Chatham Lodging Trust Announces Second Quarter 2021 Results

Chatham Lodging Trust (NYSE: CLDT), today announced results for the second quarter ended June 30, 2021.

Second Quarter 2021 Operating Results

  • Portfolio Revenue Per Available Room (RevPAR) – Increased 170 percent to $87, compared to the 2020 second quarter. Average daily rate (ADR) rose 32 percent to $127, and occupancy jumped 105 percent to 68 percent for the 39 comparable hotels owned as of June 30, 2021. All Chatham hotels remained open throughout the pandemic.
  • Net loss – Lessened $18.5 million to a net loss of $8.7 million from a net loss of $27.2 million in the 2020 second quarter. Net loss per diluted share was $(0.18) versus net loss per diluted share of $(0.57) for the same period last year.
  • GOP Margin – Generated GOP margins of 43 percent compared to 30 percent in the 2021 first quarter, 25 percent in the 2020 fourth quarter and 19 percent in the 2020 second quarter.
  • Adjusted EBITDA – Produced positive Adjusted EBITDA for the fourth consecutive quarter, generating Adjusted EBITDA of $12.5 million in the 2021 second quarter, compared to $1.2 million in the 2021 first quarter, $0.2 million in the 2020 fourth quarter and an Adjusted EBITDA loss of $3.3 million in the 2020 second quarter.
  • Adjusted FFO – Jumped $17.3 million to $4.9 million compared to the 2020 second quarter, the first quarter since the beginning of the pandemic to generate positive Adjusted FFO. Adjusted FFO per diluted share was $0.10, compared to an FFO loss of $(0.26) in the 2020 second quarter.
  • Cash Flow/Burn Before Capital Expenditures – Generated second quarter 2021 cash flow before capital expenditures of $4.0 million, an improvement of $11.6 million from first quarter cash burn of $7.6 million. This also compares to cash burn of $9.5 million in the 2020 fourth quarter, burn of $5.1 million in the 2020 third quarter and burn of $12.8 million in the 2020 second quarter. Cash flow/burn includes $2.2 million of principal amortization per quarter.
  • Taps Capital Markets for First Preferred Issuance, Under Contract to Acquire Two Hotels – Raised net proceeds of approximately $116 million through the issuance of 6.625% Series A Preferred Shares. Chatham will use a portion of the proceeds to acquire two high-quality, premium-branded, extended-stay hotels in Austin, Texas for $71 million.

“During the pandemic, we actively managed our way through the worst era in the history of the hotel industry, had significantly less cash burn than most of our peers and took a number of steps to improve our liquidity profile and solidify our financial position. Our cash burn before capital of $35 million from April 2020 through March 2021 is expected to be more than fully replenished with approximately $25 million of proceeds from the issuance of common shares during 2021 together with the $4 million of cash flow before CAPEX generated in the 2021 second quarter and expected cash flow before CAPEX in the 2021 third quarter,” highlighted Jeffrey H. Fisher, Chatham’s president and chief executive officer. “The $70 million of proceeds from the sales of the Residence Inn Mission Valley and our stake in the INK JV will be fully reinvested into our Home2 Warner Center development. We also repaid a $13 million mortgage maturing in 2021 and now have no debt maturities until 2023. Finally, in June, we completed our first perpetual preferred share offering, raising $116 million.

“The actions we have taken have enabled us to emerge from the pandemic with a stronger balance sheet and more liquidity than we had going into the pandemic. We have the flexibility to go on offense and make acquisitions or other hotel investments. In fact, with proceeds from our recently completed preferred offering, we will acquire two hotels in the thriving market of Austin, Texas. Additionally, we will open our extended-stay Home2 Suites in Los Angeles in the fourth quarter. All three hotels will increase further our exposure to high-quality, premium-branded, extended-stay hotels, grow our FFO per share and increase our net asset value,” Fisher concluded.

