Chatham Lodging Trust Announces First Quarter 2021 Results

Cash Burn Erased with April RevPAR

Chatham Lodging Trust (NYSE: CLDT), a lodging real estate investment trust (REIT) that invests in upscale, extended-stay hotels and premium-branded, select-service hotels, today announced results for the first quarter ended March 31, 2021.

First Quarter 2021 Operating Results

  • Portfolio Revenue Per Available Room (RevPAR) – Declined 42 percent to $55, compared to the 2020 first quarter. Average daily rate (ADR) decreased 31 percent to $107, and occupancy dropped 17 percent to 52 percent for the 39 comparable hotels owned as of March 31, 2021. All Chatham hotels have remained open throughout the pandemic.
    • April RevPAR was $75 on occupancy of 65 percent and ADR of $117
  • Net Income Improved $30.8 million to net income of $2.7 million from a net loss of $28.1 million in the 2020 first quarter. Net income per diluted share was $0.06 versus net loss per diluted share of $(0.59) for the same period last year. During the 2021 first quarter, Chatham recognized a gain of $23.8 million related to the sale of the Innkeepers joint venture.
  • GOP Margin Generated positive GOP margins of 30 percent compared to 25 percent in the 2020 fourth quarter and 38 percent in the 2020 first quarter.
  • Adjusted EBITDA – Produced positive Adjusted EBITDA for the third consecutive quarter, generating Adjusted EBITDA of $1.2 million versus $0.2 million in the 2020 fourth quarter and $16.5 million in the 2020 first quarter.
  • Adjusted FFO – Declined $13.4 million to $(7.1) million. Adjusted FFO per diluted share was $(0.15), compared to $0.13 in the 2020 first quarter.
  • Cash Burn Before Capital Expenditures First quarter 2021 cash burn was $7.6 million versus $9.5 million in the 2020 fourth quarter, $5.1 million in the 2020 third quarter and $12.8 million in the 2020 second quarter. Cash burn includes $2.3 million of principal amortization per quarter.
  • Cash Flow Positive – Produced positive cash flow after interest expense and corporate overhead in March for the first time since the beginning of the pandemic. In April, Chatham is expected to produce positive cash flow after all debt service and overhead, reaching that mark the second fastest of all lodging REITs.

The following chart summarizes the consolidated financial results for the three months ended March 31, 2021 and 2020 based on all properties owned during those periods ($ in millions, except margin percentages and per share data):

Three Months Ended

March 31,

2021

2020

Net income (loss)

$2.7

$(28.1)

Diluted net income (loss) per common share

$0.06

$(0.59)

GOP Margin

29.9%

38.0%

Hotel EBITDA Margin

11.1%

27.6%

Adjusted EBITDA

$1.2

$16.5

AFFO

$(7.1)

$6.3

AFFO per diluted share

$(0.15)

$0.13

Dividends per share

$0.00

$0.22

Hotel RevPAR Performance

The below chart summarizes key hotel financial statistics for the 39 comparable hotels owned as of March 31, 2021 compared to the 2020 fourth quarter (does not include one hotel sold in 2020):

Q1 2021 RevPAR

Q4 2020 RevPAR

Occupancy

52%

45%

ADR

$107

$104

RevPAR

$55

$47

% Change in RevPAR to Prior Year

(42)%

(60)%

The below chart summarizes RevPAR statistics by month for the company’s 39 comparable hotels:

January

February

March

April

Occupancy – 2021

46%

50%

60%

65%

ADR – 2021

$104

$105

$110

$117

RevPAR – 2021

$47

$53

$66

$75

RevPAR – 2020

$104

$123

$62

$23

% Change in RevPAR

(55)%

(57)%

7%

230%

RevPAR Index

132

127

122

~125

“Since RevPAR dipped to $40 in December, we have produced healthy sequential gains in occupancy, ADR and RevPAR through the first four months of 2021,” highlighted Jeffrey H. Fisher, Chatham’s president and chief executive officer. “Leisure travel continues to lead the lodging recovery. Demand remains strongest on the weekend, and we expect leisure demand to remain strong through the summer. Also, there is a bit of business travel coming back into our hotels which is very encouraging at this point.”

