LaSalle Hotel Properties Reports Fourth Quarter and Full Year 2011 Results

Chatham Lodging Trust (NYSE: CLDT) today announced results for the quarter ended December 31, 2011. In addition, the company outlined its strategic growth plan designed to increase FFO by approximately 50 percent in 2012.

Chatham Lodging Trust (NYSE: CLDT) today announced results for the quarter ended December 31, 2011. In addition, the company outlined its strategic growth plan designed to increase FFO by approximately 50 percent in 2012.

“Our debt service coverage ratio is over 2 times, and we expect to produce sufficient cash flow from operations from our 18 hotels, as well as funds from operations within our joint venture, to fund our 2012 capital expenditure needs and dividends.”

Q4 Highlights

• RevPAR – 5.7 percent increase for Chatham’s 18-hotel portfolio in Q4.
• Property Upgrades – substantially completed renovations of 13 of 18 hotels (72 percent of portfolio) during 2011.
• GOP Margins – generated industry-leading GOP margin of 42.3 percent in Q4.
• Acquisitions – completed $37 million cash investment (10.3 percent ownership) in a joint venture (JV) with Cerberus Capital Management LP that acquired 64 hotels from Innkeepers USA Trust for $1.02 billion (Chatham’s pro rata share of assets is approximately $105 million).

Subsequent Events

• RevPAR growth of 9 percent in January 2012 and 13 percent through February 21, 2012.

Consolidated Financial Results
The following is a summary of the consolidated financial results ($ in millions, except RevPAR, ADR and per share amounts):

		Three Months Ended				Year Ended
		December 31,				December 31,
		2011		2010		2011			2010
RevPAR		$95		$90		$99			$96
ADR		$126		$122		$126			$124
Adjusted EBITDA		$7.6		$3.4		$22.6			$6.9
GOP Margin		42.3%		42.2%		43.0%			44.1%
Hotel EBITDA Margin		35.1%		34.8%		35.9%			36.8%
Net income / loss		$(6.2)		$(0.3)		$(9.1)			$(1.2)
AFFO		$2.6		$2.2		$11.9			$4.9
AFFO per diluted share		$0.19		$0.24		$0.89			$0.53

