Chatham Lodging Trust Q3 RevPAR Up 5.4%

Reported a 5.4 percent increase in revenue per available room (RevPAR) to $107.76 for the company’s 18 owned hotels as of September 30, 2011 compared to the 2010 third quarter. Occupancy increased 4.9 percent to 84.4 percent and average daily rate (ADR) rose 0.4 percent to $127.64. RevPAR for the six recently renovated Homewood Suites hotels jumped 10.5 percent in the quarter.

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 third quarter ended September 30, 2011.

“This translated into a higher profit margin average as a result of the five hotels generating operating margins of approximately 53 percent during the third quarter of 2011, up 510 basis points over the 2010 third quarter.”

2011 Third Quarter Highlights and Operating Results

• Reported a 5.4 percent increase in revenue per available room (RevPAR) to $107.76 for the company’s 18 owned hotels as of September 30, 2011 compared to the 2010 third quarter. Occupancy increased 4.9 percent to 84.4 percent and average daily rate (ADR) rose 0.4 percent to $127.64. RevPAR for the six recently renovated Homewood Suites hotels jumped 10.5 percent in the quarter.
• Generated adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $8.1 million, compared to $2.3 million in the same 2010 quarter.
• Reported adjusted funds from operations (AFFO) above expectations of $4.5 million, or $0.33 per diluted share, compared to $1.9 million, or $0.21 per diluted share in 2010.
• Reported a net loss of $(1.0 million), or $(0.07) per diluted share, in the 2011 third quarter, compared to a net loss of $(0.3) million, or $(0.03) per diluted share, in the comparable period in 2010. The net loss is attributable to $2.1 million of acquisition costs related to the Innkeepers acquisitions.

• Recorded gross operating profit (GOP) margins (hotel operating revenue less hotel operating expenses, before property taxes and insurance) of 46.7 percent for the company’s 18-hotel portfolio, up 190 basis points over the 2010 third quarter for the same hotels, regardless of who owned the hotel for the comparable period.
• Completed the acquisition of five hotels, comprising 764 rooms, for $195 million, or $255,000 per room.

• Following the end of the quarter, completed a $37 million investment in a joint venture with Cerberus Capital Management LP in which Chatham acquired a 10.3 percent interest in 64 hotels from Innkeepers USA Trust for $1.02 billion.

“The third quarter was about producing strong operating results, enhancing our investment portfolio with the acquisition of five high quality hotels in great markets around the country and achieving a critical mass that will support Chatham as a premier owner of premium branded upscale extended-stay and select service hotels,” said Jeffrey H. Fisher, Chatham’s chief executive officer and president. “Our hotels generated strong profit margins during the quarter. We are beginning to see much improved results in those hotels where we have invested significantly in major renovations and realized incremental operating profits through some unique value-enhancing strategies we have implemented across our portfolio.”
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.
Year-to-Date Results

• RevPAR improved 1.9 percent to $100.38 from the comparable period in 2010 for the company’s 18 owned hotels, negatively impacted by the significant renovations that occurred year-to-date. Occupancy rose 0.7 percent to 79.5 percent, and ADR improved 1.2 percent to $126.35.
• Net loss was $(2.9) million, or $(0.22) per diluted share, for 2011 year to date, versus a net loss of $(0.9) million, or $(0.17) per diluted share, for the comparable 2010 period. The net loss was caused by $3.6 million of acquisition costs primarily related to the Innkeepers acquisitions.
• GOP margins remained strong at 44.4 percent in 2011, down 30 basis points from 44.7 percent in 2010 for the 18 hotels owned at September 30, 2011 due to the displacement caused by extensive renovations.
• Adjusted EBITDA improved sharply to $15.1 million year-to-date, compared to $3.3 million for the same 2010 period.
• Adjusted FFO advanced significantly to $9.3 million in 2011, compared to $2.7 million in 2010, and Adjusted FFO per diluted share outstanding was $0.71 in 2011 versus $0.29 in 2010.