RevPAR performance for Chatham’s six largest markets based on hotel EBITDA contribution over the last twelve months is presented below:

Q1 2021
RevPAR

% Change
vs. Q1 2020

Q4 2020
RevPAR

Q3 2020
RevPAR

39 – Hotel Portfolio

$55

(42)%

$47

$56

Silicon Valley

$54

(58)%

$46

$54

Greater New York

$87

(15)%

$80

$87

Coastal Maine and New Hampshire

$48

(34)%

$63

$109

Los Angeles

$82

(32)%

$79

$89

Charleston

$71

(13)%

$66

$70

Fort Lauderdale

$161

(9)%

$85

$104

“Our meaningful RevPAR gains have been accomplished with very little contribution from our most important market, Silicon Valley, and as business travel comes back in that market, our portfolio will continue to produce meaningful RevPAR gains,” Fisher stated. “Additionally, we expect our coastal Maine and New Hampshire hotels to have huge summers, and since those markets were essentially shut down to inbound travel through mid-July, RevPAR gains should be meaningful. In Los Angeles, specifically Anaheim, Disneyland just opened up on April 30th, and although our Residence Inn has done well through the pandemic with a lot of medical guests, we expect that market and our performance to heat up.”

Approximately 84 percent of Chatham’s hotel EBITDA over the last twelve months was generated from its Residence Inn and Homewood Suites hotels. Chatham has the highest concentration of extended-stay rooms of any public lodging REIT at 58 percent. First quarter 2021 occupancy, ADR and RevPAR for each of the company’s major brands is presented below (number of hotels in parentheses):

Residence Inn (16)

Homewood Suites (7)

Courtyard (5)

Hilton Garden Inn (4)

Hampton Inns (3)

Occupancy – 2021

60%

58%

44%

31%

60%

ADR – 2021

$116

$92

$91

$112

$90

RevPAR – 2021

$69

$53

$41

$35

$54

RevPAR – 2020

$112

$88

$85

$87

$74

% Change in RevPAR

(38)%

(39)%

(52)%

(60)%

(28)%

“Our strong performance is a testament to great portfolio attributes, high-quality, extended-stay hotels and premium-branded, select-service hotels in locations that generate room revenue from diverse demand sources,” Fisher added. “For years, we have touted the benefits of a portfolio such as ours through all phases of a lodging cycle, and our performance certainly proves that. We believed we would reach cash flow breakeven sooner than most other lodging REITs, and with April RevPAR of $75, we expect that we will be positive cash flow after debt service for the month which is incredible news to deliver to our shareholders.

“Chatham will emerge from the pandemic healthier than many of our lodging REIT peers who have burned significant amounts of cash and equity value, and we will be better positioned to be acquisitive and grow FFO in addition to the FFO that will be added with the opening of our Los Angeles development,” Fisher concluded.

Hotel Operations Performance

The below chart summarizes key hotel operating performance measures per month during the 2021 first quarter and for the three months ended March 31, 2021 and December 31, 2020. RevPAR, GOP margin and Hotel EBITDA margin is for the 39 comparable hotels. Gross operating profit is calculated as Hotel EBITDA plus property taxes, ground rent and insurance (in millions, except for RevPAR):

January

February

March

Q1 2021

Q4 2020

RevPAR – 2021

$47

$53

$66

$55

$47

Gross operating profit

$2.1

$2.5

$4.8

$9.4

$7.1

Hotel EBITDA

$0.1

$0.5

$2.9

$3.5

$2.3

GOP margin

23%

26%

37%

30%

25%

Hotel EBITDA margin

2%

5%

22%

11%

8%

“Operationally, our platform working alongside Island Hospitality allows us to adjust top- and bottom-line driven operating strategies faster than our peers and generate high operating margins which ultimately translates to better cash flow,” commented Dennis Craven, Chatham’s chief operating officer. “Compared to the 2020 fourth quarter, we have produced strong flow-through of incremental dollars in the 2021 first quarter. On a $2.6 million increase in hotel revenue, we generated an approximate 84 percent flow-through, driving our gross operating profit higher by approximately $2.2 million.”