“2011 was a banner year as we successfully executed our business plan of building a high quality hotel portfolio that generates strong operating results and provides meaningful cash dividends,” said Jeffrey H. Fisher, Chatham’s chief executive officer and president. “In 2011, our hotel investments dramatically increased nearly 150 percent from $210 million to $510 million. We assembled a great portfolio of hotels with 65 percent of our properties located in metropolitan New York City, Southern California and Washington D.C., all markets with high barriers to new competition. Our hotels produced strong results, with adjusted FFO per share increasing approximately 68 percent from $0.53 in 2010 to $0.89 in 2011.
“We were pleased with our performance in 2011, but it is 2012 and beyond which we believe will best showcase our strategy and generate even more significant returns. With 72 percent of our hotels renovated in 2011, our portfolio is positioned to benefit from projected favorable lodging fundamentals over the next several years,” Fisher continued. “Our hotels already produce industry-leading hotel EBITDA margins, and with the majority of our renovations completed, coupled with aggressive asset management and rising ADR, we expect our portfolio to generate strong RevPAR growth and operating profits in 2012.”
Property Upgrade Status
“We have invested significantly to position our hotel portfolio to benefit from the projected economic expansion in the United States and lodging fundamentals which are forecast to be more favorable than past cycles, with demand increasing and supply growth projected to remain at historically low levels,” said Dennis M. Craven, chief financial officer. “Thirteen of our 18 hotels have been renovated within the past year, and we are starting to see RevPAR growth above industry performance, with RevPAR growth in January 2012 of 9 percent and RevPAR growth of 13 percent through February 21. Some of this gain is attributable to easy comparisons due to hotels under renovation in 2011 and some is due to increased market share.”
In 2012, only two other hotels are slated for major renovation beginning in the 2012 fourth quarter. The remaining three hotels in the portfolio are in excellent physical condition and are not schedule for meaningful upgrades until 2013 and 2014.
Capital Structure
At December 31, 2011, the company had debt outstanding of $228.9 million at an average interest rate of 5.8 percent with a weighted average five-year maturity on its fixed rate debt. “Our current leverage ratio at slightly above 50 percent is higher than our stated long-term target of 35 percent. We are comfortable with this leverage level during what we believe will be a prolonged lodging recovery, a level considered on the conservative side by industry standards,” Craven said. “Our debt service coverage ratio is over 2 times, and we expect to produce sufficient cash flow from operations from our 18 hotels, as well as funds from operations within our joint venture, to fund our 2012 capital expenditure needs and dividends.”
Dividend
The company evaluates its dividend on a quarterly basis and on December 15, 2011, the company declared a common share dividend of $0.175 per share, paid on January 27, 2012 to shareholders of record on December 30, 2011.
Innkeepers Acquisition
Chatham and affiliates of Cerberus Capital Management, L.P. acquired in a joint venture 64 hotels with a total of 8,329 rooms for $1.02 billion from subsidiaries of Innkeepers USA Trust on October 27, 2011. Chatham’s $37 million investment equates to an approximate 10.3 percent interest in the joint venture. “We acquired a great portfolio of assets for approximately $118,000 per key, which we believe represents an attractive discount to replacement cost,” Fisher noted. “We expect the joint venture to provide a healthy cash-on-cash yield on Chatham’s investment and return capital to Chatham in 2012 through asset sales and debt issuance, which will be used to pay down our credit facility and free up some capacity to make acquisitions.”
2012 Guidance
The company’s guidance for 2012, including the first quarter, is presented below for key items based on sustained economic growth, lack of new supply growth and increased business travel spending:

		Q1 2012		2012 Forecast
RevPAR		$96-$98		$105-$107
RevPAR growth		+10-12%		+6-8%
Net income (loss)		$(1.2-$1.7) M		$0-$2 M
Net income (loss) per diluted share		$(0.09-0.12)		$0.00-$0.15
Adjusted EBITDA		$8.0-$8.5 M		$40-$42 M
Adjusted funds from operation ("FFO")		$2.4-$2.8 M		$17.5-$19.5 M
Adjusted FFO per diluted share		$0.17-$0.20		$1.25-$1.40
Hotel EBITDA margins		34-35%		37-38%
Corporate cash administrative expenses		$1.2 M		$5.0 M
Corporate non-cash administrative expenses		$0.4 M		$1.9 M
Interest expense		$3.3 M		$12.8 M
Non-cash amortization of deferred fees		$0.5 M		$2.0 M
Weighted average shares outstanding		13.95 M		13.95 M

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.
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.
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 and costs associated with the departure of the former CFO. 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, non-cash share-based compensation and costs associated with the departure of the former CFO, 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:

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

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.

CHATHAM LODGING TRUST
Consolidated Balance Sheets
(In thousands, except share data)
		December 31,				December 31,
		2011				2010
Assets:
Investment in hotel properties, net		$	402,815			$	208,080
Cash and cash equivalents			4,680				4,768
Restricted cash			5,299				3,018
Investment in unconsolidated real estate entities			36,003				-
Hotel receivables (net of allowance for doubtful accounts of approximately $17 and $15, respectively)			2,057				891
Deferred costs, net			6,350				4,710
Prepaid expenses and other assets			1,502				735
Total assets		$	458,706			$	222,202
Liabilities and Equity:
Debt		$	228,940			$	50,133
Accounts payable and accrued expenses			10,184				5,248
Distributions payable			2,464				1,657
Total liabilities			241,588				57,038
Commitments and contingencies
Equity:
Shareholders' Equity:
Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at December 31, 2011 and 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 December 31, 2011 and 9,208,750 shares issued and outstanding at December 31, 2010			137				91
Additional paid-in capital			239,173				169,089
Accumulated deficit			(23,220	)			(4,441	)
Total shareholders' equity			216,090				164,739
Noncontrolling Interests:
Noncontrolling Interest in Operating Partnership			1,028				425
Total equity			217,118				165,164
Total liabilities and equity		$	458,706			$	222,202

