Chesapeake Lodging Trust Reports Second Quarter Results

ANNAPOLIS, Md.--()--Chesapeake Lodging Trust (NYSE:CHSP), a lodging real estate investment trust (REIT), reported today its financial results for the quarter ended June 30, 2014.

HIGHLIGHTS

  • RevPAR: 7.0% pro forma increase for the 17-hotel portfolio and 3.4% pro forma increase for the 20-hotel portfolio over the same period in 2013.
  • Adjusted Hotel EBITDA Margin: 250 basis point pro forma increase for the 17-hotel portfolio and 170 basis point pro forma increase for the 20-hotel portfolio over the same period in 2013.
  • Adjusted Hotel EBITDA: $47.1 million.
  • Adjusted Corporate EBITDA: $43.2 million.
  • Adjusted FFO: $31.2 million or $0.64 per diluted common share.
  • Financing: Subsequent to quarter end, refinanced an existing $60.0 million loan, replacing it with a $90.0 million, 10-year loan at 4.30%.

"We are pleased with the performance of our hotel portfolio in the second quarter. Our 17-hotel portfolio achieved an occupancy level of over 87% which allowed our hotel managers to increase daily rates resulting in RevPAR growth at the top end of our guidance range. With the ADR-driven RevPAR growth for the quarter and our continued focus on reducing or limiting increases in expenses, we were able to expand hotel EBITDA margins by 250 basis points, well exceeding our guidance range for the quarter," said James L. Francis, Chesapeake Lodging Trust’s President and Chief Executive Officer.

Mr. Francis continued, "We are very proud of the renovated product at our W Chicago – Lakeshore, which we completed in the second quarter on-time and within budget. We have commenced the comprehensive renovations and rebrandings of the former W New Orleans and the former Holiday Inn New York City Midtown – 31st Street, which are scheduled to be completed in the Fall. We expect these three newly renovated hotels will provide outsized growth and add significant value to our overall hotel portfolio."

CONSOLIDATED FINANCIAL RESULTS

The following is a summary of the consolidated financial results for the three and six months ended June 30, 2014 and 2013 (in millions, except share and per share amounts):

           
Three months ended June 30, Six months ended June 30,
2014(1)       2013(2) 2014(1)       2013(3)
Total revenue $ 128.9 $ 115.6 $ 223.6 $ 186.2
 
Net income available to common shareholders $ 18.8 $ 14.6 $ 18.6 $ 9.7
Net income per diluted common share $ 0.38 $ 0.30 $ 0.37 $ 0.21
 
Adjusted Hotel EBITDA $ 47.1 $ 42.1 $ 69.0 $ 57.7
 
Adjusted Corporate EBITDA $ 43.2 $ 38.5 $ 61.2 $ 50.7
 
AFFO available to common shareholders $ 31.2 $ 26.6 $ 43.5 $ 33.5
AFFO per diluted common share $ 0.64 $ 0.56 $ 0.89 $ 0.72
 

Weighted-average number of common shares outstanding - basic and diluted

48,977,876 47,862,652 48,969,761 46,187,216
___________

(1)

 

Includes results of operations of 20 hotels for the full period.

(2)

Includes results of operations of 17 hotels for the full period and three hotels for part of the period.

(3)

Includes results of operations of 15 hotels for the full period and five hotels for part of the period.

 

HOTEL OPERATING RESULTS

Management assesses the operating performance of its hotels irrespective of the hotel owner during the periods compared. The Trust uses the term “pro forma” to refer to metrics that include, or comparisons of metrics that are based on, the operating results of hotels under previous ownership for either a portion of or the entire period. Since five of the Trust’s hotels owned as of June 30, 2014 were acquired at various times during 2013, the key operating metrics for the 17-hotel portfolio and 20-hotel portfolio reflect the pro forma operating results of three of those hotels for the three months ended June 30, 2013 and five of those hotels for the six months ended June 30, 2013. Included in the following table are comparisons of occupancy, average daily rate (ADR), room revenue per available room (RevPAR), Adjusted Hotel EBITDA, and Adjusted Hotel EBITDA Margin, the key operating metrics that management uses to assess the performance of its hotels, for the three and six months ended June 30, 2014 and 2013 (in thousands, except ADR and RevPAR):

           
Three months ended June 30, Six months ended June 30,
2014      

2013(1)

      Change 2014      

2013(1)

      Change

17-Hotel Portfolio(2)

