Chatham Lodging Trust Announces First Quarter 2019 Results

Company Beats AFFO Guidance, RevPAR In-Line, Raises 2019 Guidance

WEST PALM BEACH, Fla.–(BUSINESS WIRE)–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 and owns 137 hotels wholly or
through joint ventures, today announced results for the first quarter
ended March 31, 2019. The company also updated its full-year guidance
for 2019 and provided 2019 second quarter guidance.

First Quarter 2019 Key Metrics

• Portfolio Revenue per Available Room (RevPAR) – Declined 1.0
  percent to $121, compared to the 2018 first quarter, for Chatham’s 40,
  comparable wholly owned hotels (excludes the Residence Inn Charleston
  Summerville which opened in August 2018 and the Courtyard Dallas
  Downtown which opened in September 2018). Average daily rate (ADR)
  declined 1.5 percent to $159, and occupancy rose 0.5 percent to 76
  percent.
• Net Income – Declined $1.3 million to $1.6 million, compared to
  the 2018 first quarter. Net income per diluted share was $0.03 versus
  $0.06 for the same period a year earlier.
• Adjusted EBITDA – Advanced $0.6 million, or 2.6 percent higher
  than the 2018 first quarter, to $27.0 million, exceeding the upper end
  of the company’s guidance of $26.4 million.
• Adjusted FFO – Lessened $0.3 million, to $16.2 million, versus
  $16.5 million in the 2018 first quarter. Adjusted FFO per diluted
  share was $0.34, above guidance of $0.30-$0.33 per share.
• Operating Margins -For its 40 comparable hotels, gross
  operating profit margins declined 50 basis points to 43.7 percent.
  Comparable Hotel EBITDA margins were 60 basis points lower at 35.5
  percent.

Consolidated Financial Results

The following chart summarizes the consolidated financial results for
the three months ended March 31, 2019. RevPAR, ADR and occupancy for
2019 and 2018 are based on the 42 hotels owned as of March 31, 2019 ($
in millions, except per share, RevPAR, ADR, occupancy and margins):

Operating Results

“Overall, we are pleased with our first quarter results, delivering
RevPAR in line with our guidance, while beating our adjusted EBITDA,
AFFO and AFFO per share guidance, driven by higher than forecast
operating margins,” Fisher highlighted. “We had strong RevPAR growth in
some of our top markets during the quarter, especially our California
markets, where corporate investment and employment growth remains
healthy.”

Chatham’s six largest markets comprise approximately 60 percent of its
hotel EBITDA. First quarter 2019 RevPAR performance for these key
markets include:

• Silicon Valley RevPAR improved 3.6 percent to $183 at its four hotels,
  despite renovations occurring at one of its Sunnyvale hotels.
• RevPAR at its two San Diego hotels increased 12.6 percent with its
  Downtown Gaslamp hotel producing RevPAR growth of 1.8 percent and its
  Mission Valley hotel benefitting from an easy comparison as the hotel
  was under renovation in the 2018 first quarter.
• Washington, D.C. RevPAR declined 5.3 percent as its three hotels were
  adversely impacted by the effects of the government shutdown, as well
  as the renovation at its Tysons, Va., hotel where RevPAR was down 8.0
  percent.
• RevPAR at its three coastal hotels in Maine and New Hampshire advanced
  3.9 percent, driven by strong leisure demand.
• At its four Houston hotels, RevPAR dropped 3.9 percent due to
  difficult comparisons to the prior year attributable to demand from
  Hurricane Harvey at its two West University hotels.
• The two Los Angeles-area hotels experienced a 2.0 percent RevPAR
  increase.

Gross operating profit margins at its 40 comparable hotels, which
excludes two hotels opened in 2018, declined 50 basis points to 43.7
percent.

“Given the RevPAR decline of 1.0 percent, we are encouraged that we were
able to minimize margin erosion to only 50 basis points at our 40
comparable hotels,” said Dennis Craven, Chatham’s chief operating
officer. “Our initiatives with our hotel management company, Island
Hospitality, to enhance other revenue and closely manage our payroll and
benefits costs, which remains the line item with the highest exposure to
increase due to the strong economy and historically low unemployment,
are working well.”

On a per occupied room basis at its 40 comparable Island-managed hotels,
payroll and benefits costs increased 2.7 percent in the 2019 first
quarter.

“Continuing a positive trend since midway through 2018, on a per
occupied room basis, the rate of increase in payroll and benefits has
been declining. In fact, this is the first quarter in a very long time
that our year-over-year increase was below 3 percent,” Craven stated.

