Press Release

Chesapeake Lodging Trust Reports Third Quarter Results

November 3, 2014 at 4:15 PM EST

ANNAPOLIS, Md.--(BUSINESS WIRE)--Nov. 3, 2014-- Chesapeake Lodging Trust (NYSE:CHSP), a lodging real estate investment trust (REIT), reported today its financial results for the quarter ended September 30, 2014.

HIGHLIGHTS

  • RevPAR: 11.4% increase for the 16-hotel portfolio and 7.3% increase for the 19-hotel portfolio over the same period in 2013.
  • Adjusted Hotel EBITDA Margin: 160 basis point increase to 37.7% for the 16-hotel portfolio and 110 basis point increase to 36.0% for the 19-hotel portfolio over the same period in 2013.
  • Adjusted Hotel EBITDA: $47.2 million.
  • Adjusted Corporate EBITDA: $43.5 million.
  • Adjusted FFO: $32.8 million or $0.65 per diluted common share.
  • Disposition: Sold the 153-room Courtyard Anaheim at Disneyland Resort for a sale price of $32.5 million.
  • Acquisition: Subsequent to quarter end, acquired the 337-room JW Marriott San Francisco Union Square for a purchase price of $147.2 million.
  • Financing: Refinanced an existing $60.0 million loan, replacing it with a $90.0 million, 10-year loan at 4.30%.
  • Equity Offering: Completed a $144.3 million common share offering.

“We are extremely pleased with our hotel portfolio’s performance during the third quarter with our 16-hotel portfolio delivering RevPAR growth of 11.4%, significantly exceeding the U.S. lodging industry’s RevPAR growth of 9.2%,” said James L. Francis, Chesapeake Lodging Trust’s President and Chief Executive Officer. Mr. Francis continued, “We are also excited about our recent acquisition of the JW Marriott San Francisco Union Square, our fourth hotel in the very attractive San Francisco market, which we were able to partially fund with the reinvestment of proceeds from the sale of the Courtyard Anaheim at Disneyland Resort, a non-core asset.”

“We are bullish on our prospects heading into 2015 with the completion of our portfolio repositioning program, which encompassed the completion of our comprehensive renovations at the W Chicago - Lakeshore and the Hyatt Herald Square New York, and soon to be completed renovation and re-branding of the Le Meridien New Orleans.”

CONSOLIDATED FINANCIAL RESULTS

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

           
Three months ended Nine months ended
September 30, September 30,
2014(1)       2013(2) 2014(1)       2013(3)
Total revenue $ 130.8 $ 122.4 $ 354.5 $ 308.6
 
Net income available to common shareholders $ 26.3 $ 16.8 $ 44.8 $ 26.5
Net income per diluted common share $ 0.52 $ 0.35 $ 0.89 $ 0.56
 
Adjusted Hotel EBITDA $ 47.2 $ 42.8 $ 116.3 $ 100.5
 
Adjusted Corporate EBITDA $ 43.5 $ 39.9 $ 104.8 $ 90.6
 
AFFO available to common shareholders $ 32.8 $ 29.1 $ 76.4 $ 62.6
AFFO per diluted common share $ 0.65 $ 0.61 $ 1.53 $ 1.34
 

Weighted-average number of diluted common shares outstanding

50,567,849 47,885,696 49,758,044 46,759,598
 
___________
(1)   Includes results of operations of 19 hotels for the full period and one hotel for part of the period.
(2) Includes results of operations of 20 hotels for the full period.
(3) Includes results of operations of 15 hotels for the full period and five hotels for part of the period.
 

HOTEL OPERATING RESULTS

As of September 30, 2014, the Trust owned 19 hotels. Management assesses the operating performance of its hotels irrespective of the hotel owner during the periods compared using the following key operating metrics: occupancy, ADR, RevPAR, Adjusted Hotel EBITDA, and Adjusted Hotel EBITDA Margin. 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 19 hotels owned as of September 30, 2014 were acquired at various times during 2013, the key operating metrics reflect the pro forma operating results of five of those hotels for the nine months ended September 30, 2013.