Occupancy 87.2 % 86.5 % 70 bps 82.9 % 80.5 % 240 bps
ADR $ 215.52 $ 203.08 6.1 % $ 198.44 $ 187.82 5.7 %
RevPAR $ 188.00 $ 175.69 7.0 % $ 164.58 $ 151.21 8.8 %
 
Adjusted Hotel EBITDA $ 41,499 $ 36,544 13.6 % $ 62,447 $ 52,838 18.2 %
Adjusted Hotel EBITDA Margin 37.5 % 35.0 % 250 bps 32.2 % 29.5 % 270 bps
 

20-Hotel Portfolio

Occupancy 84.6 % 85.6 % (100) bps 79.5 % 79.2 % 30 bps
ADR $ 215.10 $ 205.64 4.6 % $ 198.08 $ 189.79 4.4 %
RevPAR $ 181.92 $ 175.93 3.4 % $ 157.49 $ 150.37 4.7 %
 
Adjusted Hotel EBITDA $ 47,104 $ 43,977 7.1 % $ 69,044 $ 62,469 10.5 %
Adjusted Hotel EBITDA Margin 36.6 % 34.9 % 170 bps 30.9 % 29.1 % 180 bps
__________

(1)

 

Includes results of operations for certain hotels prior to their acquisition by the Trust.

(2)

Excludes the W Chicago – Lakeshore, the Hotel New Orleans Downtown (formerly the W New Orleans), and the Hyatt Herald Square (formerly the Holiday Inn New York City Midtown – 31st Street), as these hotels have undergone or are undergoing comprehensive renovations during 2014.

 

Hotel EBITDA, Adjusted Hotel EBITDA, Adjusted Hotel EBITDA Margin, Corporate EBITDA, Adjusted Corporate EBITDA, FFO, FFO available to common shareholders and AFFO available to common shareholders 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.

MAJOR REPOSITIONINGS

The comprehensive renovation at the 520-room W Chicago – Lakeshore, which commenced in the third quarter of 2013, was completed in the second quarter of 2014 with a total expected cost of approximately $38.0 million.

The comprehensive renovation at the former 410-room W New Orleans to reposition the hotel commenced in the second quarter of 2014. In July 2014, the Trust and its hotel manager, Starwood Hotels & Resorts Worldwide, Inc., agreed to remove the W brand from the hotel for the duration of the renovation and rename it the Hotel New Orleans Downtown. The Trust continues to expect the renovation will cost approximately $29.0 million and be completed in the fourth quarter of 2014, at which time the hotel will be re-branded as the Le Meridien New Orleans.

The comprehensive renovation at the former 122-room Holiday Inn New York City Midtown – 31st Street to reposition the hotel as the Hyatt Herald Square commenced in the third quarter of 2014 with the closure of the hotel on August 1, 2014. The Trust expects the renovation to be completed and the hotel to re-open by October 1, 2014 and that the renovation will cost approximately $6.5 million.

CAPITAL MARKETS

The Trust did not sell any common shares under the continuous at-the-market (ATM) program during the second quarter of 2014 and through the date of this release.

DIVIDENDS

On April 15, 2014, the Trust paid dividends in the amounts of $0.30 per share to its common shareholders and $0.484375 per share to its preferred shareholders, both of record as of March 31, 2014. On May 16, 2014, the Trust declared dividends in the amounts of $0.30 per share payable to its common shareholders and $0.484375 per share payable to its preferred shareholders, both of record as of June 30, 2014. Both dividends were paid on July 15, 2014.

FINANCING ACTIVITY

On July 3, 2014, the Trust completed the refinancing of its $60.0 million term loan secured by the Hyatt Herald Square (formerly the Holiday Inn New York City Midtown – 31st Street) and the Hyatt Place New York Midtown South. The term loan was refinanced with a new 10-year, $90.0 million, fixed-rate mortgage loan secured by the two hotels mentioned previously. The loan carries a fixed interest rate of 4.30% per annum and requires interest-only payments for the first two years and principal and interest payments thereafter based on a 30-year principal amortization. Excess proceeds from the refinancing were used to repay outstanding borrowings under the Trust’s revolving credit facility.