Corporate Update

The below chart summarizes key financial performance measures for the three months ended March 31, 2021. Corporate EBITDA is calculated as hotel EBITDA minus cash corporate general and administrative expenses and is before debt service and capital expenditures. Debt service includes interest expense and principal amortization on its secured debt (approximately $2.3 million per quarter). Cash used before CAPEX is calculated as Corporate EBITDA less debt service. Amounts are in millions, except RevPAR.

January

February

March

Q1 2021

Q4 2020

RevPAR – 2021

$47

$53

$66

$55

$47

Hotel EBITDA

$0.1

$0.5

$2.9

$3.5

$2.3

Corporate EBITDA

$(0.6)

$(0.3)

$2.0

$1.1

$0.0

Debt service

$(2.9)

$(2.9)

$(2.9)

$(8.7)

$(9.5)

Cash used before CAPEX

$(3.5)

$(3.2)

$(0.9)

$(7.6)

$(9.5)

Chatham has estimated liquidity of $145 million, including cash of approximately of $15 million, as of March 31, 2021, and remaining borrowing capacity on the credit facility of $130 million.

Hotel Investments

During the 2021 first quarter, the company incurred capital expenditures of $1.1 million. During 2021, Chatham expects remaining capital expenditures of $5.2 million, excluding any spending related to the Warner Center development since it is fully funded by a construction loan. Chatham does not intend to complete any renovations in 2021.

Hotel Under Development

Chatham is developing a hotel in the Warner Center submarket of Los Angeles, Calif., on a parcel of land owned by the company. The company expects the total development costs to be approximately $70 million, inclusive of land of $6.6 million. Including land, the company has incurred costs to date of approximately $52.5 million. Construction is ahead of the previously announced schedule, and the hotel is expected to open during the 2021 fourth quarter.

Joint Venture Investment

During the quarter, Chatham sold its 10.3 percent interest in the Innkeepers joint venture with Colony Capital for $2.8 million.

“This sale culminates a very successful joint venture investment for Chatham since we bought the Innkeepers portfolio out of bankruptcy in 2011,” Craven stated. “With this final payment, we generated total proceeds of more than $100 million out of our $37 million Innkeepers joint venture investment, just a fantastic result.”

Capital Markets & Capital Structure

As of March 31, 2021, the company had net debt of $585.9 million (total consolidated debt less unrestricted cash), down $2.7 million from December 31, 2020 and down $23.7 million from March 31, 2020. Excluding the Warner Center loan, net debt is down $11.1 million from December 31, 2020 and down $45.4 million from March 31, 2020. Total debt outstanding as of March 31, 2021 was $600.6 million at an average interest rate of 4.5 percent, comprised of $458.8 million of fixed-rate mortgage debt at an average interest rate of 4.7 percent, $120.0 million outstanding on the company’s $250 million senior unsecured revolving credit facility, which currently carries a 3.1 percent interest rate and $21.8 million outstanding on the Warner Center construction loan, which carries a 7.75 percent interest rate.

Chatham’s leverage ratio was approximately 35.9 percent on March 31, 2021, based on the ratio of the company’s net debt to hotel investments at cost. The weighted average maturity date for Chatham’s fixed-rate debt is March 2024.

On April 30, 2021, Chatham repaid in full the $12.5 million mortgage secured by the Residence Inn New Rochelle, N.Y., that carried a 5.75 percent interest rate and was set to mature later this year.

During the first quarter, Chatham issued 1.5 million common shares at an average price of $14.15 per share, generating proceeds of $21.3 million. Proceeds were used to pay down borrowings on the credit facility and repay the $12.5 million New Rochelle mortgage.

“We deeply understand our responsibility to protect long-term value for our equity holders,” commented Jeremy Wegner, Chatham’s chief financial officer. “With the sale of the hotel in late 2020, as well as proceeds from the sale of the joint venture and share issuance, we have further solidified our financial position.”