In addition to assessing the operating performance of its 19-hotel portfolio for the three and nine months ended September 30, 2014, management also assesses the operating performance of a 16-hotel portfolio, which excludes the W Chicago - Lakeshore, the Hotel New Orleans Downtown (formerly the W New Orleans), and the Hyatt Herald Square New York (formerly the Holiday Inn New York City Midtown - 31st Street), as these hotels have undergone or are undergoing comprehensive renovations during 2014. Included in the following table are comparisons of the key operating metrics for the 16-hotel portfolio and the 19-hotel portfolio for the three and nine months ended September 30, 2014 and 2013 (in thousands, except for ADR and RevPAR):

           
Three months ended Nine months ended
September 30, September 30,
2014       2013       Change 2014       2013(1)       Change

16-Hotel Portfolio(2)

Occupancy 88.8 % 87.2 % 160 bps 85.1 % 82.7 % 240 bps
ADR $ 230.18 $ 210.51 9.3% $ 210.65 $ 197.27 6.8%
RevPAR $ 204.51 $ 183.58 11.4% $ 179.27 $ 163.21 9.8%
 
Adjusted Hotel EBITDA $ 42,406 $ 36,845 15.1% $ 103,510 $ 88,297 17.2%
Adjusted Hotel EBITDA Margin 37.7 % 36.1 % 160 bps 34.1 % 31.8 % 230 bps
 

19-Hotel Portfolio

Occupancy 83.8 % 85.2 % (140) bps 81.0 % 81.2 % (20) bps
ADR $ 226.65 $ 207.65 9.2% $ 208.93 $ 197.29 5.9%
RevPAR $ 189.94 $ 176.99 7.3% $ 169.31 $ 160.20 5.7%
 
Adjusted Hotel EBITDA $ 46,490 $ 42,097 10.4% $ 114,190 $ 103,179 10.7%
Adjusted Hotel EBITDA Margin 36.0 % 34.9 % 110 bps 32.7 % 31.1 % 160 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 New York (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.

DISPOSITION

On September 30, 2014, the Trust sold the 153-room Courtyard Anaheim at Disneyland Resort located in Anaheim, California for $32.5 million, including sold working capital, which resulted in a gain on sale of $7.0 million. The Courtyard Anaheim at Disneyland Resort was one of the Trust’s earliest investments, acquired in July 2010 for $25.0 million. The $32.5 million sale price represented a 7.1% trailing twelve month NOI cap rate and produced a 13.3% unleveraged internal rate of return for the Trust over its ownership period. In conjunction with the sale of the Courtyard Anaheim at Disneyland Resort, the Trust executed a 1031 exchange with the acquisition of the JW Marriott San Francisco Union Square on October 1, 2014.

ACQUISITION

On October 1, 2014, the Trust acquired the 337-room JW Marriott San Francisco Union Square located in San Francisco, California for $154.2 million, including an acquired FF&E reserve and working capital. The Trust assumed the existing management agreement with Marriott International, Inc., as well as the existing ground lease covering the property, which expires in January 2083.

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 Midtown31st Street to reposition the hotel as the Hyatt Herald Square New York, which commenced in the third quarter of 2014, was completed early in the fourth quarter of 2014 with a total expected cost of approximately $6.5 million.

FINANCING ACTIVITY

On July 3, 2014, the Trust completed the refinancing of its $60.0 million term loan secured by the Hyatt Herald Square New York (formerly the Holiday Inn New York City Midtown31st 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.

CAPITAL MARKETS ACTIVITY

On September 9, 2014, the Trust completed an underwritten public offering of 4,830,000 common shares, including 630,000 shares sold pursuant to the underwriters’ exercise of their option to purchase additional shares. The Trust generated net proceeds of $143.9 million after deducting offering costs.

The Trust has not sold any common shares under its continuous at-the-market (ATM) program during 2014 and through the date of this release.

DIVIDENDS

On July 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 June 30, 2014. On September 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 September 30, 2014. Both dividends were paid on October 15, 2014.

