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, 2023.
First Quarter 2023 Operating Results
- Portfolio Revenue Per Available Room (RevPAR) – Increased 28 percent to $116 compared to the 2022 first quarter. Average daily rate (ADR) accelerated 14 percent to $169, and occupancy jumped 13 percent to 69 percent for the 39 hotels owned as of March 31, 2023.
- RevPAR of $116 compares to $124 in 2019. ADR is up 3 percent to 2019.
- Excluding Silicon Valley, RevPAR was up 0.2 percent versus the 2019 first quarter.
- Net Loss – Incurred a $5.0 million net loss compared to a net loss of $9.7 million in the 2022 first quarter. Net loss per diluted common share was $(0.14) versus net loss per diluted common share of $(0.23) for the same period last year.
- Hotel EBITDA Margin – Improved margins to 31 percent in the 2023 first quarter compared to 2022 first quarter margins of 29 percent.
- Adjusted EBITDA – Advanced 34 percent to $17.8 million from $13.3 million in the 2022 first quarter.
- Adjusted FFO – Jumped 123 percent from $3.5 million in the 2022 first quarter to adjusted FFO of $7.9 million this year. Adjusted FFO per diluted share was $0.16, compared to $0.07 in the 2022 first quarter.
- Debt Repayments – Repaid in full three mortgages with outstanding principal of $73 million and a weighted average interest rate of 8.0 percent with available cash and proceeds from its newly issued term loan that currently carries an interest rate of 6.2 percent. On May 6, 2023, Chatham will repay another $16 million maturing mortgage.
- Hilton Development Award Winner – Received a prestigious development award from Hilton for its Home2 Suites Woodland Hills Warner Center that opened in 2022.
The following chart summarizes the consolidated financial results for the three months ended March 31, 2023, and 2022, based on all properties owned during those periods ($ in millions, except margin percentages and per share data):
|
| Three Months Ended | ||
|
| March 31, | ||
|
| 2023 |
| 2022 |
| Net loss | $(5.0) |
| $(9.7) |
| Diluted net loss per common share | $(0.14) |
| $(0.23) |
| GOP Margin | 40% |
| 38% |
| Hotel EBITDA Margin | 31% |
| 29% |
| Adjusted EBITDA | $17.8 |
| $13.3 |
| AFFO | $7.9 |
| $3.5 |
| AFFO per diluted share | $0.16 |
| $0.07 |
| Dividends per common share | $0.07 |
| $— |
Jeffrey H. Fisher, Chatham’s president and chief executive officer, highlighted, “Our portfolio’s overall operating performance in the first quarter was strong with RevPAR growth of 28 percent driving adjusted EBITDA and FFO per share growth of 34 percent and 121 percent, respectively. Hotel EBITDA margins were up meaningfully over the 2022 first quarter.
“Our first quarter RevPAR growth of 28 percent significantly outperformed the industry's 17 percent, a trend that should continue as the business traveler steadily recovers, especially in our tech driven markets, and our limited exposure to Covid-related booming leisure markets. Excluding our four Silicon Valley hotels, relative to 2019, RevPAR was up slightly during the quarter. Silicon Valley continues to slowly recover, but the remainder of the portfolio is performing extremely well. Versus 2019, March and April 2023 RevPAR excluding the four Silicon Valley hotels was up 16 percent and 3 percent, respectively,” Fisher emphasized.
Hotel RevPAR Performance
The below chart summarizes key hotel financial statistics for the hotels owned as of March 31, 2023, compared to the 2022 and 2019 first quarter:
|
| Q1 2023 RevPAR |
| Q1 2022 RevPAR |
| Q1 2019 RevPAR |
| Occupancy | 69% |
| 61% |
| 76% |
| ADR | $169 |
| $149 |
| $163 |
| RevPAR | $116 |
| $90 |
| $124 |
The below chart summarizes RevPAR statistics by month for the company’s hotels:
|
| January |
| February |
| March |
| April |
| Occupancy – 2023 | 59% |
| 70% |
| 77% |
| 77% |
| ADR – 2023 | $156 |
| $169 |
| $178 |
| $179 |
| RevPAR – 2023 | $ 93 |
| $118 |
| $137 |
| $138 |
| RevPAR – 2022 | $ 67 |
| $91 |
| $112 |
| $123 |
| % Change in RevPAR vs. prior year | 37% |
| 30% |
| 22% |
| 12% |
| % Change in RevPAR vs. 2019 | (12)% |
| (5)% |
| (4)% |
| (2)% |
Fisher added, “Relative to 2019, our portfolio is improving steadily, and that is attributable to the domestic business traveler as well as improved international travel due to loosening restrictions on entering the United States and obtaining work visas. Versus 2019, weekday occupancy in the first quarter improved each month of 2023 and was 69 percent for the entire first quarter. Weekday ADR was up approximately 17 percent versus last year and only down approximately 1 percent versus 2019, an encouraging pattern given the first quarter historically is our slowest of the year. Weekend RevPAR remained strong as it was up approximately 9 percent in the quarter versus 2019."
