COMPANY PRESENTATION April 2015

Transcription

1 COMPANY PRESENTATION April 2015

2 Chatham s Management Team Jeffrey Fisher (Chief Executive Officer and Chairman) Three decades maximizing shareholder value Chatham a top performing lodging REIT stock from 2012 through 2014 Cumulative dividends of more than $3 per share since April 2010 IPO (1) CEO has over $10 million personal cash investment in CLDT stock 2014 Sale of Chatham s 10.3% interest in Cerberus JV ~3.2x multiple of invested capital to CLDT shareholders (~$3 per share in value creation) 2007 Sale of Innkeepers (CEO: ) 318% return to Innkeepers shareholders vs. 209% for FTSE NAREIT Equity Lodging / Resorts Index (2) Dennis Craven (Chief Financial Officer and EVP) CFO of Chatham Lodging Trust since September years of lodging experience, including as CFO of Innkeepers from 2006 to 2010 Peter Willis (Chief Investment Officer and EVP) Over 20 years hotel acquisition experience, including at Innkeepers, The Kor Group and Chatham Lodging Trust Involved with over $3 billion total transactions in his career 1. Declaration of dividends are at Board of Trustees discretion. 2. Based on total return from September 23, 1994 (date of Innkeepers IPO) to June 29, 2007 (date of sale of Innkeepers). 1

3 Historical Performance & Acquisitions Chatham has generated total shareholder returns of 81% since its IPO in 2010 Total Return Performance Since IPO 8/29/14 - Acquired Hyatt Place Cherry Creek 1/21/15 - Acquired Residence Inn San Diego Downtown -Gaslamp Quarter $20.00 (0.0%) 7/2/10 - Acquired Hampton Inn Houston-Medical Center 4/23/10 - Acquired initial 6 hotels 8/3/10 - Acquired Residence Inn Holtsville NY 8/24/10 - Acquired Courtyard Altoona PA and Springhill Suites W ashington PA 10/5/10 - Acquired Residence Inn New Rochelle NY 9/23/10 - Acquired Residence Inn W hite Plains NY 10/27/11 - Closed 64-hotel Innkeepers JV with Cerberus Capital Management 12/27/12 - Acquired Hampton Inn Downtown W aterfront (Portland, ME) 2/5/13 - Acquired Courtyard Marriott Houston 7/14/11 - Acquired 5 hotel assets 6/17/13 - Acquired Downtown Pit tsburgh Hyatt Place 8/9/13 - Acquired Hampton Inn Exeter 9/26/13 - Acquired Hilton Garden Inn Denver Tech Center 10/31/13 - Acquired Residence Inn Bellevue 12/5/13 - Acquired Springhill Suites Savannah 5/9/14 - Announced recapitalization of INK portfolio with NorthStar (NYSE: NRF) 6/9/14 - Acquired Silicon Valley Residence Inn 4-Pack 9/18/14 - Announced NorthStar JV and acquistion of 4 Inland American assets $28.86 (+81.2%) 4/15/2010 7/15/ /15/2012 1/15/2014 4/17/2015 Source: FactSet and Company materials. Market data as of April 17,

4 Delivering Strong Returns to Shareholders Chatham has been a top performing Lodging REIT in the last twelve months Last Twelve Months Total Returns % change 70% 60% 50% INN: 51.6% CLDT: 45.8% 40% 30% 20% 10% PEB: 32.8% CHSP: 23.9% RLJ: 22.4% SHO: 21.4% LHO: 20.1% DRH: 18.5% HT: 15.0% 0% HST: 1.9% (10%) 4/17/2014 6/29/2014 9/10/ /22/2014 2/3/2015 4/17/2015 Chatham RLJ Hersha LaSalle Summit Pebblebrook DiamondRock Host Chesapeake Sunstone Note: Based on closing prices as of April 17, Total returns assume dividends are reinvested. 3

5 Company Overview & Business Update 4

6 Investment Highlights Leading High Quality Portfolio of 35 Premium-Branded, Upscale Extended Stay and Select Service Hotels Proactive Value-Driven Management Team Focused on Shareholder Returns Clear Business Strategy of Owning and Acquiring Select Service Hotels with Premium Brands in Attractive, High-Growth Markets Strategy / Operating Performance Driving Strong Growth in FFO Per Share Actively Managing Portfolio to Drive Future NAV Growth Positioned to Continue External Growth via Acquisitions and Internal Expansion of Silicon Valley Hotels 5

7 Chatham's Strategy Chatham s strategy is focused on owning and acquiring high quality select service hotels, with premium brands in attractive, high-growth markets Select Service Hotels Premium Brands Attractive Market Locations Higher margins (lower cost structure) than full service Higher growth lodging segment for consumers Higher market share than nonpremium branded hotels Higher RevPAR Strong customer loyalty High growth markets Technology Medical services High growth MSAs Opportunity to Drive RevPAR Growth and Higher Profit Flow-through 6