2014 OUTLOOK

The Trust is updating its 2014 outlook to incorporate its third quarter results, recent operating trends and fundamentals, the sale of the Courtyard Anaheim at Disneyland Resort, the acquisition of the JW Marriott San Francisco Union Square, and the recent common share offering. The updated outlook assumes no additional acquisitions, dispositions, or financing transactions (in millions, except RevPAR and per share amounts):

     

Fourth Quarter 2014

Outlook
Low       High

CONSOLIDATED:

 
Net income available to common shareholders $ 5.5 $ 7.0
Net income per diluted common share $ 0.10 $ 0.13
 
Adjusted Corporate EBITDA $ 33.8 $ 35.3
 
AFFO available to common shareholders $ 23.7 $ 25.2
AFFO per diluted common share $ 0.44 $ 0.47
 
Corporate general and administrative expense $ 3.7 $ 3.8
 
Weighted-average number of diluted common shares outstanding 54.0 54.0
 
HOTEL PORTFOLIO:
 

17-Hotel Portfolio(1)

RevPAR $ 170.00 $ 173.00
Pro forma RevPAR increase over 2013(2) 6.0 % 8.0 %
Adjusted Hotel EBITDA $ 32.2 $ 33.6
Adjusted Hotel EBITDA Margin 30.8 % 31.6 %
Pro forma Adjusted Hotel EBITDA Margin increase over 2013(2) 50 bps 125 bps
 

20-Hotel Portfolio

RevPAR $ 166.00 $ 169.00
Pro forma RevPAR increase over 2013(2) 5.0 % 7.0 %
Adjusted Hotel EBITDA $ 37.4 $ 39.1
Adjusted Hotel EBITDA Margin 30.8 % 31.5 %
Pro forma Adjusted Hotel EBITDA Margin increase over 2013(2) 40 bps 115 bps
 
_____________
(1)   Excludes the W Chicago – Lakeshore, the Hotel New Orleans Downtown (formerly the W New Orleans), and the Hyatt Herald Square New York (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.
 
           

Full Year 2014

Updated Outlook Previous Outlook
Low       High Low       High
CONSOLIDATED:
 
Net income available to common shareholders $ 50.0 $ 51.4 $ 40.6 $ 44.5
Net income per diluted common share $ 0.99 $ 1.02 $ 0.83 $ 0.91
 
Adjusted Corporate EBITDA $ 138.5 $ 140.1 $ 134.0 $ 138.2
 
AFFO available to common shareholders $ 100.1 $ 101.5 $ 95.3 $ 99.3
AFFO per diluted common share $ 1.98 $ 2.01 $ 1.95 $ 2.03
 
Corporate general and administrative expense $ 15.2 $ 15.3 $ 14.8 $ 15.3
 
Weighted-average number of diluted common shares outstanding 50.6 50.6 49.0 49.0
 
HOTEL PORTFOLIO(1):
 

17-Hotel Portfolio(2)

RevPAR $ 181.00 $ 182.00 $ 169.00 $ 172.00
Pro forma RevPAR increase over 2013(3) 9.0 % 9.5 % 6.5 % 8.0 %
Adjusted Hotel EBITDA $ 143.6 $ 145.1 $ 131.9 $ 135.6
Adjusted Hotel EBITDA Margin 32.7 % 32.9 % 33.1 % 33.6 %
Pro forma Adjusted Hotel EBITDA Margin increase over 2013(3) 175 bps 195 bps 140 bps 190 bps
 

20-Hotel Portfolio

RevPAR $ 173.00 $ 174.00 $ 163.00 $ 166.00
Pro forma RevPAR increase over 2013(3) 6.0 % 6.5 % 4.0 % 6.0 %
Adjusted Hotel EBITDA $ 159.6 $ 161.3 $ 148.8 $ 153.5
Adjusted Hotel EBITDA Margin 31.8 % 32.0 % 32.1 % 32.5 %
Pro forma Adjusted Hotel EBITDA Margin increase over 2013(3) 120 bps 140 bps 90 bps 140 bps
 