2014 OUTLOOK

The Trust is updating its 2014 outlook to incorporate its second quarter results, recent operating trends and fundamentals, and the refinancing of the $60.0 million term loan. The updated outlook assumes no additional acquisitions, dispositions, or financing transactions (in millions, except RevPAR and per share amounts):

     

Third Quarter 2014

Outlook
Low       High
CONSOLIDATED:
 
Net income available to common shareholders $ 15.5 $ 17.0
Net income per diluted common share $ 0.32 $ 0.35
 
Adjusted Corporate EBITDA $ 40.5 $ 42.2
 
AFFO available to common shareholders $ 29.9 $ 31.4
AFFO per diluted common share $ 0.61 $ 0.64
 
Corporate general and administrative expense $ 3.5 $ 3.6
Weighted-average number of diluted common shares outstanding 49.0 49.0
 
HOTEL PORTFOLIO:
 

17-Hotel Portfolio(1)

RevPAR $ 193.00 $ 197.00
RevPAR increase over 2013 6.5 % 8.5 %
Adjusted Hotel EBITDA $ 40.4 $ 42.0
Adjusted Hotel EBITDA Margin 36.9 % 37.7 %
Adjusted Hotel EBITDA Margin increase over 2013 75 bps 150 bps
 

20-Hotel Portfolio

RevPAR $ 180.00 $ 184.00
RevPAR increase over 2013 3.0 % 5.0 %
Adjusted Hotel EBITDA $ 44.0 $ 45.8
Adjusted Hotel EBITDA Margin 35.0 % 35.7 %
Adjusted Hotel EBITDA Margin increase over 2013 0 bps 75 bps
_____________

(1)

 

Excludes the W Chicago – Lakeshore, the Hotel New Orleans Downtown (formerly the W New Orleans), and the Hyatt Herald Square (formerly the Holiday Inn New York City Midtown – 31st Street), as these hotels have undergone or are undergoing comprehensive renovations during 2014.

 
           

Full Year 2014

Updated Outlook Previous Outlook
Low       High Low       High
CONSOLIDATED:
 
Net income available to common shareholders $ 40.6 $ 44.5 $ 39.7 $ 44.5
Net income per diluted common share $ 0.83 $ 0.91 $ 0.81 $ 0.91
 
Adjusted Corporate EBITDA $ 134.0 $ 138.2 $ 132.7 $ 138.0
 
AFFO available to common shareholders $ 95.3 $ 99.3 $ 94.6 $ 99.4
AFFO per diluted common share $ 1.95 $ 2.03 $ 1.93 $ 2.03
 
Corporate general and administrative expense $ 14.8 $ 15.3 $ 14.5 $ 15.2
 
Weighted-average number of diluted common shares outstanding 49.0 49.0 49.0 49.0
 
HOTEL PORTFOLIO:
 

17-Hotel Portfolio(1)

RevPAR $ 169.00 $ 172.00 $ 168.00 $ 171.00
Pro forma RevPAR increase over 2013(2) 6.5 % 8.0 % 5.5 % 7.5 %
Adjusted Hotel EBITDA $ 131.9 $ 135.6 $ 129.8 $ 134.8
Adjusted Hotel EBITDA Margin 33.1 % 33.6 % 32.7 % 33.4 %
Pro forma Adjusted Hotel EBITDA Margin increase over 2013(2) 140 bps 190 bps 100 bps 175 bps
 

20-Hotel Portfolio

RevPAR $ 163.00 $ 166.00 $ 163.00 $ 166.00
Pro forma RevPAR increase over 2013(2) 4.0 % 6.0 % 4.0 % 6.0 %
Adjusted Hotel EBITDA $ 148.8 $ 153.5 $ 147.2 $ 153.2
Adjusted Hotel EBITDA Margin 32.1 % 32.5 % 31.7 % 32.4 %
Pro forma Adjusted Hotel EBITDA Margin increase over 2013(2) 90 bps 140 bps 50 bps 125 bps
___________
(1)   Excludes the W Chicago – Lakeshore, the Hotel New Orleans Downtown (formerly the W New Orleans), and the Hyatt Herald Square (formerly the Holiday Inn New York City Midtown – 31st Street), as these hotels have undergone or are undergoing comprehensive renovations during 2014.
(2) The comparable 2013 period includes results of operations for certain hotels prior to their acquisition by the Trust.

NON-GAAP FINANCIAL MEASURES

The Trust reports the following eight non-GAAP financial measures that it believes are useful to investors as key measures of its operating performance: (1) Hotel EBITDA, (2) Adjusted Hotel EBITDA, (3) Adjusted Hotel EBITDA Margin, (4) Corporate EBITDA, (5) Adjusted Corporate EBITDA, (6) FFO, (7) FFO available to common shareholders and (8) AFFO available to common shareholders. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measure are included in the accompanying financial tables.

Hotel EBITDA – Hotel EBITDA is defined as total revenues less total hotel operating expenses. The Trust believes that Hotel EBITDA provides investors a useful financial measure to evaluate the Trust’s hotel operating performance.