RevPAR performance for Chatham’s largest markets comprise 68 percent of trailing twelve-month hotel EBITDA (based on EBITDA contribution over the last twelve months) is presented below:
|
| % OF LTM EBITDA |
| Q1 2023 RevPAR |
| Change vs. Q1 2022 |
| Q1 2022 RevPAR |
| Q1 2019 RevPAR |
| 39 - Hotel Portfolio |
|
| $116 |
| 28% |
| $90 |
| $124 |
| Silicon Valley | 16% |
| $114 |
| 59% |
| $71 |
| $183 |
| Coastal Northeast | 9% |
| $93 |
| 29% |
| $72 |
| $88 |
| Los Angeles | 9% |
| $151 |
| 39% |
| $109 |
| $161 |
| Washington, D.C. | 7% |
| $120 |
| 39% |
| $87 |
| $128 |
| San Diego | 6% |
| $187 |
| 43% |
| $130 |
| $172 |
| Greater New York | 6% |
| $116 |
| 7% |
| $109 |
| $125 |
| Austin | 6% |
| $135 |
| 25% |
| $109 |
| $130 |
| Dallas | 5% |
| $114 |
| 35% |
| $84 |
| $98 |
| Seattle | 4% |
| $75 |
| 17% |
| $64 |
| $115 |
“With most of our largest markets more reliant on the gradually recovering business travel segment, all but three of our largest markets produced RevPAR growth in excess of our portfolio average," stated Dennis Craven, Chatham's chief operating officer. "Our largest market, Silicon Valley, was up $43, or 59 percent, over the 2022 first quarter but remains well below 2019 levels. Slower return to office policies, layoffs and less international travel are contributors to the slower recovery. Having said that, we are starting to see broadening corporate demand from many companies that were not producing last year which is promising. Additionally, international deplanements into San Francisco and San Jose have improved to their highest levels since the pandemic, though still off approximately 16 percent versus 2019. These international travelers are typically longer stay guests which is more beneficial for us. Weekday occupancy was approximately 68 percent in the first quarter, up 24 percent over the first quarter last year.”
Approximately 64 percent of Chatham’s hotel EBITDA over the last twelve months was generated from its extended-stay hotels. Chatham has the highest concentration of extended-stay rooms of any public lodging REIT at 61 percent. First quarter 2023 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 (6) |
| HGI (4) |
| Courtyard (4) |
| Hampton Inn (3) |
| % of LTM EBITDA | 48% |
| 11% |
| 9% |
| 8% |
| 7% |
| Occupancy – 2023 | 68% |
| 71% |
| 63% |
| 71% |
| 67% |
| ADR – 2023 | $187 |
| $150 |
| $165 |
| $155 |
| $139 |
| RevPAR – 2023 | $127 |
| $107 |
| $103 |
| $110 |
| $93 |
| RevPAR – 2022 | $98 |
| $91 |
| $82 |
| $87 |
| $77 |
| % Change in RevPAR | 30% |
| 17% |
| 25% |
| 27% |
| 21% |
Hotel Operations Performance
The below chart summarizes key hotel operating performance measures for the three months ended March 31, 2023, and 2022. Gross operating profit is calculated as Hotel EBITDA plus property taxes, ground rent and insurance (in millions, except for RevPAR and margin percentages):
|
|
| Q1 2023 |
| Q1 2022 |
|
| RevPAR |
| $116 |
| $90 |
|
| Gross operating profit |
| $26.8 |
| $20.9 |
|
| Hotel EBITDA |
| $20.7 |
| $15.9 |
|
| GOP margin |
| 40% |
| 38% |
|
| Hotel EBITDA margin |
| 31% |
| 29% |
|
Craven concluded, "Our operating and hotel EBITDA margins rose approximately 200 basis points in the quarter as we generated flow-through on incremental revenue of approximately 46 percent year-over-year. Efficiencies due to lower overall headcount, as well as lower utility costs, were the primary drivers of the margin improvement.”