Innkeepers Acquisitions
Chatham acquired five hotels from Innkeepers in the 2011 third quarter, comprising a total of 764 rooms, at an average cost of approximately $255,000 per room. The properties include:

Hotel		Location		Rooms
Residence Inn Anaheim		Garden Grove, CA		200
Residence Inn San Diego		Mission Valley, CA		192
Residence Inn Tysons Corner		Tysons Corner, VA		121
Doubletree Guest Suites Washington, D.C.		Washington, D.C.		105
Homewood Suites on the Riverwalk		San Antonio, TX		146
Total:				764

“These are five great hotels that command ADR and RevPAR premiums greater than 25 percent when compared to our initial 13 hotels, with third quarter ADR and RevPAR of $150 and $125, respectively,” Fisher noted. “This translated into a higher profit margin average as a result of the five hotels generating operating margins of approximately 53 percent during the third quarter of 2011, up 510 basis points over the 2010 third quarter.”
In a separate transaction following the close of the 2011 third quarter, Chatham acquired with affiliates of Cerberus Capital Management, L.P., 64 hotels aggregating 8,329 rooms for $1.02 billion from subsidiaries of Innkeepers USA Trust, including the assumption of $675 million of debt. Chatham’s investment of $37 million results in an approximate 10.3 percent interest in the joint venture.
“This was a complex transaction that had to be revalued due to changing market conditions,” Fisher said. “However, we believe it will be an outstanding long-term investment with Cerberus. We believe both of these transactions are truly transformative for Chatham, growing our hotel investments to over half a billion dollars. Our annual cash overhead now represents less than 1 percent of our assets, a goal we set forth at the time of our IPO and consistent with the management team’s prior leadership of other publicly held companies.”
Pittsburgh Acquisition Update
Following the close of the third quarter, Chatham terminated its previously announced acquisition of the Residence Inn Pittsburgh University Medical Center. In connection with the termination, Chatham forfeited a $600,000 deposit, which will be included in acquisition costs in the 2011 fourth quarter.
Property Upgrade Status
“To remain highly competitive, we intend to maintain our portfolio in top condition and we have spent $13.2 million to date on our portfolio,” said Dennis M. Craven, chief financial officer. “As we indicated on our last earnings call, we expected these investments to start delivering exceptional performance, and we are just beginning to experience that, as evidenced by third quarter RevPAR growth of 10.5 percent at the initial six renovated hotels. Our fourth quarter renovations are proceeding as planned and upon completion, 13 of our 18 hotels will have been renovated since the 2010 fourth quarter. Only two other hotels are slated for renovation beginning in the 2012 fourth quarter. We fully expect our portfolio to benefit strongly from a much better room product to sell, allowing us to take advantage of industry forecasts for continued improvement in lodging fundamentals and limited supply growth over the next few years.”
Capital Structure
At September 30, 2011, the company had debt outstanding of approximately $192.9 million at an average interest rate of 5.73% with a weighted average five-year maturity on its fixed rate debt. “We increased our leverage profile with very attractive long-term debt to take advantage of the unique opportunities afforded to us with the Innkeepers transactions and are now at the point where if we want to continue our growth strategy, we will need to fund that growth by recycling our capital through the sale of existing hotels and reinvesting those proceeds or by issuing equity at pricing that enhances Chatham’s net asset value,” Craven said. “Although we are at a leverage level higher than our long-term goal, we are confident that this portfolio will generate sufficient cash flow from operations to fund future capital improvements and dividends in 2012 and beyond.”
Dividend
On September 13, 2011, the company declared a common share dividend of $0.175 per share, paid on October 14, 2011 to shareholders of record on September 30, 2011. The company will continue to evaluate its dividend policy on a quarterly basis.
2011 Fourth Quarter Guidance
The company is providing initial guidance for the 2011 fourth quarter based on the later-than-expected closing of the joint venture and the termination of the Pittsburgh acquisition. Combined, these two items reduced fourth quarter adjusted FFO per share by $0.04. The company’s last guidance which was issued on June 30, 2011 anticipated closing the joint venture on July 31, 2011 and closing the Pittsburgh acquisition on October 1, 2011. The impact on full year 2011 adjusted FFO per share caused by the delayed closing of the joint venture was $0.05 per share and Pittsburgh was $0.02 per share. Key guidance points are below:

		Q4 2011 Guidance		Prior Full Year 2011 Guidance		Revised Full Year 2011 Guidance
RevPAR		$95-$96		$97-$99		$98-$99
RevPAR growth		+5-6%		+3-5%		+3-4%
Adjusted EBITDA		$7.5-$7.9 million		$26-$27 million		$22.6-$23.0 million
Adjusted funds from operation ("FFO")		$2.5-$2.9 million		$12.5-$13.5 million		$11.8-$12.2 million
Adjusted FFO per diluted share		$0.18-$0.21		$0.93-$1.00		$0.89-$0.92
Hotel EBITDA margins		35-37%		36-37%		36-37%

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 64 hotels with 8,329 rooms/suites.