Adjusted Hotel EBITDA – The Trust further adjusts Hotel EBITDA for certain additional recurring and non-recurring items. Specifically, the Trust adjusts for non-cash amortization of intangible assets and liabilities, including ground lease assets and unfavorable contract liabilities, deferred franchise costs, and deferred key money, all of which are recurring items. The Trust believes that Adjusted Hotel EBITDA provides investors with another useful financial measure to evaluate the Trust’s hotel operating performance.

Adjusted Hotel EBITDA Margin – Adjusted Hotel EBITDA Margin is defined as Adjusted Hotel EBITDA as a percentage of total revenues. The Trust believes that Adjusted Hotel EBITDA Margin provides investors another useful financial measure to evaluate the Trust’s hotel operating performance.

Corporate EBITDA – Corporate EBITDA is defined as net income before interest, income taxes, and depreciation and amortization. The Trust believes that Corporate EBITDA provides investors a useful financial measure to evaluate the Trust’s operating performance, excluding the impact of the Trust’s capital structure (primarily interest expense) and the Trust’s asset base (primarily depreciation and amortization).

Adjusted Corporate EBITDA – The Trust further adjusts Corporate EBITDA for certain additional recurring and non-recurring items. Specifically, the Trust adjusts for hotel acquisition costs and non-cash amortization of intangible assets and liabilities, including air rights contracts, ground lease assets and unfavorable contract liabilities, deferred franchise costs, and deferred key money, all of which are recurring items. The Trust believes that Adjusted Corporate EBITDA provides investors with another financial measure of its operating performance that provides for greater comparability of its core operating results between periods.

FFO – The Trust calculates FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which defines FFO as net income (calculated in accordance with GAAP), excluding depreciation and amortization, impairment charges, gains (losses) from sales of real estate, the cumulative effect of changes in accounting principles, and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. By excluding the effect of depreciation and amortization and gains (losses) from sales of real estate, both of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, the Trust believes that FFO provides investors a useful financial measure to evaluate the Trust’s operating performance.

FFO available to common shareholders – The Trust reduces FFO for preferred share dividends and dividends declared on and earnings allocated to unvested time-based awards (consistent with adjustments required by GAAP in reporting net income available to common shareholders and related per share amounts). FFO available to common shareholders provides investors another financial measure to evaluate the Trust’s operating performance after taking into account the interests of holders of the Trust’s preferred shares and unvested time-based awards.

AFFO available to common shareholders – The Trust further adjusts FFO available to common shareholders for certain additional recurring and non-recurring items that are not in NAREIT’s definition of FFO. Specifically, the Trust adjusts for hotel acquisition costs and non-cash amortization of intangible assets and liabilities, including air rights contracts, ground lease assets and unfavorable contract liabilities, deferred franchise costs, and deferred key money, all of which are recurring items. The Trust believes that AFFO available to common shareholders provides investors with another financial measure of its operating performance that provides for greater comparability of its core operating results between periods.

CONFERENCE CALL

The Trust will host a conference call on Monday, August 4, 2014 at 5:00 p.m. Eastern Time to discuss its financial results. Interested individuals are invited to listen to the call by dialing (877) 683-0303 (U.S./Canadian callers) or (706) 643-5037 (International callers). The conference call ID is 75660019. A simultaneous webcast of the call will be available on the Trust’s website at www.chesapeakelodgingtrust.com. It is recommended that participants call or log on 10 minutes ahead of the scheduled start time to ensure proper connection.

A replay of the conference call will be available two hours after the live call until midnight on August 11, 2014. To access the replay, dial (855) 859-2056 (U.S./Canadian callers) or (404) 537-3406 (International callers). The conference call ID is 75660019. A webcast replay and transcript of the conference call will be archived and available on the Trust’s website for 12 months.

ABOUT CHESAPEAKE LODGING TRUST

Chesapeake Lodging Trust is a self-advised lodging real estate investment trust (REIT) focused on investments primarily in upper-upscale hotels in major business and convention markets and, on a selective basis, premium select-service hotels in urban settings or unique locations in the United States. The Trust owns 20 hotels with an aggregate of 5,932 rooms in eight states and the District of Columbia. Additional information can be found on the Trust’s website at www.chesapeakelodgingtrust.com.

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 assumptions and forecasts, such as the Trust’s expectations regarding the future Hotel EBITDA and Adjusted Hotel EBITDA of its existing hotels and the Trust’s 2014 outlook, and the Trust’s expectation of its ability and the cost and timing of completing various renovations at its existing hotels. 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: the Trust’s ability to complete renovations timely and within expected costs; the Trust’s ability to continue to satisfy complex rules in order for it to remain a REIT for federal income tax purposes; and other risks and uncertainties associated with the Trust’s business described in its filings with the SEC. Although the Trust 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 August 4, 2014, and the Trust undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Trust’s expectations, except as required by law.