Corporate Update
The below chart summarizes key financial performance measures for the three months ended March 31, 2023, and 2022. 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), as well as dividends on its preferred shares of $2.0 million per quarter. Cash flow before CapEx is calculated as Corporate EBITDA less debt service. Amounts are in millions, except RevPAR.
|
|
| Q1 2023 |
| Q1 2022 |
|
| RevPAR |
| $116 |
| $90 |
|
| Hotel EBITDA |
| $20.7 |
| $15.9 |
|
| Corporate EBITDA |
| $17.8 |
| $13.3 |
|
| Debt Service & Preferred |
| $(10.2) |
| $(10.5) |
|
| Cash flow before CapEx |
| $7.6 |
| $2.8 |
|
Hotel Investments
During the 2023 first quarter, the company incurred capital expenditures of $8.1 million. Chatham substantially completed renovations on the Residence Inns in Holtsville and White Plains, N.Y., and the Residence Inn Washington, D.C. Chatham’s 2023 capital expenditure budget is approximately $30.6 million. No renovations are planned for the 2023 second quarter.
Capital Markets & Capital Structure
During the first quarter, Chatham repaid maturing debt of approximately $73 million using available cash and proceeds under its term loan. Chatham has $77 million of debt maturing in the next twelve months and will be repaying a $16 million maturing mortgage on May 5, 2023.
As of March 31, 2023, the company had net debt of $447.2 million (total consolidated debt less unrestricted cash). Total debt outstanding as of March 31, 2023, was $469.7 million at an average interest rate of 4.9 percent, comprised of $394.7 million of fixed-rate mortgage debt at an average interest rate of 4.6 percent, $75 million outstanding on its term loan at a rate of 6.2% and nothing outstanding on the company's $260 million senior unsecured revolving credit facility. Based on the ratio of the company’s net debt to hotel investments at cost, Chatham’s leverage ratio was approximately 27 percent on March 31, 2023.
"Our balance sheet is in great shape as we paid off a meaningful amount of debt in the first quarter and have the financial flexibility to enhance shareholder value by executing acquisitions and refinancing upcoming maturities at the right time," remarked Jeremy Wegner, Chatham's chief financial officer.
Dividend
During the quarter, the Board of Trustees declared a preferred share dividend of $0.41406 per share as well as a common share dividend of $0.07 per share, payable on April 17, 2023, to shareholders of record as of March 31, 2023.
2023 Guidance
Due to uncertainty surrounding 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. The company owns 39 hotels totaling 5,915 rooms/suites in 16 states and the District of Columbia.