CHATHAM LODGING TRUST
Consolidated Balance Sheets
(In thousands, except share data)
		September 30,				December 31,
			2011				2010
		(unaudited)
Assets:
Investment in hotel properties, net		$	402,631			$	208,080
Cash and cash equivalents			8,150				4,768
Restricted cash			7,841				3,018
Hotel receivables (net of allowance for doubtful accounts of approximately $6 and $15, respectively)			2,144				891
Deferred costs, net			6,844				4,710
Prepaid expenses and other assets			2,152				735
Total assets		$	429,762			$	222,202
Liabilities and Equity:
Debt		$	192,946			$	50,133
Accounts payable and accrued expenses			8,893				5,248
Distributions payable			2,464				1,657
Total liabilities			204,303				57,038
Commitments and contingencies
Equity:
Shareholders' Equity:
Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at September 30, 2011 and December 31, 2010			-				-
Common shares, $0.01 par value, 500,000,000 shares authorized; 13,820,854 and 13,819,939 shares issued and outstanding, respectively at September 30, 2011 and 9,208,750 shares issued and outstanding at December 31, 2010			137				91
Additional paid-in capital			239,051				169,089
Accumulated deficit			(14,606	)			(4,441	)
Total shareholders' equity			224,582				164,739
Noncontrolling Interests:
Noncontrolling Interest in Operating Partnership			877				425
Total equity			225,459				165,164
Total liabilities and equity		$	429,762			$	222,202

CHATHAM LODGING TRUST
Consolidated Statements of Operations
(In thousands, except share and per share data)
(unaudited)
		For the three months ended								For the nine months ended
		September 30,								September 30,
			2011				2010				2011				2010
Revenue:
Room		$	22,660			$	8,147			$	49,288			$	12,691
Other operating			918				237				1,679				350
Total revenue			23,578				8,384				50,967				13,041
Expenses:
Hotel operating expenses:
Room			4,653				1,925				10,865				2,995
Other operating			8,185				3,002				18,215				4,597
Total hotel operating expenses			12,838				4,927				29,080				7,592
Depreciation and amortization			3,399				798				8,647				1,200
Property taxes and insurance			1,623				471				3,723				718
General and administrative			1,427				1,368				4,280				2,340
Hotel property acquisition costs			2,104				1,161				3,587				2,165
Total operating expenses			21,391				8,725				49,317				14,015
Operating income (loss)			2,187				(341	)			1,650				(974	)
Interest and other income			6				72				18				109
Interest expense, including amortization of deferred fees			(3,087	)			(19	)			(4,503	)			(19	)
Loss before income tax expense			(894	)			(288	)			(2,835	)			(884	)
Income tax expense			(61	)			-				(75	)			(46	)
Net loss attributable to common shareholders		$	(955	)		$	(288	)		$	(2,910	)		$	(930	)
Loss per Common Share - Basic:
Net loss attributable to common shareholders		$	(0.07	)		$	(0.03	)		$	(0.22	)		$	(0.17	)
Loss per Common Share - Diluted:
Net loss attributable to common shareholders		$	(0.07	)		$	(0.03	)		$	(0.22	)		$	(0.17	)
Weighted average number of common shares outstanding:
Basic			13,766,297				9,125,000				13,115,439				5,448,663
Diluted			13,766,297				9,125,000				13,115,439				5,448,663

CHATHAM LODGING TRUST
FFO and EBITDA
(In thousands, except share and per share data)
(unaudited)
		For the three months ended									For the nine months ended
		September 30,									September 30,
			2011				2010					2011				2010
Funds From Operations ("FFO"):
Net loss attributable to common shareholders		$	(955	)		$	(288	)			$	(2,910	)		$	(930	)
Depreciation			3,381				798					8,604				1,200
FFO			2,426				510					5,694				270
Hotel property acquisition costs			2,104				1,161					3,587				2,165
Other charges included in general and administrative expenses			-				270									270
Adjusted FFO		$	4,530			$	1,941				$	9,281			$	2,705
Weighted average number of common shares:
Basic			13,766,297				9,125,000					13,115,439				5,448,663
Diluted			13,766,297				9,125,000					13,115,439				5,448,663
		For the three months ended									For the nine months ended
		September 30,									September 30,
			2011				2010					2011				2010
Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA"):
Net loss attributable to common shareholders		$	(955	)		$	(288	)			$	(2,910	)		$	(930	)
Interest expense			3,087				19					4,503				19
Income tax expense			61				-					75				46
Depreciation and amortization			3,399				798					8,647				1,200
EBITDA			5,592				529					10,315				335
Hotel property acquisition costs			2,104				1,161					3,587				2,165
Other charges included in general and administrative expenses			-				183					-				183
Share based compensation			393				406					1,178				630
Adjusted EBITDA		$	8,089			$	2,279				$	15,080			$	3,313