 
CHESAPEAKE LODGING TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
           
June 30, 2014 December 31, 2013
(unaudited)
ASSETS
Property and equipment, net $ 1,440,848 $ 1,422,439
Intangible assets, net 38,480 38,781
Cash and cash equivalents 40,047 28,713
Restricted cash 36,313 34,235
Accounts receivable, net 21,123 13,011
Prepaid expenses and other assets 15,362 10,478
Deferred financing costs, net 5,178   6,501  
Total assets $ 1,597,351   $ 1,554,158  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Long-term debt $ 576,776 $ 531,771
Accounts payable and accrued expenses 51,440 45,982
Other liabilities 31,564   29,848  
Total liabilities 659,780   607,601  
 
Commitments and contingencies
 

Preferred shares, $.01 par value; 100,000,000 shares authorized; Series A Cumulative Redeemable Preferred Shares; 5,000,000 shares issued and outstanding ($127,422 liquidation preference)

50 50

Common shares, $.01 par value; 400,000,000 shares authorized; 50,048,154 shares and 49,574,005 shares issued and outstanding, respectively

501 496
Additional paid-in capital 993,801 991,417
Cumulative dividends in excess of net income (56,781 ) (45,339 )
Accumulated other comprehensive loss   (67 )
Total shareholders’ equity 937,571   946,557  
Total liabilities and shareholders’ equity $ 1,597,351   $ 1,554,158  
 
 
SUPPLEMENTAL CREDIT INFORMATION:
Fixed charge coverage ratio(1) 2.59 2.67
Leverage ratio(1) 35.9 % 33.5 %
______________
(1)   Calculated as defined under the Trust’s revolving credit facility.
 
 
CHESAPEAKE LODGING TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
           
Three Months Ended June 30, Six Months Ended June 30,
2014       2013 2014       2013
REVENUE
Rooms $ 98,118 $ 86,946 $ 168,957 $ 138,490
Food and beverage 26,063 24,313 46,331 40,225
Other 4,684   4,311   8,351   7,456  
Total revenue 128,865   115,570   223,639   186,171  
 
EXPENSES
Hotel operating expenses:
Rooms 21,326 19,167 39,945 33,186
Food and beverage 18,730 17,142 34,940 29,734
Other direct 1,998 1,936 3,779 3,707
Indirect 39,633   35,125   75,782   61,705  
Total hotel operating expenses 81,687 73,370 154,446 128,332
Depreciation and amortization 12,524 10,838 25,022 19,677
Air rights contract amortization 130 130 260 260
Corporate general and administrative 3,891 3,643 7,811 6,985
Hotel acquisition costs   1,237     4,136  
Total operating expenses 98,232   89,218   187,539   159,390  
 
Operating income 30,633 26,352 36,100 26,781
 
Interest income 25 243
Interest expense (6,828 ) (6,346 ) (13,514 ) (11,787 )
 
Income before income taxes 23,805 20,031 22,586 15,237
 
Income tax benefit (expense) (2,556 ) (2,974 ) 841   (690 )
 
Net income 21,249 17,057 23,427 14,547
 
Preferred share dividends (2,422 ) (2,422 ) (4,844 ) (4,844 )
Net income available to common shareholders $ 18,827   $ 14,635   $ 18,583   $ 9,703  
 
Net income per common share - basic and diluted $ 0.38 $ 0.30 $ 0.37 $ 0.21
 

Weighted-average number of common shares outstanding - basic and diluted

48,977,876 47,862,652 48,969,761 46,187,216
 
 
CHESAPEAKE LODGING TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
     
Six Months Ended June 30,
2014       2013
Cash flows from operating activities:
Net income $ 23,427 $ 14,547

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 25,022 19,677
Air rights contract amortization 260 260
Deferred financing costs amortization 1,446 1,372
Share-based compensation 2,819 2,277
Other (282 ) (275 )
Changes in assets and liabilities:
Accounts receivable, net (8,112 ) (12,458 )
Prepaid expenses and other assets (2,769 ) (1,658 )
Accounts payable and accrued expenses 5,078 11,323
Other liabilities (14 ) 788  
Net cash provided by operating activities 46,875   35,853  
 