| CHATHAM LODGING TRUST Consolidated Balance Sheets (In thousands, except share and per share data) | |||||||
|
| March 31, 2023 |
| December 31, 2022 | ||||
|
| (unaudited) |
|
| ||||
| Assets: |
|
|
| ||||
| Investment in hotel properties, net | $ | 1,258,002 |
|
| $ | 1,264,252 |
|
| Cash and cash equivalents |
| 22,473 |
|
|
| 26,274 |
|
| Restricted cash |
| 13,277 |
|
|
| 18,879 |
|
| Right of use asset, net |
| 19,120 |
|
|
| 19,297 |
|
| Hotel receivables (net of allowance for doubtful accounts of $353 and $344, respectively) |
| 4,547 |
|
|
| 5,178 |
|
| Deferred costs, net |
| 4,805 |
|
|
| 6,428 |
|
| Prepaid expenses and other assets |
| 9,632 |
|
|
| 3,430 |
|
| Total assets | $ | 1,331,856 |
|
| $ | 1,343,738 |
|
| Liabilities and Equity: |
|
|
| ||||
| Mortgage debt, net | $ | 394,406 |
|
| $ | 430,553 |
|
| Revolving credit facility |
| — |
|
|
| — |
|
| Construction loan |
| — |
|
|
| 39,331 |
|
| Unsecured term loan, net |
| 74,341 |
|
|
| — |
|
| Accounts payable and accrued expenses |
| 26,616 |
|
|
| 28,528 |
|
| Lease liability, net |
| 21,953 |
|
|
| 22,108 |
|
| Distributions payable |
| 5,284 |
|
|
| 5,221 |
|
| Total liabilities |
| 522,600 |
|
|
| 525,741 |
|
| Commitments and contingencies |
|
|
| ||||
| Equity: |
|
|
| ||||
| Shareholders’ Equity: |
|
|
| ||||
| Preferred shares, $0.01 par value, 100,000,000 shares authorized; 4,800,000 and 4,800,000 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively |
| 48 |
|
|
| 48 |
|
| Common shares, $0.01 par value, 500,000,000 shares authorized; 48,855,155 and 48,808,105 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively |
| 488 |
|
|
| 488 |
|
| Additional paid-in capital |
| 1,047,095 |
|
|
| 1,047,023 |
|
| Accumulated deficit |
| (262,921 | ) |
|
| (252,665 | ) |
| Total shareholders’ equity |
| 784,710 |
|
|
| 794,894 |
|
| Noncontrolling interests: |
|
|
| ||||
| Noncontrolling interest in Operating Partnership |
| 24,546 |
|
|
| 23,103 |
|
| Total equity |
| 809,256 |
|
|
| 817,997 |
|
| Total liabilities and equity | $ | 1,331,856 |
|
| $ | 1,343,738 |
|
| CHATHAM LODGING TRUST Consolidated Statements of Operations (In thousands, except share and per share data) (unaudited) | |||||||
|
| For the three months ended | ||||||
|
| March 31, | ||||||
|
| 2023 |
| 2022 | ||||
| Revenue: |
|
|
| ||||
| Room | $ | 61,671 |
|
| $ | 50,164 |
|
| Food and beverage |
| 2,087 |
|
|
| 1,415 |
|
| Other |
| 3,491 |
|
|
| 2,980 |
|
| Reimbursable costs from related parties |
| 365 |
|
|
| 326 |
|
| Total revenue |
| 67,614 |
|
|
| 54,885 |
|
| Expenses: |
|
|
| ||||
| Hotel operating expenses: |
|
|
| ||||
| Room |
| 14,117 |
|
|
| 11,594 |
|
| Food and beverage |
| 1,557 |
|
|
| 1,047 |
|
| Telephone |
| 362 |
|
|
| 402 |
|
| Other hotel operating |
| 914 |
|
|
| 732 |
|
| General and administrative |
| 6,805 |
|
|
| 5,350 |
|
| Franchise and marketing fees |
| 5,341 |
|
|
| 4,408 |
|
| Advertising and promotions |
| 1,515 |
|
|
| 1,189 |
|
| Utilities |
| 3,151 |
|
|
| 2,888 |
|
| Repairs and maintenance |
| 3,730 |
|
|
| 3,445 |
|
| Management fees |
| 2,287 |
|
|
| 1,918 |
|
| Insurance |
| 699 |
|
|
| 710 |
|
| Total hotel operating expenses |
| 40,478 |
|
|
| 33,683 |
|
| Depreciation and amortization |
| 14,258 |
|
|
| 15,036 |
|
| Property taxes, ground rent and insurance |
| 6,105 |
|
|
| 4,958 |
|
| General and administrative |
| 4,341 |
|
|
| 3,942 |
|
| Other charges |
| — |
|
|
| 250 |
|
| Reimbursable costs from related parties |
