noticeably.
“Our long-term stated goal is to build Chatham into the premier, select-service and upscale, extended-stay lodging REIT. To date, we have successfully created significant, long-term value for our shareholders by making disciplined acquisitions at very attractive pricing, as most of our transactions have been privately sourced with no broker involvement. With historically low interest rates and our belief that there is still running room in this cycle, we will continue to look at opportunities to grow our hotel portfolio with the right balance of leverage and well-timed access to capital,” Fisher said.
Acquisitions
During the 2013 fourth quarter, the company acquired the 231-room
“These last two deals capped off an exceptional group of acquisitions,
purchasing approximately
Capital Structure
As of
During 2013, the company issued
“We feel strongly that the capital transactions in 2013 have positioned
us for attractive earnings and portfolio growth in 2014 and beyond as
the cycle matures,” commented
Innkeepers Joint Venture
During the 2013 fourth quarter, Chatham received distributions of
As announced in late January, the joint venture began marketing for sale
its 51-hotel, 6,847- room portfolio. The highly diversified portfolio of
newly-renovated hotels benefits from superior locations, leading brands,
strong property performance, substantial recent capital investment and
compelling, long-term value enhancement opportunities. The portfolio is
being offered unencumbered by management contracts and has an assumable
“The joint venture has proven to be a great investment to date, and should we consummate a transaction at an acceptable valuation, the returns would be outstanding given our promote interest,” Craven highlighted.
The renovation and conversion of the
The two hotels undergoing major renovation in 2014 are the
Dividend
Chatham currently pays a monthly dividend of
“We believe our dividend should grow in tandem with our earnings, and our Board will re-assess our 2014 dividend for the second quarter,” Fisher noted.
2014 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
- No additional acquisitions, debt or equity issuance
-
Renovations at the company’s
Denver Hilton Garden Inn andResidence Inn White Plains , New York - No sale of the Innkeepers joint venture
Q1 2014 | 2014 Forecast | |||||
RevPAR | $100-$101 | $114-$116 | ||||
RevPAR growth | +3-4% | +5-6% | ||||
Total hotel revenue | $34.3-$34.8 M | $159-$161 M | ||||
Net income | $0.0-$0.5 M | $14.2-$16.2 M | ||||
Net income per diluted share | $0.00-$0.02 | $0.53-$0.61 | ||||
Adjusted EBITDA | $12.6-$13.0 M | $67.5-$69.5 M | ||||
Adjusted funds from operation ("FFO") | $6.9-$7.4 M | $44.8-$46.8 M | ||||
Adjusted FFO per diluted share | $0.26-$0.28 | $1.69-$1.77 | ||||
Hotel EBITDA margins | 34.7-35.3% | 39.8-40.5% | ||||
Corporate cash administrative expenses | $1.6 M | $6.4 M | ||||
Corporate non-cash administrative expenses | $0.6 M | $2.4 M | ||||
Interest expense | $3.2 M | $12.8 M | ||||
Non-cash amortization of deferred fees | $0.4 M | $1.6 M | ||||
Income taxes | $0.0 M | $0.2 M | ||||
Chatham’s share of JV EBITDA | $2.3 M | $10.6 M | ||||
Chatham’s share of JV FFO | $0.9 M | $4.9 M | ||||
Weighted average shares outstanding | 26.5 M | 26.5 M | ||||
Funds from operations (FFO), Adjusted FFO (AFFO), EBITDA and Adjusted
EBITDA are non-GAAP financial measures within the meaning of the rules
of the
Earnings Call
The company will hold its fourth quarter 2013 conference call tomorrow,
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 (loss) 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) | ||||||||||
December 31, | December 31, | |||||||||
2013 | 2012 | |||||||||
(unaudited) | ||||||||||
Assets: | ||||||||||
Investment in hotel properties, net | $ | 652,877 | $ | 426,074 | ||||||
Cash and cash equivalents | 4,221 | 4,496 | ||||||||