Cash flows from investing activities:
Acquisition of hotels, net of cash acquired (331,058 )
Receipt of deposit on hotel acquisition 700
Improvements and additions to hotels (43,431 ) (9,979 )
Repayment of hotel construction loan 7,810
Change in restricted cash (2,078 ) (3,872 )
Net cash used in investing activities (45,509 ) (336,399 )
 
Cash flows from financing activities:
Proceeds from sale of common shares, net of underwriting fees 166,083
Payment of offering costs related to sale of common shares (215 )
Borrowings under revolving credit facility 50,000 105,000
Repayments under revolving credit facility (55,000 )
Proceeds from issuance of mortgage debt 127,000
Scheduled principal payments on mortgage debt (4,889 ) (1,701 )
Payment of deferred financing costs (123 ) (1,769 )
Deposits on loan applications (2,115 ) (3,032 )
Payment of dividends to common shareholders (27,631 ) (20,322 )
Payment of dividends to preferred shareholders (4,844 ) (4,844 )
Repurchase of common shares (430 ) (1,088 )
Net cash provided by financing activities 9,968   310,112  
Net increase in cash 11,334 9,566
Cash and cash equivalents, beginning of period 28,713   33,194  
Cash and cash equivalents, end of period $ 40,047   $ 42,760  
 
 

CHESAPEAKE LODGING TRUST

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except per share data)

(unaudited)

 
 

The following table calculates Hotel EBITDA, Adjusted Hotel EBITDA, and Adjusted Hotel EBITDA Margin for the 17-hotel portfolio and the 20-hotel portfolio for the three and six months ended June 30, 2014 and 2013:

           
Three Months Ended June 30, Six Months Ended June 30,
2014       2013(1) 2014       2013(1)

17-Hotel Portfolio(2)

Total revenue $ 110,729 $ 104,528 $ 194,138 $ 178,823
Less: Total hotel operating expenses 69,156   67,904   131,542   125,837  
Hotel EBITDA 41,573 36,624 62,596 52,986
 
Less: Non-cash amortization(3) (74 ) (80 ) (149 ) (148 )
Adjusted Hotel EBITDA $ 41,499   $ 36,544   $ 62,447   $ 52,838  
 
Adjusted Hotel EBITDA Margin 37.5 % 35.0 % 32.2 % 29.5 %
 

20-Hotel Portfolio

Total revenue $ 128,865 $ 125,906 $ 223,639 $ 214,416
Less: Total hotel operating expenses 81,687   81,849   154,446   151,799  
Hotel EBITDA 47,178 44,057 69,193 62,617
 
Less: Non-cash amortization(3) (74 ) (80 ) (149 ) (148 )
Adjusted Hotel EBITDA $ 47,104   $ 43,977   $ 69,044   $ 62,469  
 
Adjusted Hotel EBITDA Margin 36.6 % 34.9 % 30.9 % 29.1 %
 
_____________
(1) Includes results of operations for certain hotels prior to their acquisition by the Trust.
(2) Excludes the W Chicago – Lakeshore, the Hotel New Orleans Downtown (formerly the W New Orleans), and the Hyatt Herald Square (formerly the Holiday Inn New York City Midtown – 31st Street), as these hotels have undergone or are undergoing comprehensive renovations during 2014.
(3) Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, and unfavorable contract liability.
 
The following table calculates Hotel EBITDA and Adjusted Hotel EBITDA contributed by the Trust’s hotel portfolio for the three and six months ended June 30, 2014 and 2013:
           
Three Months Ended June 30, Six Months Ended June 30,
2014       2013 2014       2013
Total revenue $ 128,865 $ 115,570 $ 223,639 $ 186,171
Less: Total hotel operating expenses 81,687   73,370   154,446   128,332  
Hotel EBITDA 47,178 42,200 69,193 57,839
 
Less: Non-cash amortization(1) (74 ) (80 ) (149 ) (148 )
Adjusted Hotel EBITDA $ 47,104   $ 42,120   $ 69,044   $ 57,691  
_____________
(1)   Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, and unfavorable contract liability.
 
The following table reconciles net income to Corporate EBITDA and Adjusted Corporate EBITDA for the three and six months ended June 30, 2014 and 2013:
           
Three Months Ended June 30, Six Months Ended June 30,
2014       2013 2014       2013
Net income $ 21,249 $ 17,057 $ 23,427 $ 14,547

Add:

Depreciation and amortization

12,524 10,838 25,022 19,677

Interest expense

6,828 6,346 13,514 11,787
Income tax expense (benefit) 2,556 2,974 (841 ) 690

Less:

Interest income

  (25 )   (243 )
Corporate EBITDA 43,157 37,190 61,122 46,458
 

Add:

Hotel acquisition costs

1,237 4,136
Non-cash amortization(1) 56   50   111   112  
Adjusted Corporate EBITDA $ 43,213   $ 38,477   $ 61,233   $ 50,706  
____________
(1)   Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.
 
