News for the Hospitality Executive
PALM BEACH, Fla., May 9, 2011—Chatham Lodging Trust (NYSE: CLDT), a hotel real estate investment trust (REIT) focused on investing in upscale extended-stay hotels and premium-branded select-service hotels, today announced results for the first quarter ended March 31, 2011.
2011 First Quarter Highlights and Operating
“It has been quite a start to 2011, producing solid first quarter operating results in line with our previous guidance and consensus estimates, and completing renovations on 40 percent of our portfolio on time and under budget. We expect that these improvements will boost RevPAR in the coming months as extended stay occupancy returns to more normalized levels,” said Jeffrey H. Fisher, Chatham’s chief executive officer and president. “Recent notable developments with respect to our pending acquisition of five outstanding hotels and our joint venture investment with Cerberus will double the size of our asset base. These deals are truly transformative and demonstrate our ability to continue to execute on our original business plan.”
“We will add five hotels to our portfolio that exemplify exactly what our acquisition strategy is—to buy the highest quality, upscale extended stay and limited-service hotels, concentrated in high-barrier-to-entry markets with strong and diverse demand generators. These hotels are positioned for cash flow growth driven by ADR and margin expansion. With the joint venture, we are able to participate in an off balance sheet, higher leveraged investment in hotels that we understand better than anyone, hotels we believe will generate strong returns for our shareholders,” Fisher continued. “Additionally, we believe the potential to acquire hotels from the joint venture will provide meaningful growth to the company and allow us to more efficiently leverage the REIT’s overhead structure in our role as asset manager of the joint venture.”Completion of the five hotel acquisition and acquisition of the 64 joint venture hotels is pursuant to a Plan of Reorganization and contingent upon satisfaction of certain conditions, including the entry of a Confirmation Order by the Bankruptcy Court with respect to such Plan. A hearing to approve the Plan of Reorganization is scheduled for June 23, 2011, and assuming the Confirmation Order is entered into at such time, the company would expect to close no later than September 15, 2011 on both transactions.
In addition to the $230 million investments above, the company expects to close on the acquisition of the Residence Inn Pittsburgh University Medical Center in the second quarter. “We will be opportunistic in building our portfolio and deploying our capital,” commented Peter Willis, chief investment officer. We continue to have a robust pipeline of quality assets, consistent with our underwriting criteria, that we believe would be great additions to our portfolio.”Property Upgrade Status
As of the date of this release, the company has substantially completed major renovations on five of the seven hotels requiring full renovations during 2011. These five hotels account for approximately 40 percent of the company’s rooms. The company has spent approximately $8 million on the renovations as of March 31, 2011 with full year expenditures unchanged from our prior guidance of approximately $12 million in 2011, excluding any potential expenditures related to future hotels that may be acquired.Balance Sheet
As of March 31, 2011, the company had approximately $31 million of cash and cash equivalents and borrowing capacity of approximately $85 million under the company’s credit facility. The company’s ratio of net debt to investment in hotels, at cost was approximately 5.7 percent as of March 31, 2011.
At March 31, 2011, the company had debt outstanding of approximately $12 million, comprised of amounts owed on two separate loans collateralized by single hotels. The weighted average interest rate on the two loans is 5.91 percent.
Subsequent to the end of the first quarter, the company amended certain covenants related to the company’s consolidated leverage ratio and fixed charge coverage ratio. Subject to certain conditions, the line of credit maintains its accordion feature that provides the company with the ability to increase the facility to $110 million. “This amendment provides us with the flexibility to consummate these opportunistic investments and accelerate our growth,” said Dennis M. Craven, chief financial officer. “Our overall leverage will be higher than our targeted 35 percent after these investments. However, we are comfortable with temporarily increasing our leverage at this early stage of the lodging cycle recovery to take advantage of these opportunities and add high quality assets to our portfolio that we expect will generate returns consistent with our current portfolio.”
On February 9, 2011, the company declared a common share dividend of $0.175 per share on its common shares, paid on April 15, 2011 to shareholders of record on March 31, 2011. The company will continue to evaluate its dividend policy on a quarterly basis.
Second Quarter Update
The improvement in the hospitality industry forecast to occur in 2011 is largely dependent on economic growth, reduced unemployment and increased business travel spending. Excluding the Homewood Suites Dallas, which was the only hotel under renovation in April 2011, RevPAR at the company’s remaining 12 hotels was up 5.4 percent in April 2011 as compared to April 2010.
Given the uncertainty regarding the timing of the acquisition of the five hotels and the joint venture investment, the company is not providing updated guidance for the remainder of 2011.
The company will hold a conference call regarding its first quarter 2011 results tomorrow, May 10, 2011, at 10 a.m. Eastern time. Shareholders and other interested parties may listen to a simultaneous webcast of the conference call on the Internet by logging onto Chatham’s Web site, http://www.chathamlodgingtrust.com/, or http://www.streetevents.com/, or may participate in the conference call by calling (480) 629-9866, reference number 4436528. A recording of the call will be available by telephone until midnight on Tuesday, May 17, 2011, by dialing (800) 406-7325, reference number 4436528. A replay of the conference call will be posted on Chatham’s website.
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, six additional hotels comprising 938 rooms/suites under contract to purchase and a minority investment in a joint venture that will acquire 64 hotels in the 2011 third quarter. Additional information about Chatham may be found at www.chathamlodgingtrust.com.
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.
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
Adjusted EBITDA provides investors with another financial measure that
may facilitate comparisons of operating performance between periods and
Although the company presentsFFO, Adjusted
FFO, EBITDA and Adjusted EBITDA because it believes they are useful to
investors in comparing the company’s operating performance between
between REITs, these measures have limitations as analytical tools.
these limitations are:
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.
Note: This press release
contains forward-looking statements within the
meaning of federal securities regulations. These forward-looking
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
not guarantees of future performance and involve known and unknown
uncertainties and other factors which may cause the actual results to
materially from those anticipated at the time the forward-looking
are made. These risks include, but are not limited to: national and
economic and business conditions, including the effect on travel of
terrorist attacks, that will affect occupancy rates at the company’s
the demand for hotel products and services; operating risks associated
hotel business; risks associated with the level of the company’s
and its ability to meet covenants in its debt agreements; relationships
property managers; the company’s ability to maintain its properties in
manner, including meeting capital expenditure requirements; the
ability to compete effectively in areas such as access, location,
accommodations and room rate structures; changes in travel patterns,
government regulations which influence or determine wages, prices,
procedures and costs; the company’s ability to complete acquisitions
dispositions; and the company’s ability to continue to satisfy complex
order for the company to remain a REIT for federal income tax purposes
other risks and uncertainties associated with the company’s business
in the company's filings with the SEC. Although the company believes
expectations reflected in such forward-looking statements are based
reasonable assumptions, it can give no assurance that the expectations
attained or that any deviation will not be material. All information in
release is as of May 9, 2011, and the company undertakes no obligation
update any forward-looking statement to conform the statement to actual
or changes in the company's expectations.
Dennis Craven (Company)
Chief Financial Officer
Jerry Daly or Carol McCune
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