The following chart summarizes the consolidated financial results for the three and six months ended June 30, 2021, and 2020 based on all properties owned during those periods ($ in millions, except margin percentages and per share data):

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Net loss

$(8.7)

$(27.2)

$(6.0)

$(55.3)

Diluted net loss per common share

$(0.18)

$(0.57)

$(0.12)

$(1.16)

GOP Margin

43.1%

18.8%

38.0%

33.2%

Hotel EBITDA Margin

31.2%

(11.6)%

23.4%

17.9%

Adjusted EBITDA

$12.5

$(3.3)

$13.7

$13.2

AFFO

$4.9

$(12.4)

$(2.3)

$(6.2)

AFFO per diluted share

$0.10

$(0.26)

$(0.05)

$(0.13)

Hotel RevPAR Performance

The below chart summarizes key hotel financial statistics for the 39 comparable hotels owned as of June 30, 2021, compared to the 2021 first quarter and the 2020 fourth quarter (does not include one hotel sold in 2020):

Q2 2021
RevPAR

Q1 2021
RevPAR

Q4 2020
RevPAR

Occupancy

68%

52%

45%

ADR

$127

$107

$104

RevPAR

$87

$55

$47

% Change in RevPAR to Prior Year

170%

(42)%

(60)%

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

April

May

June

July

Occupancy – 2021

65%

70%

70%

75%

ADR – 2021

$117

$126

$138

$152

RevPAR – 2021

$75

$88

$96

$113

RevPAR – 2020

$23

$30

$44

$50

% Change in RevPAR

232%

195%

121%

126%

“Since RevPAR dipped to $40 in December, we have seen sequential monthly RevPAR improvements in 2021, with July RevPAR jumping 18 percent over June, finishing the month with RevPAR of $113 on ADR of $152 and occupancy of 75 percent,” Fisher commented. “Our second quarter RevPAR of $87 advanced 58% percent higher than our first quarter RevPAR, as our portfolio benefited from a combination of strong leisure travel and the steady return of the business traveler and other non-leisure guests. Demand remains strongest on the weekend, and we expect leisure demand to remain strong through the summer. After Labor Day, portfolios such as ours will outperform as the industry transitions away from the significant volume of leisure travel to a more diverse mix of demand generators.”

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

Q2 2021
RevPAR

% Change
vs. Q2 2020

Q1 2021
RevPAR

Q4 2020
RevPAR

Q3 2020
RevPAR

39 – Hotel Portfolio

$87

170%

$55

$47

$56

Silicon Valley

$73

95%

$54

$46

$54

Greater New York

$123

101%

$87

$80

$87

Coastal Northeast

$120

380%

$48

$63

$109

Dallas

$78

342%

$44

$31

$34

Los Angeles

$103

134%

$82

$79

$89

Houston

$70

296%

$52

$35

$35

“All of our top markets produced significant gains in the second quarter, with the strongest growth coming from our three Coastal Northeastern hotels in Maine and New Hampshire that experienced strong leisure demand,” Fisher stated. “Dallas, Houston and Silicon Valley showed much better growth in the second quarter as business, government and healthcare-related travel picked up, which is encouraging. In Los Angeles, we saw the transition from primarily healthcare-related demand to leisure demand with Disneyland now open. Lastly, our Greater New York market, comprised of three Residence Inns, has produced stable results since the outset of the pandemic as it has been able to draw guests from a diverse set of demand generators, and this summer is benefitting from the uptick in leisure travel.”

Approximately 69 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. Second 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

73%

70%

65%

51%

79%

ADR – 2021

$128

$115

$109

$137

$142

RevPAR – 2021

$93

$81

$71

$70

$112

RevPAR – 2020

$45

$28

$16

$21

$27

% Change in RevPAR

107%

184%

349%

239%

319%

Hotel Operations Performance

The below chart summarizes key hotel operating performance measures per month during the 2021 second quarter and for the three months ended March 31, 2021, and December 30, 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 and margin percentages):

April

May

June

Q2 2021

Q1 2021

Q4 2020

RevPAR – 2021

$75

$88

$96

$87

$55

$47

Gross operating profit

$5.8

$7.5

$8.2

$21.5

$9.4

$7.1

Hotel EBITDA

$3.9

$5.5

$6.2

$15.6

$3.5

$2.3

GOP margin

41%

44%

44%

43%

30%

25%

Hotel EBITDA margin

27%

32%

34%

31%

11%

8%

“Operationally, our platform working alongside Island Hospitality continues to excel, generating second quarter GOP margins of 43 percent on RevPAR of $87, which is pretty incredible since our 2019 operating margins were 46 percent on RevPAR of $132,” commented Dennis Craven, Chatham’s chief operating officer. “Compared to the 2021 first quarter, our flow-through was strong. On a $18.6 million increase in hotel revenue, our gross operating profit advanced $12.2 million on flow-through of 65 percent. This flow-through is particularly impressive given that our portfolio occupancy advanced from 52 percent in the first quarter to 68 percent in the second quarter, occupancy levels where staffing needs are rising to meet the needs of so many more overnight guests.”

