News for the Hospitality Executive
PALM BEACH, Fla.--(August 6, 2012)--Chatham Lodging Trust (NYSE: CLDT), a hotel real estate investment trust (REIT) focused on investing in premium branded upscale extended-stay hotels and select-service hotels, today announced results for the quarter ended June 30, 2012.
Second Quarter 2012 Highlights
Consolidated Financial Results
The following is a summary of the consolidated financial results ($ in millions, except RevPAR, ADR, occupancy and per share amounts):
Operating Results Led By Market Share Gains, Improving Rates and JV Performance
“Our portfolio continues to produce strong results with second quarter comparable RevPAR increasing 7.6 percent, EBITDA and FFO growth up significantly and all other metrics producing solid advances year-over-year,” said Jeffrey H. Fisher, Chatham’s president and CEO. “These results validate our business plan to generate superior returns for our shareholders by building a high quality portfolio of premium-branded hotels in high barrier-to-entry markets, acquired at attractive prices that can benefit from strategic asset management and experienced operators. The performance of our 18 owned hotels, as well as our joint-venture investment, has significantly exceeded hotel industry averages, giving us the ability to reward our investors with meaningful dividends, which we increased 14 percent to $0.20 per quarter during the second quarter.
“Our portfolio is in excellent physical condition, which gives us a substantial competitive advantage. We have invested more than $25 million upgrading 13 of our 18 hotels, putting them in noticeably better condition than our competitors. Many of our competitors still need to complete significant renovations in the future, which will temporarily take supply out of the market,” Fisher said.
“This positions us well to gain additional market share, accelerate ADR and further improve our industry leading margins,” Fisher added. “Given current occupancy levels in our markets, we see additional opportunities to increase ADR for the foreseeable future.”
“We will continue to maintain our portfolio in top condition, sell assets when they no longer meet our long-term strategy and invest in hotels that we believe will generate better returns,” he commented. “We continue to evaluate opportunities to profitably recycle our capital by selectively disposing of assets or using distributions from the joint venture to invest in hotels that will generate incremental returns without raising equity.”
During the quarter, the company transferred management of five of the six Homewood Suites by Hilton hotels previously managed by Hilton to Island Hospitality. For the quarter, RevPAR at these properties increased by 12.5 percent.
Joint Venture Results Exceeded Budgeted Expectations
Chatham holds a 10.3 percent interest in a JV that currently owns a 58-hotel portfolio comprising 7,550 rooms.
“The performance of the joint venture hotels continues to exceed our pre-acquisition expectations,” Fisher noted. “Portfolio RevPAR growth again comfortably exceeded the industry average in the second quarter. With EBITDA and margin growth accelerating, the joint venture is producing excellent leveraged returns.”
The JV previously announced that it would sell 13 non-core assets. During the 2012 second quarter, the JV sold five hotels and to date in the 2012 third quarter, has divested one hotel. The JV currently is marketing for sale seven non-core hotels. Most of those properties are not currently branded, and their sale is not expected to have a material impact on the JV’s portfolio results. Upon successful completion of the sale of the remaining seven hotels, the JV expects to receive additional net proceeds of approximately $12 million in 2012.
The company received distributions of $6.1 million from the joint venture attributed to asset sales and cash flow from operations during the 2012 second quarter, bringing total distributions of $19.2 million year-to-date.
“With the proceeds from the sale of the remaining, non-core, JV hotels and distribution of proceeds to the partners, Chatham’s net investment after distributions will be approximately $16 million,” said Dennis Craven, Chatham’s chief financial officer. “Distributions received through the 2012 second quarter represent approximately 52 percent of our initial investment, which is especially impressive since this equity was returned within eight months of closing the joint venture.”
As of June 30, 2012, the company had debt outstanding of $214.1 million at an average interest rate of 5.8 percent with a weighted average five-year maturity on its fixed-rate debt. Net debt was $205.6 million at June 30, 2012. Chatham’s leverage ratio is 47 percent based on the company’s investment in hotels at cost and its investment in the joint venture at cost.
“During the second quarter, we generated significant free cash flow, allowing us to pay down $8.9 million of debt,” Craven said. “Our joint venture investment and our wholly owned portfolio are producing great results, and with minimal capital spending requirements required over the next few years, we expect to continue to produce free cash flow to reduce our debt and ultimately acquire hotels.”
The company approved a 14 percent increase in the company’s common share dividend in May to an annualized rate of $0.80 per common share. Based on the company’s common share closing price of $13.93 at the close of business on August 3, 2012, the annualized dividend represents a yield of approximately 5.7 percent, one of the highest in the industry.
The company is providing 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 Securities and Exchange Commission. The company is providing initial guidance for the third quarter and is slightly reducing the upper end of its adjusted FFO and FFO per share outlook for 2012 to account for more slightly modest RevPAR growth in the second half of the year:
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.
The company will hold its second quarter 2012 conference call tomorrow, August 7, 2012, 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, www.chathamlodgingtrust.com, or www.streetevents.com, or may participate in the conference call by dialing 1-888-549-7750, reference number 4552955. A recording of the call will be available by telephone until midnight on Tuesday, August 14, 2012, by dialing 1-800-406-7325, reference number 4552955. A replay of the conference call 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 18 hotels with an aggregate of 2,414 rooms/suites in 10 states and the District of Columbia and holds a minority investment in a joint venture that owns 58 hotels with 7,550 rooms/suites. 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, impairment write-downs, 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 or other charges 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, 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:
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 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 August 6, 2012, 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.
Chatham Lodging Trust
Dennis Craven (Company)
Chief Financial Officer
Jerry Daly or Carol McCune
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