Strategic Capital Recycling Program and Hotel Investments

During the first quarter, the company substantially completed the
renovations of the Homewood Suites Farmington, Conn., the Residence Inn
Sunnyvale, Calif., (#1), and Residence Inn Tysons Corner, Va. Also
during the quarter, the company commenced renovations of the Residence
Inn Dedham, Mass. and expects to complete the Dedham renovation in the
2019 second quarter.

Capital Markets & Capital Structure

As of March 31, 2019, the company had net debt of $588.0 million (total
consolidated debt less unrestricted cash). Total debt outstanding was
$599.2 million at an average interest rate of 4.6 percent, comprised of
$502.2 million of fixed-rate mortgage debt at an average interest rate
of 4.7 percent and $97.0 million outstanding on the company’s $250
million senior unsecured revolving credit facility, which currently
carries a 4.6 percent interest rate.

Chatham’s leverage ratio was approximately 35.1 percent on March 31,
2019, 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 February 2024, with the earliest maturity in 2021. As of March
31, 2019, Chatham’s proportionate share of joint venture debt and
unrestricted cash was $165.4 million and $2.7 million, respectively. At
Chatham’s current leverage level, the borrowing cost under its credit
facility is LIBOR plus 1.65 percent.

On March 31, 2019, as defined in the company’s credit agreement,
Chatham’s fixed charge coverage ratio, including its interest in the two
joint venture portfolios with Colony NorthStar, was 3.3 times, and total
net debt to trailing 12-month corporate EBITDA was 5.7 times. Excluding
its interest in the two joint ventures, Chatham’s fixed charge coverage
ratio was 3.6 times, and net debt to trailing 12-month corporate EBITDA
was 5.1 times.

Joint Venture Investments

During the 2019 first quarter, the Innkeepers and Inland joint ventures
contributed Adjusted EBITDA and Adjusted FFO of approximately $3.2
million and $0.7 million, respectively, compared to the 2018 first
quarter Adjusted EBITDA and FFO of approximately $3.1 million and $0.9
million, respectively. Adjusted EBITDA and Adjusted FFO were $0.1
million and $0.2 million, respectively, above the company’s previous
guidance for the quarter. Adjusted EBITDA increased slightly due to
improved hotel operating results, and the year-over-year decrease in
adjusted FFO is primarily attributable to increased interest expense
attributable to higher LIBOR borrowing rates.

Dividend

Chatham currently pays a monthly dividend of $0.11 per common share.
Chatham’s estimated 2019 dividend per share of $1.32 represents
approximately 71 percent of adjusted FFO per share based upon the
midpoint of its 2019 guidance.

2019 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 Securities and
Exchange Commission.

The company’s 2019 guidance reflects the following assumptions:

• Industrywide RevPAR growth of 1 to 2.5 percent in 2019
  • Marriott International forecast North American RevPAR growth of 1
    to 3 percent; Hilton Hotels & Resorts estimated systemwide RevPAR
    growth of 1 to 3 percent
  • STR projected industry RevPAR growth of 2.3 percent
• RevPAR range is adversely impacted by approximately 65 basis points
  due to non-recurring demand related to the Boston area gas explosions
  in the 2018 fourth quarter
• Renovations commencing at the following hotels:
  • Residence Inn Dedham, Mass. in the first quarter
  • Residence Inn San Mateo, Calif., Residence Inn Houston and Hampton
    Inn and Suites Houston, Texas, during the second quarter
  • Residence Inn Fort Lauderdale, Fla., during the third quarter
  • Residence Inn Sunnyvale, Calif., #2, in the fourth quarter
• No additional acquisitions, dispositions, debt or equity issuance

Earnings Call

The company will hold its first quarter 2019 conference later today at
10:00 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 either www.chathamlodgingtrust.com
or www.streetevents.com
or may participate in the conference call by dialing 1-877-407-0789 and
referencing Chatham Lodging Trust. A recording of the call will be
available by telephone until 11:59 p.m. ET on Wednesday, May 8, 2019, by
dialing 1-844-512-2921, reference number 13689472. A replay of the
conference call will be posted on Chatham’s website.

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. The
company owns interests in 137 hotels totaling 18,783 rooms/suites,
comprised of 42 properties it wholly owns with an aggregate of 6,283
rooms/suites in 15 states and the District of Columbia and a minority
investment in two joint ventures that own 95 hotels with an aggregate of
12,500 rooms/suites. Additional information about Chatham may be found
at chathamlodgingtrust.com.

Non-GAAP Financial Measures

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, (5)
EBITDAre (6) Adjusted EBITDA and (7) Adjusted Hotel EBITDA. These
non-GAAP financial measures should be considered along with, but not as
alternatives to, net income or loss as prescribed by GAAP as a measure
of its operating performance.