___________
(1)   Updated outlook excludes the Courtyard Anaheim at Disneyland Resort, which was sold on September 30, 2014, and includes the JW Marriott San Francisco Union Square, which was acquired on October 1, 2014. Previous outlook included the Courtyard Anaheim at Disneyland Resort and did not include the JW Marriott San Francisco Union Square.
(2) Excludes the W Chicago – Lakeshore, the Hotel New Orleans Downtown (formerly the W New Orleans), and the Hyatt Herald Square New York (formerly the Holiday Inn New York City Midtown – 31st Street), as these hotels have undergone or are undergoing comprehensive renovations during 2014.
(3) 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 EBITDAHotel 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 MarginAdjusted 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, and gains (losses) from sales of real estate, which is a non-recurring item. 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 of depreciable real estate, 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, November 3, 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 15295377. 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 November 10, 2014. To access the replay, dial (855) 859-2056 (U.S./Canadian callers) or (404) 537-3406 (International callers). The conference call ID is 15295377. 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 6,116 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 November 3, 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)
 
 
 
September 30, 2014 December 31, 2013
(unaudited)
ASSETS
Property and equipment, net $ 1,427,673 $ 1,422,439
Intangible assets, net 37,137 38,781
Cash and cash equivalents 180,495 28,713
Restricted cash 40,035 34,235
Accounts receivable, net 21,900 13,011
Prepaid expenses and other assets 52,413 10,478
Deferred financing costs, net 6,531   6,501  
Total assets $ 1,766,184   $ 1,554,158  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Long-term debt $ 589,287 $ 531,771
Accounts payable and accrued expenses 51,200 45,982
Other liabilities 32,897   29,848  
Total liabilities 673,384   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; 54,878,586 shares and 49,574,005 shares issued and outstanding, respectively

549 496
Additional paid-in capital 1,139,179 991,417
Cumulative dividends in excess of net income (46,978 ) (45,339 )
Accumulated other comprehensive loss   (67 )
Total shareholders’ equity 1,092,800   946,557  
Total liabilities and shareholders’ equity $ 1,766,184   $ 1,554,158  
 
 
SUPPLEMENTAL CREDIT INFORMATION:
Fixed charge coverage ratio(1) 2.61 2.67
Leverage ratio(1) 33.3 % 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 September 30, Nine Months Ended September 30,
2014       2013 2014       2013
REVENUE
Rooms $ 102,473 $ 95,547 $ 271,430 $ 234,037
Food and beverage 22,883 21,955 69,214 62,180
Other 5,484   4,941   13,835   12,397  
Total revenue 130,840   122,443   354,479   308,614  
 
EXPENSES
Hotel operating expenses:
Rooms 21,985 20,861 61,930 54,047
Food and beverage 17,860 17,558 52,800 47,292
Other direct 2,234 2,333 6,013 6,040
Indirect 42,641   38,780   118,423   100,485  
Total hotel operating expenses 84,720 79,532 239,166 207,864
Depreciation and amortization 12,466 12,335 37,488 32,012
Air rights contract amortization 130 130 390 390
Corporate general and administrative 3,694 2,936 11,505 9,921
Hotel acquisition costs 60   59   60   4,195  
Total operating expenses 101,070   94,992   288,609   254,382  
 
Operating income 29,770 27,451 65,870 54,232
 
Interest income 8 4 8 247
Interest expense (6,963 ) (7,199 ) (20,477 ) (18,986 )
Gain on sale of hotel 7,006 7,006
Loss on early extinguishment of debt   (372 )   (372 )
 
Income before income taxes 29,821 19,884 52,407 35,121
 
Income tax expense (1,133 ) (641 ) (292 ) (1,331 )
 
Net income 28,688 19,243 52,115 33,790
 
Preferred share dividends (2,422 ) (2,422 ) (7,266 ) (7,266 )
Net income available to common shareholders $ 26,266   $ 16,821   $ 44,849   $ 26,524  
 
Net income per common share:
Basic $ 0.52 $ 0.35 $ 0.90 $ 0.56
Diluted $ 0.52 $ 0.35 $ 0.89 $ 0.56
 

Weighted-average number of common shares outstanding:

Basic 50,141,513 47,885,696 49,364,637 46,759,598
Diluted 50,567,849 47,885,696 49,758,044 46,759,598
 
 
CHESAPEAKE LODGING TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
     
 
 
Nine Months Ended September 30,
2014       2013
Cash flows from operating activities:
Net income $ 52,115 $ 33,790