The following table reconciles net income to FFO, FFO available to common shareholders, and AFFO available to common shareholders for the three and six months ended June 30, 2014 and 2013:
           
Three Months Ended June 30, Six Months Ended June 30,
2014       2013 2014       2013
Net income $ 21,249 $ 17,057 $ 23,427 $ 14,547

Add:

Depreciation and amortization

12,524   10,838   25,022   19,677  
FFO 33,773 27,895 48,449 34,224
 

Less:

Preferred share dividends

(2,422 ) (2,422 ) (4,844 ) (4,844 )
Dividends declared on unvested time-based awards (128 ) (90 ) (257 ) (178 )
Undistributed earnings allocated to unvested time-based awards (35 ) (23 )    
FFO available to common shareholders 31,188 25,360 43,348 29,202
 

Add:

Hotel acquisition costs

1,237 4,136
Non-cash amortization(1) 56   50   111   112  
AFFO available to common shareholders $ 31,244   $ 26,647   $ 43,459   $ 33,450  
 
FFO per common share - basic and diluted $ 0.64 $ 0.53 $ 0.89 $ 0.63
 
AFFO per common share - basic and diluted $ 0.64 $ 0.56 $ 0.89 $ 0.72
____________
(1)   Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.
 
The following table calculates forecasted Hotel EBITDA and Adjusted Hotel EBITDA for the 17-hotel portfolio and the 20-hotel portfolio for the three months ending September 30, 2014:
 
     
Three Months Ending September 30, 2014
17-Hotel Portfolio(1)       20-Hotel Portfolio
Low       High Low       High
Total revenue $ 109,400 $ 111,500 $ 125,700 $ 128,200
Less: Total hotel operating expenses 68,920   69,420   81,620   82,320  
Hotel EBITDA 40,480 42,080 44,080 45,880
 
Less: Non-cash amortization(2) (80 ) (80 ) (80 ) (80 )
Adjusted Hotel EBITDA $ 40,400   $ 42,000   $ 44,000   $ 45,800  
_____________

(1)

 

Excludes the W Chicago – Lakeshore, the Hotel New Orleans Downtown (formerly the W New Orleans), and the Hyatt Herald Square (formerly the Holiday Inn New York City Midtown – 31st Street), as these hotels have undergone or are undergoing comprehensive renovations during 2014.

(2)

Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, and unfavorable contract liability.

 
 
The following table reconciles forecasted net income to Corporate EBITDA and Adjusted Corporate EBITDA for the three months ending September 30, 2014:
 
     
Three Months Ending September 30, 2014
Low       High
Net income $ 18,050 $ 19,550

Add:

Depreciation and amortization

14,300 14,300
Interest expense 7,010 7,010
Income tax expense 1,050 1,250

Less:

Interest income

 
Corporate EBITDA 40,410 42,110
 

Add:

Hotel acquisition costs

Non-cash amortization(1) 50   50
Adjusted Corporate EBITDA $ 40,460   $ 42,160
_____________

(1)

 

Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.

 
 
The following table reconciles forecasted net income to FFO, FFO available to common shareholders, and AFFO available to common shareholders for the three months ending September 30, 2014:
 
     
Three Months Ending September 30, 2014
Low       High
Net income $ 18,050 $ 19,550

Add:

Depreciation and amortization

14,300   14,300  
FFO 32,350 33,850
 

Less:

Preferred share dividends

(2,420 ) (2,420 )
Dividends declared on unvested time-based awards (130 ) (130 )
Undistributed earnings allocated to unvested time-based awards    
FFO available to common shareholders 29,800 31,300
 

Add:

Hotel acquisition costs

Non-cash amortization(1) 50   50  
AFFO available to common shareholders $ 29,850   $ 31,350  
 
FFO per common share - basic and diluted $ 0.61 $ 0.64
 
AFFO per common share - basic and diluted $ 0.61 $ 0.64
 
Weighted-average number of diluted common shares outstanding 48,987 48,987
_____________

(1)

 

Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.