| 365 |
|
|
| 326 |
|
| Total operating expenses |
| 65,547 |
|
|
| 58,195 |
|
| Operating income (loss) |
| 2,067 |
|
|
| (3,310 | ) |
| Interest and other income |
| 20 |
|
|
| — |
|
| Interest expense, including amortization of deferred fees |
| (6,438 | ) |
|
| (6,389 | ) |
| Loss on early extinguishment of debt |
| (691 | ) |
|
| — |
|
| Loss before income tax expense |
| (5,042 | ) |
|
| (9,699 | ) |
| Income tax expense |
| — |
|
|
| — |
|
| Net loss |
| (5,042 | ) |
|
| (9,699 | ) |
| Net loss attributable to noncontrolling interests |
| 193 |
|
|
| 253 |
|
| Net loss attributable to Chatham Lodging Trust |
| (4,849 | ) |
|
| (9,446 | ) |
| Preferred dividends |
| (1,987 | ) |
|
| (1,987 | ) |
| Net loss attributable to common shareholders | $ | (6,836 | ) |
| $ | (11,433 | ) |
| Loss per common share - basic: |
|
|
| ||||
| Net loss attributable to common shareholders | $ | (0.14 | ) |
| $ | (0.23 | ) |
| Loss per common share - diluted: |
|
|
| ||||
| Net loss attributable to common shareholders | $ | (0.14 | ) |
| $ | (0.23 | ) |
| Weighted average number of common shares outstanding: |
|
|
| ||||
| Basic |
| 48,838,742 |
|
|
| 48,787,519 |
|
| Diluted |
| 48,838,742 |
|
|
| 48,787,519 |
|
| Distributions declared per common share: | $ | 0.07 |
|
| $ | — |
|
| CHATHAM LODGING TRUST FFO and EBITDA (In thousands, except share and per share data) | |||||||
|
| For the three months ended | ||||||
|
| March 31, | ||||||
|
| 2023 |
| 2022 | ||||
| Funds From Operations (“FFO”): |
|
|
| ||||
| Net loss | $ | (5,042 | ) |
| $ | (9,699 | ) |
| Preferred dividends |
| (1,987 | ) |
|
| (1,987 | ) |
| Net loss attributable to common shares and common units |
| (7,029 | ) |
|
| (11,686 | ) |
| Depreciation |
| 14,204 |
|
|
| 14,970 |
|
| FFO attributable to common share and unit holders |
| 7,175 |
|
|
| 3,284 |
|
| Other charges |
| — |
|
|
| 250 |
|
| Loss on early extinguishment of debt |
| 691 |
|
|
| — |
|
| Adjusted FFO attributable to common share and unit holders | $ | 7,866 |
|
| $ | 3,534 |
|
| Weighted average number of common shares and units |
|
|
| ||||
| Basic |
| 50,181,826 |
|
|
| 49,845,825 |
|
| Diluted |
| 50,310,638 |
|
|
| 50,042,723 |
|
|
| For the three months ended | ||||||
|
| March 31, | ||||||
|
| 2023 |
| 2022 | ||||
| Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”): |
|
|
| ||||
| Net loss | $ | (5,042 | ) |
| $ | (9,699 | ) |
| Interest expense |
| 6,438 |
|
|
| 6,389 |
|
| Depreciation and amortization |
| 14,258 |
|
|
| 15,036 |
|
| EBITDA |
| 15,654 |
|
|
| 11,726 |
|
| EBITDAre |
| 15,654 |
|
|
| 11,726 |
|
| Other charges |
| — |
|
|
| 250 |
|
| Loss on early extinguishment of debt |
| 691 |
|
|
| — |
|
| Share based compensation |
| 1,452 |
|
|
| 1,294 |
|
| Adjusted EBITDA | $ | 17,797 |
|
| $ | 13,270 |
|
| CHATHAM LODGING TRUST ADJUSTED HOTEL EBITDA (In thousands, except share and per share data) | ||||||||
|
|
| For the three months ended | ||||||
|
|
| March 31, | ||||||
|
|
| 2023 |
| 2022 | ||||
|
|
|
|
|
| ||||
| Net loss | $ | (5,042 | ) |
| $ | (9,699 | ) | |
| Add: | Interest expense |
| 6,438 |
|
|
| 6,389 |
|
|
| Depreciation and amortization |
| 14,258 |
|
|
| 15,036 |
|
|
| Corporate general and administrative |
| 4,341 |
|
|
| 3,942 |
|
|
| Other charges |
| — |
|
|
| 250 |
|
|
| Loss on early extinguishment of debt |
| 691 |
|
|
| — |
|
| Less: | Interest and other income |
| (20 | ) |
|
| — |
|
|
| Adjusted Hotel EBITDA | $ | 20,666 |
|
| $ | 15,918 |
|