Restricted cash | 4,605 | 2,949 | ||||||||
Investment in unconsolidated real estate entities | 774 | 13,362 | ||||||||
Hotel receivables (net of allowance for doubtful accounts of $30 and $28, respectively). | 2,455 | 2,098 | ||||||||
Deferred costs, net | 7,113 | 6,312 | ||||||||
Prepaid expenses and other assets | 1,879 | 1,930 | ||||||||
Total assets | $ | 673,924 | $ | 457,221 | ||||||
Liabilities and Equity: | ||||||||||
Debt | $ | 222,063 | $ | 159,746 | ||||||
Revolving credit facility | 50,000 | 79,500 | ||||||||
Accounts payable and accrued expenses | 12,799 | 8,488 | ||||||||
Distributions in excess of investments in and net income of unconsolidated real estate entities | 1,576 | - | ||||||||
Distributions payable | 1,950 | 2,875 | ||||||||
Total liabilities | 288,388 | 250,609 | ||||||||
Commitments and contingencies | ||||||||||
Equity: | ||||||||||
Shareholders' Equity: | ||||||||||
Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at December 31, 2013 and 2012 |
- | - | ||||||||
Common shares, $0.01 par value, 500,000,000 shares authorized; 26,295,558 and 13,908,907 shares issued and outstanding at December 31, 2013 and 2012, respectively |
261 | 137 | ||||||||
Additional paid-in capital | 433,900 | 240,355 | ||||||||
Accumulated deficit | (50,792 | ) | (35,491 | ) | ||||||
Total shareholders' equity | 383,369 | 205,001 | ||||||||
Noncontrolling Interests: | ||||||||||
Noncontrolling Interest in Operating Partnership | 2,167 | 1,611 | ||||||||
Total equity | 385,536 | 206,612 | ||||||||
Total liabilities and equity | $ | 673,924 | $ | 457,221 | ||||||
CHATHAM LODGING TRUST | ||||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||
For the three months ended | For the year ended | |||||||||||||||||||
December 31, |
December 31, |
|||||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||||
Revenue: | ||||||||||||||||||||
Room | $ | 31,792 | $ | 22,788 | $ | 118,169 | $ | 94,566 | ||||||||||||
Food and beverage | 594 | 68 | 1,311 | 253 | ||||||||||||||||
Other | 1,538 | 958 | 5,113 | 4,023 | ||||||||||||||||
Cost reimbursements from unconsolidated real estate entities | 409 | 471 | 1,635 | 1,622 | ||||||||||||||||
Total revenue | 34,333 | 24,285 | 126,228 | 100,464 | ||||||||||||||||
Expenses: | ||||||||||||||||||||
Hotel operating expenses: | ||||||||||||||||||||
Room | 7,249 | 5,231 | 25,709 | 20,957 | ||||||||||||||||
Food and beverage expense | 438 | 66 | 944 | 307 | ||||||||||||||||
Telephone | 256 | 169 | 899 | 718 | ||||||||||||||||
Other | 423 | 379 | 1,580 | 1,508 | ||||||||||||||||
General and administrative | 3,270 | 2,605 | 11,529 | 9,320 | ||||||||||||||||
Franchise and marketing fees | 2,588 | 1,814 | 9,394 | 7,529 | ||||||||||||||||
Advertising and promotions | 736 | 517 | 2,782 | 2,257 | ||||||||||||||||
Utilities | 1,280 | 964 | 4,955 | 4,081 | ||||||||||||||||
Repairs and maintenance | 1,599 | 1,280 | 6,310 | 4,958 | ||||||||||||||||
Management fees | 1,088 | 705 | 3,752 | 2,872 | ||||||||||||||||
Insurance | 202 | 106 | 742 | 523 | ||||||||||||||||
Total hotel operating expenses | 19,129 | 13,836 | 68,596 | 55,030 | ||||||||||||||||
Depreciation and amortization | 5,724 | 3,412 | 18,249 | 14,273 | ||||||||||||||||
Property taxes and insurance | 2,585 | 1,913 | 8,915 | 7,088 | ||||||||||||||||
General and administrative | 2,175 | 2,165 | 8,131 | 7,565 | ||||||||||||||||
Hotel property acquisition costs and other charges | 760 | 128 | 3,341 | 236 | ||||||||||||||||
Reimbursed costs from unconsolidated real estate entities | 409 | 471 | 1,635 | 1,622 | ||||||||||||||||
Total operating expenses | 30,782 | 21,925 | 108,867 | 85,814 | ||||||||||||||||
Operating income | 3,551 | 2,360 | 17,361 | 14,650 | ||||||||||||||||
Interest and other income | 8 | - | 132 | 55 | ||||||||||||||||
Interest expense, including amortization of deferred fees | (3,147 | ) | (3,338 | ) | (11,580 | ) | (14,641 | ) | ||||||||||||