 
 
The following table calculates forecasted Hotel EBITDA and Adjusted Hotel EBITDA for the 17-hotel portfolio and the 20-hotel portfolio for the year ending December 31, 2014:
 
     
Year Ending December 31, 2014
17-Hotel Portfolio(1)       20-Hotel Portfolio
Low       High Low       High
Total revenue $ 398,500 $ 403,700 $ 464,100 $ 471,600
Less: Total hotel operating expenses 266,300   267,800   315,050   317,800  
Hotel EBITDA 132,200 135,900 149,050 153,800
 
Less: Non-cash amortization(2) (300 ) (300 ) (300 ) (300 )
Adjusted Hotel EBITDA $ 131,900   $ 135,600   $ 148,750   $ 153,500  
_____________
(1)   Excludes the W Chicago – Lakeshore, the Hotel New Orleans Downtown (formerly the W New Orleans), and the Hyatt Herald Square (formerly the Holiday Inn New York City Midtown – 31st Street), as these hotels have undergone or are undergoing comprehensive renovations during 2014.
(2) Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, and unfavorable contract liability.
 

The following table reconciles forecasted net income to Corporate EBITDA and Adjusted Corporate EBITDA for the year ending December 31, 2014:

     
Year Ending December 31, 2014
Low       High
Net income $ 50,760 $ 54,710

Add:

Depreciation and amortization

54,520 54,520
Interest expense 27,500 27,500
Income tax expense 950 1,250

Less:

Interest income

 
Corporate EBITDA 133,730 137,980
 

Add:

Hotel acquisition costs

Non-cash amortization(1) 220   220
Adjusted Corporate EBITDA $ 133,950   $ 138,200
____________
(1) Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.
 

The following table reconciles forecasted net income to FFO, FFO available to common shareholders, and AFFO available to common shareholders for the year ending December 31, 2014:

     
Year Ending December 31, 2014
Low       High
Net income $ 50,760 $ 54,710

Add:

Depreciation and amortization

54,520   54,520  
FFO 105,280 109,230

Less:

Preferred share dividends

(9,690 ) (9,690 )
Dividends declared on unvested time-based awards (500 ) (500 )
Undistributed earnings allocated to unvested time-based awards    
FFO available to common shareholders 95,090 99,040
 

Add:

Hotel acquisition costs

Non-cash amortization(1) 220   220  
AFFO available to common shareholders $ 95,310   $ 99,260  
 
FFO per common share - basic and diluted $ 1.94 $ 2.02
 
AFFO per common share - basic and diluted $ 1.95 $ 2.03
 
Weighted-average number of diluted common shares outstanding 48,985 48,985
____________
(1) Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.
 
                 
CHESAPEAKE LODGING TRUST
CURRENT HOTEL PORTFOLIO
 
 
 
Hotel Location Rooms Acquisition Date
1   Hyatt Regency Boston Boston, MA 502 March 18, 2010
2 Hilton Checkers Los Angeles Los Angeles, CA 193 June 1, 2010
3 Courtyard Anaheim at Disneyland Resort Anaheim, CA 153 July 30, 2010
4 Boston Marriott Newton Newton, MA 430 July 30, 2010
5 Le Meridien San Francisco San Francisco, CA 360 December 15, 2010
6 Homewood Suites Seattle Convention Center Seattle, WA 195 May 2, 2011
7 W Chicago – City Center Chicago, IL 403 May 10, 2011
8 Hotel Indigo San Diego Gaslamp Quarter San Diego, CA 210 June 17, 2011
9 Courtyard Washington Capitol Hill/Navy Yard Washington, DC 204 June 30, 2011
10 Hotel Adagio San Francisco, Autograph Collection San Francisco, CA 171 July 8, 2011
11 Denver Marriott City Center Denver, CO 613 October 3, 2011
12 Hyatt Herald Square (formerly the Holiday Inn New York City Midtown – 31st Street) New York, NY 122 December 22, 2011
13 W Chicago – Lakeshore Chicago, IL 520 August 21, 2012
14 Hyatt Regency Mission Bay Spa and Marina San Diego, CA 429 September 7, 2012
15 The Hotel Minneapolis, Autograph Collection Minneapolis, MN 222 October 30, 2012
16 Hyatt Place New York Midtown South New York, NY 185 March 14, 2013
17 W New Orleans – French Quarter New Orleans, LA 97 March 28, 2013
18 Hotel New Orleans Downtown (formerly the W New Orleans) New Orleans, LA 410 April 25, 2013
19 Hyatt Fisherman’s Wharf San Francisco, CA 313 May 31, 2013
20 Hyatt Santa Barbara Santa Barbara, CA 200 June 27, 2013
5,932
 

Contacts

Chesapeake Lodging Trust
Douglas W. Vicari, 410-972-4142

Contacts

Chesapeake Lodging Trust
Douglas W. Vicari, 410-972-4142