Dividend

Although not expected, any dividend required for Chatham to maintain its REIT status for 2021 will be declared in the 2021 fourth quarter and paid in January 2022. Pursuant to its amended credit facility, any dividends paid would include a cash component no greater than the minimum percentage allowed under the Internal Revenue Code.

2021 Guidance

Due to uncertainty surrounding the impact of the pandemic on the hotel industry, the company is not providing guidance at this time.

About Chatham Lodging Trust

Chatham Lodging Trust is a self-advised, publicly traded real estate investment trust focused primarily on investing in upscale, extended-stay hotels and premium-branded, select-service hotels. As of March 31, 2021, the company owns 39 hotels totaling 5,900 rooms/suites in 15 states and the District of Columbia.

       

CHATHAM LODGING TRUST

Consolidated Balance Sheets

(In thousands, except share and per share data)

       

March 31,
2021

 

December 31,
2020

(unaudited)

 

Assets:

 

Investment in hotel properties, net

$

1,251,986

 

$

1,265,174

Investment in hotel properties under development

52,540

 

43,651

Cash and cash equivalents

14,638

 

21,124

Restricted cash

8,724

 

10,329

Right of use asset, net

20,480

 

20,641

Hotel receivables (net of allowance for doubtful accounts of $263 and $248, respectively)

2,507

 

1,688

Deferred costs, net

4,990

 

5,384

Prepaid expenses and other assets

6,882

 

2,266

Total assets

$

1,362,747

 

$

1,370,257

Liabilities and Equity:

 

Mortgage debt, net

$

457,924

 

$

460,145

Revolving credit facility

120,000

 

135,300

Construction loan

21,757

 

13,325

Accounts payable and accrued expenses

22,350

 

25,374

Distributions and losses in excess of investments in unconsolidated real estate entities

 

19,951

Lease liability, net

23,103

 

23,233

Distributions payable

147

 

469

Total liabilities

645,281

 

677,797

Commitments and contingencies

 

Equity:

 

Shareholders’ Equity:

 

Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at March 31, 2021 and December 31, 2020

 

Common shares, $0.01 par value, 500,000,000 shares authorized; 48,518,201 and 46,973,473 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

485

 

470

Additional paid-in capital

929,725

 

906,000

Accumulated deficit

(226,062

)

 

(228,718

)

Total shareholders’ equity

704,148

 

677,752

Noncontrolling interests:

 

Noncontrolling interest in Operating Partnership

13,318

 

14,708

Total equity

717,466

 

692,460

Total liabilities and equity

$

1,362,747

 

$

1,370,257

               
   

CHATHAM LODGING TRUST

Consolidated Statements of Operations

(In thousands, except share and per share data)

(unaudited)

   

For the three months ended

March 31,

2021

 

2020

Revenue:

 

Room

$

29,390

 

$

53,048

Food and beverage

363

 

2,063

Other

1,574

 

3,518

Reimbursable costs from unconsolidated real estate entities

787

 

1,580

Total revenue

32,114

 

60,209

Expenses:

 

Hotel operating expenses:

 

Room

7,166

 

13,394

Food and beverage

284

 

1,889

Telephone

400

 

378

Other hotel operating

365

 

810

General and administrative

3,812

 

5,278

Franchise and marketing fees

2,598

 

4,720

Advertising and promotions

757

 

1,510

Utilities

2,287

 

2,516

Repairs and maintenance

2,461

 

3,462

Management fees

1,196

 

2,024

Insurance

648

 

360

Total hotel operating expenses

21,974

 

36,341

Depreciation and amortization

13,334

 

13,061

Impairment loss on investment in unconsolidated real estate entities

 

15,282

Property taxes, ground rent and insurance

5,879

 

6,099

General and administrative

3,530

 

2,765

Other charges

55

 

2,768

Reimbursable costs from unconsolidated real estate entities

787

 

1,580

Total operating expenses

45,559

 

77,896

Operating loss before (loss) gain on sale of hotel property

(13,445

)

 

(17,687

)