Corporate Update

The below chart summarizes key financial performance measures for the three months ended June 30, 2021, and each of the three months ended March 31, 2021 and December 30, 2020. 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 $2.2 million per quarter). Cash flow/(burn) before CAPEX is calculated as Corporate EBITDA less debt service. Amounts are in millions, except RevPAR.

April

May

June

Q2 2021

Q1 2021

Q4 2020

RevPAR – 2021

$75

$88

$96

$87

$55

$47

Hotel EBITDA

$3.9

$5.5

$6.2

$15.6

$3.5

$2.3

Corporate EBITDA

$2.9

$4.5

$5.1

$12.5

$1.1

$0.0

Debt service

$(2.9)

$(2.7)

$(2.9)

$(8.5)

$(8.7)

$(9.5)

Cash flow/(burn) before CAPEX

$0.0

$1.8

$2.2

$4.0

$(7.6)

$(9.5)

Chatham has estimated liquidity of $253 million, including cash of approximately of $131 million, as of June 30, 2021, and remaining borrowing capacity on the credit facility of $122 million.

Hotel Acquisitions

On June 15, 2021, in an off-market transaction, Chatham entered into a purchase and sale agreement to acquire two hotels comprising 269 rooms at The Domain in Austin, Texas for an aggregate purchase price of approximately $71.2 million (the “Austin Acquisitions”). The two hotels include the 132-room Residence Inn by Marriott, which opened in 2016, and the 137-room TownePlace Suites, which opened in the 2021 second quarter. Subject to closing conditions, Chatham intends to close on the acquisitions within the next week.

“Austin is one of the strongest, fastest growing markets in the country, and The Domain is a rapidly growing mixed-use development known as Austin’s ‘second downtown’ with over 4.2 million square feet of office space, 1.8 million square feet of retail space, plus another 2.8 million additional square feet of office space expected to be delivered over the next two years and another 3.8 million square feet planned thereafter,” Fisher emphasized. “Many major companies have large offices located at The Domain, including IBM, Amazon, Facebook, Indeed, Expedia / VRBO and Trend Micro, and we will leverage our relationships with these companies from other markets to enhance performance at these two hotels. These two hotels will reduce the average age of our portfolio and will increase our portfolio-wide RevPAR. These two high-quality, very well-located, extended-stay hotels are ideal additions to our portfolio.”

Hotel Investments

During the 2021 second quarter, the company incurred capital expenditures of $3.1 million. Chatham’s 2021 capital expenditure budget is approximately $6.3 million, excluding any spending related to the Warner Center development. Chatham does not have any renovations planned for 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 $58.9 million. Construction is ahead of the previously announced schedule, and the hotel is expected to open during the 2021 fourth quarter.

Capital Markets & Capital Structure

On June 30, 2021, Chatham issued 4.8 million of its 6.625% Series A Cumulative Redeemable Preferred Shares at a public offering price of $25.00 per share, for net proceeds of approximately $116.2 million, after deducting the underwriting discount and offering-related expenses. On July 1, 2021, the operating partnership used the net proceeds to repay indebtedness under the company’s revolving credit facility with the full intention to re-borrow funds under its revolving credit facility to fund the purchase price for the Austin Acquisitions.

During the second quarter, Chatham issued 0.2 million common shares at an average price of $13.80 per share, generating proceeds of $3.3 million. Proceeds were used to pay down borrowings on the credit facility.