Loss on early extinguishment of debt | - | - | (933 | ) | - | |||||||||||||||
Loss from unconsolidated real estate entities | (480 | ) | (1,382 | ) | (1,874 | ) | (1,439 | ) | ||||||||||||
Income (loss) before income tax benefit (expense) | (68 | ) | (2,360 | ) | 3,106 | (1,375 | ) | |||||||||||||
Income tax expense | (48 | ) | (14 | ) | (124 | ) | (75 | ) | ||||||||||||
Net income (loss) | $ | (116 | ) | $ | (2,374 | ) | $ | 2,982 | $ | (1,450 | ) | |||||||||
Income per Common Share - Basic: | ||||||||||||||||||||
Net income (loss) attributable to common shareholders | $ | (0.01 | ) | $ | (0.17 | ) | $ | 0.13 | $ | (0.12 | ) | |||||||||
Income per Common Share - Diluted: | ||||||||||||||||||||
Net income (loss) attributable to common shareholders | $ | (0.01 | ) | $ | (0.17 | ) | $ | 0.13 | $ | (0.12 | ) | |||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||||||
Basic | 26,160,823 | 13,822,021 | 21,035,892 | 13,811,691 | ||||||||||||||||
Diluted | 26,160,823 | 13,822,021 | 21,283,831 | 13,811,691 | ||||||||||||||||
Distributions per common share | $ | 0.21 | $ | 0.200 | $ | 0.840 | $ | 0.775 | ||||||||||||
CHATHAM LODGING TRUST | |||||||||||||||||||
FFO and EBITDA | |||||||||||||||||||
(In thousands, except share and per share data) | |||||||||||||||||||
For the three months ended | For the year ended | ||||||||||||||||||
December 31, |
December 31, |
||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||
Funds From Operations ("FFO"): | |||||||||||||||||||
Net income (loss) | $ | (116 | ) | $ | (2,374 | ) | $ | 2,982 | $ | (1,450 | ) | ||||||||
Loss (gain) on the sale of assets within the unconsolidated real estate entity | 14 | 225 | 252 | (257 | ) | ||||||||||||||
Depreciation | 5,697 | 3,393 | 18,162 | 14,198 | |||||||||||||||
Adjustments for unconsolidated real estate entity items | 1,223 | 1,553 | 5,055 | 5,340 | |||||||||||||||
FFO | 6,818 | 2,797 | 26,451 | 17,831 | |||||||||||||||
Hotel property acquisition costs and other charges | 760 | 128 | 3,341 | 236 | |||||||||||||||
Loss on early extinguishment of debt | - | - | 933 | - | |||||||||||||||
Adjustments for unconsolidated real estate entity items | 2 | 7 | 964 | 49 | |||||||||||||||
Adjusted FFO | $ | 7,580 | $ | 2,932 | $ | 31,689 | $ | 18,116 | |||||||||||
Weighted average number of common shares | |||||||||||||||||||
Basic | 26,160,823 | 13,822,021 | 21,035,892 | 13,811,691 | |||||||||||||||
Diluted | 26,452,391 | 13,995,626 | 21,283,831 | 13,937,726 | |||||||||||||||
For the three months ended | For the year ended | ||||||||||||||||||
December 31, |
December 31, |
||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"): |
|||||||||||||||||||
Net income (loss) | $ | (116 | ) | $ | (2,374 | ) | $ | 2,982 | $ | (1,450 | ) | ||||||||
Interest expense | 3,147 | 3,338 | 11,580 | 14,641 | |||||||||||||||
Income tax expense | 48 | 14 | 124 | 75 | |||||||||||||||
Depreciation and amortization | 5,724 | 3,412 | 18,249 | 14,273 | |||||||||||||||
Adjustments for unconsolidated real estate entity items | 2,655 | 2,785 | 10,934 | 11,319 | |||||||||||||||
EBITDA | 11,458 | 7,175 | 43,869 | 38,858 | |||||||||||||||
Hotel property acquisition costs and other charges | 760 | 128 | 3,341 | 236 | |||||||||||||||
Loss on early extinguishment of debt | - | - | 933 | - | |||||||||||||||
Adjustments for unconsolidated real estate entity items | 2 | 304 | 964 | 49 | |||||||||||||||
Loss (gain) on the sale of assets within the unconsolidated real estate entity | 14 | 225 | 252 | (257 | ) | ||||||||||||||
Share based compensation | 498 | 519 | 2,087 | 2,004 | |||||||||||||||
Adjusted EBITDA | $ | 12,732 | $ | 8,351 | $ | 51,446 | $ | 40,890 | |||||||||||
Source:
Chatham Lodging Trust
Dennis Craven (Company)
Chief Financial
Officer
(561) 227-1386
or
Daly Gray, Inc. (Media)
Chris
Daly
(703) 435-6293