(Loss) gain on sale of hotel property

(43

)

 

1

Operating loss

(13,488

)

 

(17,686

)

Interest and other income

74

 

81

Interest expense, including amortization of deferred fees

(6,470

)

 

(6,833

)

Loss from unconsolidated real estate entities

(1,231

)

 

(3,673

)

Gain on sale of investment in unconsolidated real estate entities

23,817

 

Income (loss) before income tax expense

2,702

 

(28,111

)

Income tax expense

 

Net income (loss)

2,702

 

(28,111

)

Net income (loss) attributable to noncontrolling interests

(46

)

 

328

Net income (loss) attributable to common shareholders

$

2,656

 

$

(27,783

)

Income (loss) per Common Share – Basic:

 

Net income (loss) attributable to common shareholders

$

0.06

 

$

(0.59

)

Income (loss) per Common Share – Diluted:

 

Net income (loss) attributable to common shareholders

$

0.06

 

$

(0.59

)

Weighted average number of common shares outstanding:

 

Basic

47,224,972

 

46,948,533

Diluted

47,368,518

 

46,948,533

Distributions declared per common share:

$

 

$

0.22

               
   

CHATHAM LODGING TRUST

FFO and EBITDA

(In thousands, except share and per share data)

   

For the three months ended

March 31,

2021

 

2020

Funds From Operations (“FFO”):

 

Net income (loss)

$

2,702

 

$

(28,111

)

Loss (gain) on sale of hotel property

43

 

(1

)

Loss on sale of assets within the unconsolidated real estate entities

 

8

Gain on sale of investment in unconsolidated real estate entities

(23,817

)

 

Depreciation

13,274

 

13,000

Impairment loss on investment in unconsolidated real estate entities

 

15,282

Impairment loss from unconsolidated real estate entities

 

1,388

Adjustments for unconsolidated real estate entity items

568

 

1,926

FFO attributable to common share and unit holders

(7,230

)

 

3,492

Other charges

55

 

2,768

Adjustments for unconsolidated real estate entity items

46

 

2

Adjusted FFO attributable to common share and unit holders

$

(7,129

)

 

$

6,262

Weighted average number of common shares and units

 

Basic

48,019,747

 

47,496,006

Diluted

48,019,747

 

47,607,096

   

For the three months ended

March 31,

2021

 

2020

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”):

 

Net income (loss)

$

2,702

 

$

(28,111

)

Interest expense

6,470

 

6,833

Depreciation and amortization

13,334

 

13,061

Adjustments for unconsolidated real estate entity items

1,184

 

4,075

EBITDA

23,690

 

(4,142

)

Impairment loss on investment in unconsolidated real estate entities

 

15,282

Impairment loss from unconsolidated real estate entities

 

1,388

Loss (gain) on sale of hotel property

43

 

(1

)

Loss on the sale of assets within unconsolidated real estate entities

 

8

Gain on sale of investment in unconsolidated real estate entities

(23,817

)

 

EBITDAre

(84

)

 

12,535

Other charges

55

 

2,768

Adjustments for unconsolidated real estate entity items

46

 

Share based compensation

1,156

 

1,206

Adjusted EBITDA

$

1,173

 

$

16,509

     

CHATHAM LODGING TRUST

ADJUSTED HOTEL EBITDA

(In thousands, except share and per share data)

     

For the three months ended

March 31,

2021

 

2020

 

Net income (loss)

$

2,702

 

$

(28,111

)

Add:

Interest expense

6,470

 

6,833

Depreciation and amortization

13,334

 

13,061

Corporate general and administrative

3,530

 

2,765

Other charges

55

 

2,768

Loss from unconsolidated real estate entities

1,231

 

3,673

Impairment loss on investment in unconsolidated real estate entities

 

15,282

Loss on sale of hotel property

43

 

Less:

Interest and other income

(74

)

 

(81

)

Gain on sale of hotel property

 

(1

)

Gain on sale of investment in unconsolidated real estate entities

(23,817

)

 

Adjusted Hotel EBITDA

$

3,474

 

$

16,189