As of June 30, 2021, the company had net debt of $468.4 million (total consolidated debt less unrestricted cash), down $120.2 million from December 31, 2020. Total debt outstanding as of June 30, 2021 was $599.8 million at an average interest rate of 4.5 percent, comprised of $444.2 million of fixed-rate mortgage debt at an average interest rate of 4.6 percent, $128.0 million outstanding on the company’s $250 million senior unsecured revolving credit facility, which currently carries a 3.1 percent interest rate and $27.6 million outstanding on the Warner Center construction loan, which carries a 7.75 percent interest rate.

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.

Chatham’s leverage ratio was approximately 28.6 percent on June 30, 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 April 2024.

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 (REIT) focused primarily on investing in upscale, extended-stay hotels and premium-branded, select-service hotels. As of June 30, 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)

       

June 30,
2021

December 31,
2020

(unaudited)

Assets:

Investment in hotel properties, net

$

1,240,983

$

1,265,174

Investment in hotel properties under development

58,882

43,651

Cash and cash equivalents

131,367

21,124

Restricted cash

10,928

10,329

Right of use asset, net

20,317

20,641

Hotel receivables (net of allowance for doubtful accounts of $278 and $248, respectively)

3,834

1,688

Deferred costs, net

4,564

5,384

Prepaid expenses and other assets

5,843

2,266

Total assets

$

1,476,718

$

1,370,257

Liabilities and Equity:

Mortgage debt, net

$

443,464

$

460,145

Revolving credit facility

128,000

135,300

Construction loan

27,573

13,325

Accounts payable and accrued expenses

25,504

25,374

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

19,951

Lease liability, net

22,971

23,233

Distributions payable

147

469

Total liabilities

647,659

677,797

Commitments and contingencies

Equity:

Shareholders’ Equity:

Preferred shares, $0.01 par value, 100,000,000 shares authorized; 4,800,000 and 0 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

48

Common shares, $0.01 par value, 500,000,000 shares authorized; 48,756,555 and 46,973,473 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

487

470

Additional paid-in capital

1,048,306

906,000

Accumulated deficit

(234,620

)

(228,718

)

Total shareholders’ equity

814,221

677,752

Noncontrolling interests:

Noncontrolling interest in Operating Partnership

14,838

14,708

Total equity

829,059

692,460

Total liabilities and equity

$

1,476,718

$

1,370,257

CHATHAM LODGING TRUST

Consolidated Statements of Operations

(In thousands, except share and per share data)

(unaudited)

       

For the three months ended

For the six months ended

June 30,

June 30,

2021

2020

2021

2020

Revenue:

Room

$

46,514

$

18,389

$

75,905

$

71,437

Food and beverage

756

117

1,120

2,180

Other

2,647

873

4,218

4,391

Reimbursable costs from unconsolidated real estate entities

327

794

1,114

2,374

Total revenue

50,244

20,173

82,357

80,382

Expenses:

Hotel operating expenses:

Room

9,486

4,517

16,653

17,912

Food and beverage

491

128

775

2,018

Telephone

348

351

748

730

Other hotel operating

544

182

909

992

General and administrative

5,056

3,360

8,870

8,636

Franchise and marketing fees

4,091

1,636

6,688

6,356

Advertising and promotions

835

854

1,592

2,364

Utilities

2,352

1,863

4,638

4,378

Repairs and maintenance

2,720

1,640

5,180

5,101

Management fees

1,760

848

2,956

2,872

Insurance

707

361

1,356

721

Total hotel operating expenses

28,390

15,740

50,365

52,080

Depreciation and amortization

13,353

13,667

26,687

26,729

Impairment loss on investment in unconsolidated real estate entities

15,282

Property taxes, ground rent and insurance

5,954

5,892

11,833

11,990

General and administrative

4,316

2,487

7,844

5,252

Other charges

322

215

377

2,984

Reimbursable costs from unconsolidated real estate entities

327

794

1,114

2,374

Total operating expenses

52,662

38,795

98,220

116,691

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

(2,418

)

(18,622

)

(15,863

)

(36,309

)

Gain (loss) on sale of hotel property

28

2

(15

)

3

Operating loss

(2,390

)

(18,620

)

(15,878

)

(36,306

)

Interest and other income

28

39

102

120

Interest expense, including amortization of deferred fees

(6,356

)

(7,034

)

(12,826

)

(13,867

)

Loss from unconsolidated real estate entities

(1,578

)

(1,231

)

(5,251

)