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

Depreciation and amortization 37,488 32,012
Air rights contract amortization 390 390
Deferred financing costs amortization 1,950 2,102
Gain on sale of hotel (7,006 )
Loss on early extinguishment of debt 372
Share-based compensation 4,311 3,458
Other 771 (155 )
Changes in assets and liabilities:
Accounts receivable, net (8,958 ) (9,628 )
Prepaid expenses and other assets 26 (1,194 )
Accounts payable and accrued expenses 4,629 10,467
Other liabilities (22 ) 782  
Net cash provided by operating activities 85,694   72,396  
 
Cash flows from investing activities:
Acquisition of hotels, net of cash acquired (331,058 )
Disposition of hotel, net of cash sold 31,933
Deposit on hotel acquisition (42,142 )
Receipt of deposit on hotel acquisition 700
Improvements and additions to hotels (67,500 ) (19,510 )
Repayment of hotel construction loan 7,810
Change in restricted cash (5,680 ) (8,066 )
Net cash used in investing activities (83,389 ) (350,124 )
 
Cash flows from financing activities:
Proceeds from sale of common shares, net of underwriting fees 144,320 169,855
Payment of offering costs related to sale of common shares (378 ) (406 )
Borrowings under revolving credit facility 85,000 105,000
Repayments under revolving credit facility (50,000 ) (125,000 )
Proceeds from issuance of mortgage debt 90,000 312,500
Principal prepayment on mortgage debt (130,000 )
Scheduled principal payments on mortgage debt (67,326 ) (3,321 )
Payment of deferred financing costs (1,980 ) (3,075 )
Payment of dividends to common shareholders (42,455 ) (31,899 )
Payment of dividends to preferred shareholders (7,266 ) (7,266 )
Repurchase of common shares (438 ) (1,098 )
Net cash provided by financing activities 149,477   285,290  
Net increase in cash 151,782 7,562
Cash and cash equivalents, beginning of period 28,713   33,194  
Cash and cash equivalents, end of period $ 180,495   $ 40,756  
 
 

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 16-hotel portfolio and the 19-hotel portfolio for the three and nine months ended September 30, 2014 and 2013:
 
      Three Months Ended September 30,       Nine Months Ended September 30,
2014       2013 2014       2013(1)

16-Hotel Portfolio(2)

Total revenue $ 112,624 $ 102,185 $ 303,399 $ 277,645
Less: Total hotel operating expenses 71,336   65,265   200,855   189,122  
Hotel EBITDA 41,288 36,920 102,544 88,523
 
Add: Non-cash amortization(3) 1,118   (75 ) 966   (226 )
Adjusted Hotel EBITDA $ 42,406   $ 36,845   $ 103,510   $ 88,297  
 
Adjusted Hotel EBITDA Margin 37.7 % 36.1 % 34.1 % 31.8 %
 

19-Hotel Portfolio

Total revenue $ 129,038 $ 120,705 $ 349,313 $ 331,758
Less: Total hotel operating expenses 83,666   78,533   236,089   228,353  
Hotel EBITDA 45,372 42,172 113,224 103,405
 
Add: Non-cash amortization(3) 1,118   (75 ) 966   (226 )
Adjusted Hotel EBITDA $ 46,490   $ 42,097   $ 114,190   $ 103,179  
 
Adjusted Hotel EBITDA Margin 36.0 % 34.9 % 32.7 % 31.1 %
 
_____________
(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 New York (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 nine months ended September 30, 2014 and 2013:
 
           
Three Months Ended September 30, Nine Months Ended September 30,
2014       2013 2014       2013
Total revenue $ 130,840 $ 122,443 $ 354,479 $ 308,614
Less: Total hotel operating expenses 84,720   79,532   239,166   207,864  
Hotel EBITDA 46,120 42,911 115,313 100,750
 
Add: Non-cash amortization(1) 1,119   (74 ) 970   (222 )
Adjusted Hotel EBITDA $ 47,239   $ 42,837   $ 116,283   $ 100,528  
 
