Chatham Lodging Trust: 10-Q Summary (Period Ended June 30, 2010)
Business Context and Reporting Period
Chatham Lodging Trust (the "Company") is a Maryland real estate investment trust (REIT) formed in October 2009. The Company completed its initial public offering (IPO) on April 21, 2010, raising gross proceeds of $172.5 million. This filing covers the quarterly period ended June 30, 2010, representing the Company's first quarter of operations following the IPO. As of the reporting date, the Company owned six Homewood Suites by Hilton hotels with 813 rooms, acquired on April 23, 2010, for $73.5 million.
Key Financial Metrics
| Metric | Value (in thousands) |
|---|---|
| Total Revenues | $4,658 |
| Net Loss | $(642) |
| Funds From Operations (FFO) | $(245) |
| Adjusted FFO | $760 |
| EBITDA | $31 |
| Adjusted EBITDA | $1,036 |
| Cash and Cash Equivalents | $98,700 |
| Total Assets | $175,755 |
| Total Liabilities | $7,320 |
| Shareholders' Equity | $168,286 |
Note: Financial results reflect operations for only 69 days (April 23 to June 30, 2010) post-acquisition.
Material Changes vs. Prior Period
The Company had no operating assets or revenues prior to the IPO on April 21, 2010. Consequently, there are no comparable operating results for the prior period. The balance sheet reflects a transition from a shell company with $24,000 in cash to an operating entity with $175.8 million in total assets, driven primarily by the acquisition of six hotel properties and the capital raised through the IPO and a concurrent private placement.
Guidance, Outlook, and Risks
- Acquisition Strategy: The Company intends to deploy remaining IPO proceeds to acquire additional hotels. Subsequent to June 30, 2010, the Company acquired or signed agreements for six additional hotels, including properties in Houston, New York, and Pennsylvania.
- Liquidity: As of June 30, 2010, the Company held $98.7 million in cash. It has signed a non-binding letter of intent for an $85 million senior secured credit facility to fund future acquisitions and improvements.
- Deferred Fees: The Company has accrued $5.2 million in underwriting fees payable once it invests at least 85% of net IPO proceeds in hotel properties.
- Risks: Key risks include the global economic downturn, the ability to obtain financing on satisfactory terms, and the success of the acquisition strategy. The Company is subject to REIT qualification requirements, including distributing at least 90% of taxable income.
Investor Verification Checklist
- Investment Deployment: Verify the timeline for investing the remaining $98.7 million cash balance to trigger the payment of the $5.2 million deferred underwriting fee.
- Subsequent Acquisitions: Confirm the closing status of the four hotels signed for acquisition in May 2010 (White Plains, Houston, Altoona, Washington) and the New Rochelle property, noting lender approval contingencies.
- Debt Capacity: Monitor the finalization of the $85 million credit facility and the Company's leverage policy (limiting debt to 35% of property cost).
- Operating Metrics: Track RevPAR, ADR, and Occupancy rates for the initial six hotels as they move beyond the initial 69-day partial quarter.
- Related Party Transactions: Review the management agreements with Island Hospitality Management, Inc. (owned by the CEO) for future properties.