8 High Quality Hotels in High Quality Markets Coastal Preference: 74% of portfolio located on the West Coast (51%) and Northeast (23%) 2 nd highest exposure to West Coast markets of all U.S. lodging REITs Seattle (6%) Minnesota (1%) Portland, ME (2%) Exeter, NH (1%) Massachusetts (4%) Pennsylvania (5%) Connecticut (1%) New York (5%) Silicon Valley (27%) PLACE Denver (5%) PLACE Washington D.C. (5%) Los Angeles (4%) San Diego (14%) Dallas (3%) Nashville (1%) Savannah, GA (3%) Northeast (23%) Houston (9%) Orlando (1%) West Coast (51%) San Antonio (3%) Texas (15%) Note: Figures are rounded to the nearest whole percentage. MSA/State reflects % of total undepreciated cost basis as of December 31, Pro forma for the Residence Inn San Diego Downtown-Gaslamp Quarter acquisition completed on 2/26/

9 Delivering Strong RevPAR Growth Chatham s portfolio delivered strong RevPAR growth of 8.0% for the twelve month period ended December 31, 2014 RevPAR Growth 14.0% Year-Over-Year RevPAR Growth (Twelve months ended December 31, 2014) 12.0% 10.0% 11.6% 10.9% 10.2% 9.5% 9.4% 9.2% 8.8% 8.0% 8.0% 7.6% 7.4% 7.2% 6.8% 6.0% 5.7% 5.7% 4.0% 2.0% 0.0% DRH INN AHT CHSP PEB FCH LHO CLDT AHP BEE RLJ SHO HST HT Full-Service Lodging REITs Select-Service Lodging REITs Source: Company filings and earnings announcements. 8

10 Well-Positioned to Increase Room Rates High occupancy creates the opportunity to increase room rates (ADR), which drives higher profit flow-through / Hotel EBITDA growth (rate increases are primarily profit) Occupancy Rate (Twelve months ended December 31, 2014) (1) 90% 80% 85.0% 83.4% 82.9% 82.4% 82.0% 81.2% 78.7% 78.7% 77.0% 76.8% 76.0% 75.7% 75.4% 70% 60% 50% % Occupancy 85% 80% 75% 70% 65% 60% 55% 50% PEB CHSP HT SHO CLDT LHO DRH RLJ HST FCH AHT INN BEE Full-Service Lodging REITs Select-Service Lodging REITs Occupancy Rate Outperformance Source: Smith Travel Research, PKF and Company filings. 1. Assumes comparable occupancy where available. Such figures may therefore not be comparable. Chatham U.S. Lodging Industry U.S. Upscale Sector 9 CLDT Avg. 75% U.S. Upscale Avg. 68% U.S. Overall Avg. 61%

11 Market Leading Hotel EBITDA Margins Chatham s model produces attractive RevPAR growth (premium brands in attractive markets) with lower operating costs (select service hotels), which drives high EBITDA margins and flow-through Chatham s Hotel EBITDA margin for the twelve month period ended December 31, 2014 increased to 41.8% from 37.8% in the prior year Hotel EBITDA Margin (Twelve months ended December 31, 2014) 45% 41.8% 40% 35% 37.7% 35.6% 35.4% 33.3% 33.2% 32.9% 31.7% 31.6% 30.2% 30% 29.5% 26.7% 26.5% 25.1% 25% 20% 15% 10% 5% 0% CLDT HT RLJ INN AHP LHO CHSP PEB AHT SHO DRH FCH HST BEE Full-Service Lodging REITs Select-Service Lodging REITs Source: Company filings and earnings announcements. 10

12 Delivering Strong Shareholder Value Unique operating strategy has delivered strong Adjusted FFO / share growth 28% CAGR in Adjusted FFO/Share between 2011A and 2015E Chatham s Adjusted FFO / Share Growth (2011A 2015E) (1) Adjusted FFO / Share $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 $2.39 $1.91 $1.30 $1.49 $ E Lodging REITs Adjusted FFO / Share CAGR (2011A 2015E) (1) Growth 80% Full-Service Lodging REITs Select-Service Lodging REITs 60% 57% 40% 20% 41% 28% 25% 19% 15% 14% 13% 12% 11% 11% 10% 0% FCH BEE CLDT PEB CHSP LHO HST DRH RLJ INN HT SHO Source: Historical figures based on company filings estimates reflect the mid-point of guidance as reported and FactSet consensus as of 4/17/2015 where not available. 1. CLDT represents mid-point of guidance per 12/31/2014 earnings release. 11