_____________
(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 nine months ended September 30, 2014 and 2013:
           
Three Months Ended September 30, Nine Months Ended September 30,
2014         2013   2014         2013  
Net income $ 28,688 $ 19,243 $ 52,115 $ 33,790

Add:

Depreciation and amortization

12,466 12,335 37,488 32,012
Interest expense 6,963 7,199 20,477 18,986
Loss on early extinguishment of debt 372 372
Income tax expense 1,133 641 292 1,331

Less:

Interest income

(8 ) (4 ) (8 ) (247 )
Corporate EBITDA 49,242 39,786 110,364 86,244
 

Add:

Hotel acquisition costs

60 59 60 4,195
Non-cash amortization(1) 1,248 55 1,359 167

Less:

Gain on sale of hotel

(7,006 )   (7,006 )  
Adjusted Corporate EBITDA $ 43,544   $ 39,900   $ 104,777   $ 90,606  
 
____________

(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 nine months ended September 30, 2014 and 2013:
           
Three Months Ended September 30, Nine Months Ended September 30,
2014         2013   2014         2013  
Net income $ 28,688 $ 19,243 $ 52,115 $ 33,790

Add:

Depreciation and amortization

12,466 12,335 37,488 32,012

Less:

Gain on sale of hotel

(7,006 )   (7,006 )  
FFO 34,148 31,578 82,597 65,802
 

Less:

Preferred share dividends

(2,422 ) (2,422 ) (7,266 ) (7,266 )
Dividends declared on unvested time-based awards (128 ) (98 ) (385 ) (276 )
Undistributed earnings allocated to unvested time-based awards (84 ) (33 )    
FFO available to common shareholders 31,514 29,025 74,946 58,260
 

Add:

Hotel acquisition costs

60 59 60 4,195
Non-cash amortization(1) 1,248   55   1,359   167  
AFFO available to common shareholders $ 32,822   $ 29,139   $ 76,365   $ 62,622  
 
FFO per common share:
Basic $ 0.63 $ 0.61 $ 1.52 $ 1.25
Diluted $ 0.62 $ 0.61 $ 1.51 $ 1.25
 
AFFO per common share:
Basic $ 0.65 $ 0.61 $ 1.55 $ 1.34
Diluted $ 0.65 $ 0.61 $ 1.53 $ 1.34
 
____________

(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 December 31, 2014:
     
Three Months Ending December 31, 2014
17-Hotel Portfolio(1)       20-Hotel Portfolio
Low       High Low       High
Total revenue $ 104,350 $ 106,470 $ 121,600 $ 124,100
Less: Total hotel operating expenses 72,120   72,790   84,120   84,920  
Hotel EBITDA 32,230 33,680 37,480 39,180
 
Less: Non-cash amortization(2) (80 ) (80 ) (80 ) (80 )
Adjusted Hotel EBITDA $ 32,150   $ 33,600   $ 37,400   $ 39,100  
_____________
(1)   Excludes the W Chicago – Lakeshore, the Hotel New Orleans Downtown (formerly the W New Orleans), and the Hyatt Herald Square New York (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 December 31, 2014:
     
Three Months Ending December 31, 2014
Low       High
Net income $ 8,040 $ 9,490

Add:

Depreciation and amortization

14,340 14,340
Interest expense 6,880 6,880

Income tax expense

610 710

Less:

Interest income

 
Corporate EBITDA 29,870 31,420
 

Add:

Hotel acquisition costs

3,830 3,830
Non-cash amortization(1) 50   50
Adjusted Corporate EBITDA $ 33,750   $ 35,300
_____________
(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 December 31, 2014:
     
Three Months Ending December 31, 2014
Low       High
Net income $ 8,040 $ 9,490

Add:

Depreciation and amortization

14,340   14,340  
FFO 22,380 23,830
 

Less:

Preferred share dividends

(2,420 ) (2,420 )
Dividends declared on unvested time-based awards (120 ) (120 )
Undistributed earnings allocated to unvested time-based awards    
FFO available to common shareholders 19,840 21,290
 

Add:

Hotel acquisition costs

3,830 3,830

Non-cash amortization(1)