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, 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 following the same approach. The company believes
that the presentation of FFO provides useful information to investors
regarding its operating performance because it measures its 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 property level performance of its hotel properties.
The company believes that these items reflect historical cost of its
asset base and its acquisition and disposition activities and are less
reflective of its ongoing operations, and that by adjusting to exclude
the effects of these items, FFO is useful to investors in comparing its
operating performance between periods and between REITs that also report
using the NAREIT definition.

The company calculates Adjusted FFO by further adjusting FFO for
certain additional items that are not addressed in NAREIT’s definition
of FFO, including other charges (2018 includes expenses related to the
previously planned Silicon Valley expansions that the Company is no
longer actively pursuing), losses on the early extinguishment of debt
and similar items related to its unconsolidated real estate entities
that it believes do not represent costs related to hotel operations. 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, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA

The company calculates EBITDA for purposes of the credit facility
debt as net income or loss excluding: (1) interest expense; (2)
provision for income taxes, including income taxes applicable to sale of
assets; (3) depreciation and amortization; and (4) unconsolidated real
estate entity items including interest, depreciation and amortization
excluding gains and losses from sales of real estate. The company
believes EBITDA is useful to investors in evaluating and facilitating
comparisons of its operating performance because it helps investors
compare the company’s operating performance between periods and between
REITs 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 calculates EBITDAre in accordance with NAREIT guidelines,
which defines EBITDAre as net income or loss excluding interest expense,
income tax expense, depreciation and amortization expense, gains or
losses from sales of real estate, impairment, and adjustments for
unconsolidated joint ventures. We believe that the presentation
of EBITDAre provides useful information to investors regarding the
Company’s operating performance and can facilitate comparisons of
operating performance between periods and between REITs.

The company calculates Adjusted EBITDA by further adjusting EBITDA
for certain additional items, including other charges (2018 includes
expenses related to the previously planned Silicon Valley expansions
that the Company is no longer actively pursuing), losses on the early
extinguishment of debt, amortization of non-cash share-based
compensation and similar items related to its unconsolidated real estate
entities, which it believes are not indicative of the performance of its
underlying hotel properties entities. The company believes that Adjusted
EBITDA provides investors with another financial measure that may
facilitate comparisons of operating performance between periods and
between REITs that report similar measures.

Adjusted Hotel EBITDA is defined as net income before interest,
income taxes, depreciation and amortization, corporate general and
administrative, impairment loss, loss on early extinguishment of debt,
interest and other income and income or loss from unconsolidated real
estate entities. The Company presents Adjusted Hotel EBITDA
because the Company believes it is useful to investors in comparing its
hotel operating performance between periods and comparing its Adjusted
Hotel EBITDA margins to those of our peer companies. Adjusted
Hotel EBITDA represents the results of operations for its wholly owned
hotels only.

Although the company presents FFO, Adjusted FFO, EBITDA, EBITDAre,
Adjusted EBITDA and Adjusted Hotel EBITDA because it believes they are
useful to investors in comparing the company’s operating performance
between periods and between REITs that report similar measures, these
measures have limitations as analytical tools. Some of these limitations
are:

• FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted
  Hotel EBITDA do not reflect the company’s cash expenditures, or future
  requirements, for capital expenditures or contractual commitments;
• FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted
  Hotel EBITDA do not reflect changes in, or cash requirements for, the
  company’s working capital needs;
• FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted
  Hotel EBITDA do not reflect funds available to make cash distributions;
• EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel 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, EBITDAre, Adjusted EBITDA and
  Adjusted Hotel 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 ongoing
  operating performance for a particular period using adjusted EBITDA;
• Adjusted FFO, Adjusted EBITDA and Adjusted Hotel 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, EBITDAre, Adjusted EBITDA and Adjusted Hotel
  EBITDA differently than the company does, limiting their usefulness as
  a comparative measure.

In addition, FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and
Adjusted Hotel EBITDA do not represent cash generated from operating
activities as determined by GAAP and should not be considered as
alternatives to net income or loss, cash flows from operations or any
other operating performance measure prescribed by GAAP. FFO, Adjusted
FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA are not
measures of the Company’s liquidity. Because of these limitations, FFO,
Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel
EBITDA should not be considered in isolation or as a substitute for
performance measures calculated in accordance with GAAP. The Company
compensates for these limitations by relying primarily on its GAAP
results and using FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA
and Adjusted Hotel EBITDA only supplementally. The Company’s
consolidated financial statements and the notes to those statements
included elsewhere are prepared in accordance with GAAP.

The company’s reconciliation of FFO, Adjusted FFO, EBITDA, EBITDAre,
Adjusted EBITDA and Adjusted Hotel EBITDA to net income 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 Fourth-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 the date hereof, 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.

Contacts

Dennis Craven (Company)
Chief Operating Officer
(561) 227-1386

Chris Daly (Media)
Daly Gray, Inc.
(703) 435-6293

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