Gain on sale of investment in unconsolidated real estate entities

23,817

Loss before income tax expense

(8,718

)

(27,193

)

(6,016

)

(55,304

)

Income tax expense

Net loss

(8,718

)

(27,193

)

(6,016

)

(55,304

)

Net loss attributable to noncontrolling interests

160

366

114

694

Net loss attributable to common shareholders

$

(8,558

)

$

(26,827

)

$

(5,902

)

$

(54,610

)

Loss per Common Share – Basic:

Net loss attributable to common shareholders

$

(0.18

)

$

(0.57

)

$

(0.12

)

$

(1.16

)

Loss per Common Share – Diluted:

Net loss attributable to common shareholders

$

(0.18

)

$

(0.57

)

$

(0.12

)

$

(1.16

)

Weighted average number of common shares outstanding:

Basic

48,637,484

46,960,289

47,935,130

46,954,411

Diluted

48,637,484

46,960,289

47,935,130

46,954,411

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

For the six months ended

June 30,

June 30,

2021

2020

2021

2020

Funds From Operations (“FFO”):

Net loss

$

(8,718

)

$

(27,193

)

$

(6,016

)

$

(55,304

)

(Gain) loss on sale of hotel property

(28

)

(2

)

15

(3

)

(Gain) loss on sale of assets within the unconsolidated real estate entities

(7

)

1

Gain on sale of investment in unconsolidated real estate entities

(23,817

)

Depreciation

13,292

13,606

26,566

26,607

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

937

568

2,863

FFO attributable to common share and unit holders

4,546

(12,659

)

(2,684

)

(9,166

)

Other charges

322

215

377

2,984

Adjustments for unconsolidated real estate entity items

5

46

5

Adjusted FFO attributable to common share and unit holders

$

4,868

$

(12,439

)

$

(2,261

)

$

(6,177

)

Weighted average number of common shares and units

Basic

49,613,586

47,676,905

48,823,781

47,586,456

Diluted

49,794,765

47,676,905

48,823,781

47,586,456

For the three months ended

For the six months ended

June 30,

June 30,

2021

2020

2021

2020

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

Net loss

$

(8,718

)

$

(27,193

)

$

(6,016

)

$

(55,304

)

Interest expense

6,356

7,034

12,826

13,867

Depreciation and amortization

13,353

13,667

26,687

26,729

Adjustments for unconsolidated real estate entity items

1,828

1,184

5,901

EBITDA

10,991

(4,664

)

34,681

(8,807

)

Impairment loss on investment in unconsolidated real estate entities

15,282

Impairment loss from unconsolidated real estate entities

1,388

(Gain) loss on sale of hotel property

(28

)

(2

)

15

(3

)

(Gain) loss on the sale of assets within unconsolidated real estate entities

(7

)

1

Gain on sale of investment in unconsolidated real estate entities

(23,817

)

EBITDAre

10,963

(4,673

)

10,879

7,861

Other charges

322

215

377

2,984

Adjustments for unconsolidated real estate entity items

5

46

7

Share based compensation

1,194

1,145

2,351

2,350

Adjusted EBITDA

$

12,479

$

(3,308

)

$

13,653

$

13,202

CHATHAM LODGING TRUST

ADJUSTED HOTEL EBITDA

(In thousands, except share and per share data)

         

For the three months ended

For the six months ended

June 30,

June 30,

2021

2020

2021

2020

Net loss

$

(8,718

)

$

(27,193

)

$

(6,016

)

$

(55,304

)

Add:

Interest expense

6,356

7,034

12,826

13,867

Depreciation and amortization

13,353

13,667

26,687

26,729

Corporate general and administrative

4,316

2,487

7,844

5,252

Other charges

322

215

377

2,984

Loss from unconsolidated real estate entities

1,578

1,231

5,251

Impairment loss on investment in unconsolidated real estate entities

15,282

Loss on sale of hotel property

15

Less:

Interest and other income

(28

)

(39

)

(102

)

(120

)

Gain on sale of hotel property

(28

)

(2

)

(3

)

Gain on sale of investment in unconsolidated real estate entities

(23,817

)

Adjusted Hotel EBITDA

$

15,573

$

(2,253

)

$

19,045

$

13,938