50   50  
AFFO available to common shareholders $ 23,720   $ 25,170  
 
FFO per common share:
Basic $ 0.37 $ 0.40
Diluted $ 0.37 $ 0.39
 
AFFO per common share:
Basic $ 0.44 $ 0.47
Diluted $ 0.44 $ 0.47
 
Weighted-average number of common shares outstanding:
Basic 53,825 53,825
Diluted 54,000 54,000
_____________
(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 $ 439,000 $ 441,100 $ 502,100 $ 504,700

Less:

Total hotel operating expenses

296,260   296,910   343,430   344,330
Hotel EBITDA 142,740 144,190 158,670 160,370
 

Add:

Non-cash amortization(2)

890   890   890   890
Adjusted Hotel EBITDA $ 143,630   $ 145,080   $ 159,560   $ 161,260
_____________
(1)   Excludes the W Chicago – Lakeshore, the Hotel New Orleans Downtown (formerly the W New Orleans), and the Hyatt Herald Square New York (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 $ 60,160 $ 61,610

Add:

Depreciation and amortization

51,830 51,830
Interest expense 27,360 27,360
Income tax expense 900 1,000

Less:

Interest income

(10 ) (10 )
Corporate EBITDA 140,240 141,790
 

Add:

Hotel acquisition costs

3,890 3,890
Non-cash amortization(1) 1,410 1,410

Less:

Gain on sale of hotel

(7,010 ) (7,010 )
Adjusted Corporate EBITDA $ 138,530   $ 140,080  
____________
(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 $ 60,160 $ 61,610

Add:

Depreciation and amortization

51,830 51,830

Less:

Gain on sale of hotel

(7,010 ) (7,010 )
FFO 104,980 106,430

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 94,790 96,240
 

Add:

Hotel acquisition costs

3,890 3,890
Non-cash amortization(1) 1,410   1,410  
AFFO available to common shareholders $ 100,090   $ 101,540  
 
FFO per common share:
Basic $ 1.88 $ 1.91
Diluted $ 1.87 $ 1.90
 
AFFO per common share:
Basic $ 1.98 $ 2.01
Diluted $ 1.98 $ 2.01
 
Weighted-average number of common shares outstanding:
Basic 50,490 50,490
Diluted 50,620 50,620
____________
(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 Boston Marriott Newton Newton, MA 430 July 30, 2010
4 Le Meridien San Francisco San Francisco, CA 360 December 15, 2010
5 Homewood Suites Seattle Convention Center Seattle, WA 195 May 2, 2011
6 W Chicago – City Center Chicago, IL 403 May 10, 2011
7 Hotel Indigo San Diego Gaslamp Quarter San Diego, CA 210 June 17, 2011
8 Courtyard Washington Capitol Hill/Navy Yard Washington, DC 204 June 30, 2011
9 Hotel Adagio San Francisco, Autograph Collection San Francisco, CA 171 July 8, 2011
10 Denver Marriott City Center Denver, CO 613 October 3, 2011
11 Hyatt Herald Square New York (formerly the Holiday Inn New York City Midtown – 31st Street) New York, NY 122 December 22, 2011
12 W Chicago – Lakeshore Chicago, IL 520 August 21, 2012
13 Hyatt Regency Mission Bay Spa and Marina San Diego, CA 429 September 7, 2012
14 The Hotel Minneapolis, Autograph Collection Minneapolis, MN 222 October 30, 2012
15 Hyatt Place New York Midtown South New York, NY 185 March 14, 2013
16 W New Orleans – French Quarter New Orleans, LA 97 March 28, 2013
17 Hotel New Orleans Downtown (formerly the W New Orleans) New Orleans, LA

410

April 25, 2013
18 Hyatt Fisherman’s Wharf San Francisco, CA 313 May 31, 2013
19 Hyatt Santa Barbara Santa Barbara, CA 200 June 27, 2013
20 JW Marriott San Francisco Union Square San Francisco, CA 337 October 1, 2014
6,116

Source: Chesapeake Lodging Trust

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

 

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Chesapeake Lodging Trust has combined with Park Hotels & Resorts

In May 2019, Chesapeake announced that it was being acquired by Park Hotels & Resorts Inc. The transaction closed on September 18, 2019.

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