CHATHAM LODGING TRUST
Consolidated Statement of Operations
(In thousands, except share and per share data)
		For the three months ended								For the years ended
		December 31,								December 31,
		2011				2010				2011				2010
Revenue:
Room		$	21,133			$	12,052			$	70,421			$	24,743
Other operating			996				377				2,675				727
Total revenue			22,129				12,429				73,096				25,470
Expenses:
Hotel operating expenses:
Room			5,147				2,994				16,011				5,989
Other operating			7,940				4,440				26,156				9,036
Total hotel operating expenses			13,087				7,434				42,167				15,025
Depreciation and amortization			3,324				1,368				11,971				2,564
Property taxes and insurance			1,598				879				5,321				1,606
General and administrative			1,522				1,216				5,802				3,547
Hotel property acquisition costs			4,119				1,023				7,706				3,189
Total operating expenses			23,650				11,920				72,967				25,931
Operating income (loss)			(1,521	)			509				129				(461	)
Interest and other income			4				84				22				193
Interest expense, including amortization of deferred fees			(3,687	)			(909	)			(8,190	)			(932	)
Loss in unconsolidated entity			(997	)			-				(997	)			-
Loss before income tax expense			(6,201	)			(316	)			(9,036	)			(1,200	)
Income tax expense			6				29				(69	)			(17	)
Net loss attributable to common shareholders		$	(6,195	)			(287	)			(9,105	)			(1,217	)
Loss per Common Share - Basic:
Net loss attributable to common shareholders		$	(0.45	)		$	(0.03	)		$	(0.69	)		$	(0.20	)
Loss per Common Share - Diluted:
Net loss attributable to common shareholders		$	(0.45	)		$	(0.03	)		$	(0.69	)		$	(0.20	)
Weighted average number of common shares outstanding:
Basic			13,768,910				9,132,100				13,280,149				6,377,333
Diluted			13,768,910				9,132,100				13,280,149				6,377,333

CHATHAM LODGING TRUST
FFO and EBITDA
(In thousands, except share and per share data)
		For the three months ended									For the years ended
		December 31									December 31
		2011				2010					2011				2010
Funds From Operations ("FFO"):
Net loss attributable to common shareholders		$	(6,195	)		$	(287	)			$	(9,105	)		$	(1,217	)
Depreciation			3,306				1,355					11,909				2,537
Adjustments for joint venture items			900				-					900				-
FFO			(1,989	)			1,068					3,704				1,320
Hotel property acquisition costs			4,119				1,023					7,706				3,189
Other charges included in general and administrative expenses			-				75					-				345
Adjustments for joint venture items			473				0					473				-
Adjusted FFO		$	2,603			$	2,166				$	11,883			$	4,854
Weighted average number of common shares
Basic			13,768,910				9,132,100					13,280,149				6,377,333
Diluted			13,768,910				9,132,100					13,280,149				6,377,333
		For the three months ended									For the years ended
		December 31									December 31
		2011				2010					2011				2010
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"):
Net loss attributable to common shareholders		$	(6,195	)		$	(287	)			$	(9,105	)		$	(1,217	)
Interest expense			3,687				909					8,190				932
Income tax expense			(6	)			(29	)				69				17
Depreciation and amortization			3,324				1,368					11,971				2,564
Adjustments for joint venture items			1,773				-					1,773				-
EBITDA			2,583				1,961					12,898				2,296
Hotel property acquisition costs			4,119				1,023					7,706				3,189
Adjustments for joint venture items			473				-					473				-
Other charges included in general and administrative expenses			-				75					-				345
Share based compensation			393				389					1,571				1,070
Adjusted EBITDA		$	7,568			$	3,448				$	22,648			$	6,900

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