13 Attractive Common Dividend Yield Strong free cash flows support an attractive dividend yield of 4.2% Cash Dividend Yield / 2015E Payout Ratio Annualized Dividend Yield 2015E FFO Payout Full-Service Lodging REITs Select-Service Lodging REITs 6.0% 120% 5.0% 4.0% 5.1% 4.4% 4.4% 4.2% 4.0% 3.9% 3.9% 3.6% 3.6% 96% 72% 3.0% 2.0% 1.0% 0.0% 45% 62% 49% 51% 54% 57% 52% 49% 43% 2.8% 51% 1.4% 19% 1.3% 1.2% (1) AHT CHSP HT CLDT LHO RLJ HST DRH INN PEB FCH AHP SHO BEE Source: Company fillings and FactSet. Note: Based on closing stock prices as of April 17, Declaration of dividends are at board s discretion. 2015E FFO based on mid-point of 2015 guidance as reported and FactSet consensus estimates as of 4/17/2015 where guidance is not available. 1. in January 2015, Chatham s Board of Directors approved a monthly dividend increase of 25% to a monthly rate of $0.10 per share, or an annual rate of $1.20 per share % 16% NA 48% 24% 0%

14 2015 Outlook 2015 Outlook Range U.S. Industry RevPAR $79 $80 $80 U.S. Industry RevPAR Growth 6.0% 7.0% 8.0% CLDT RevPAR $129 $130 $131 CLDT RevPAR Growth 5.5% 6.3% 7.0% Hotel EBITDA Margin 44.2% 44.6% 45.0% Hotel EBITDA Margin Increase 240 bps 280 bps 320 bps Adjusted EBITDA $126 $128 $131 Adjusted EBITDA Growth 49% 51% 55% Adjusted FFO Per Share $2.33 $2.39 $2.46 AFFO / Share Growth 22% 25% 29% Note: All dollars in millions except per share data. Figures may be rounded for illustrative purposes. 13

15 2015 Shareholder Meeting New Governance Resolutions 1. Declassification of the Board Beginning with the 2015 Annual Meeting of Shareholders, as each class s term expires, the elected successors to the board of trustees will serve until the next annual meeting; the transition to a declassified Board will be complete at the 2017 meeting 2. Opt Out of MUTA The Company will opt out of Section of the Maryland General Corporation Law 3. Adoption of a Clawback Policy Clawback policy will apply to incentive compensation received by current and former executive officers who are found to have engaged in fraud, intentional misconduct or illegal behavior 4. Adoption of an Anti-Pledging and Anti-Hedging Policy Prohibiting all officers and trustees from pledging or hedging the Company s securities 5. Amendment of Corporate Governance Guidelines a. Extension of Board Self-Evaluation Process to cover the performance of the Board as a whole, each of the three committees and each of the individual trustees b. Adoption of Trustee Share Ownership Guidelines, whereby each non-management trustee must own shares equal to 3.0x his or her annual Board retainer c. Adoption of CEO Share Ownership Guidelines, whereby the CEO must own shares equal to 6.0x his annual base salary 14

16 Acquisitions & Investments 15

17 Successfully Expanding in Strategically Targeted Markets Since our September 2013 common stock offering, Chatham has announced or completed $745 million of hotel investments (1) Complementary acquisitions located in target high growth markets: Technology (Silicon Valley, Bellevue, Denver, Burlington); Medical (Houston); Oil & Gas (Dallas, Houston) Residence Inn Bellevue, WA (2) Rooms: 231 Investment: $72 million SpringHill Suites Savannah, GA (2) Rooms: 160 Investment: $40 million Hyatt Place Denver / Cherry Creek (4) Rooms: 194 Investment: $32 million Inland 4-Pack Acquisition (4) Rooms: 575 Investment: $107 million Residence Inn San Diego Downtown-Gaslamp District (5) Rooms: 240 Investment: $90 million October April 2015 Hilton Garden Inn Denver Tech Center, CO (2) Rooms: 180 Investment: $28 million Innkeepers JV (3) Rooms: 6,847 CLDT Inv. (10.3% of JV) $22 million 1. Pro Forma for the acquisition of the San Diego Downtown-Gaslamp completed on February 26, Please refer to the Company's Form 10-K filed March 10, 2014 for more information. 3. Please refer to the Company's Form 8-K filed June 10, 2014 for more information. 4. Please refer to the Company's Form 8-K filed November 18, 2014 for more information. 5. Please refer to the Company's press release from February 26, 2015 for more information. Residence Inn Silicon Valley 4-Pack (3) Rooms: 751 Investment: $326 million Inland JV (4) Rooms: 6,976 CLDT Inv. (10% of JV) $28 million 16

18 Residence Inn San Diego Downtown / Gaslamp Quarter On February 26, 2014, Chatham acquired the 240-room Residence Inn San Diego Downtown-Gaslamp Quarter for $90 million, or approximately $375,000 per key at an estimated 2015 capitalization rate of 7.6% Acquisition Overview The hotel represents Chatham s second San Diego-area hotel and aligns with Chatham s strategy to acquire in-fill, premium branded, select service hotels in markets with strong, growing demand San Diego overall market RevPAR up 9.4% for the year-ended December 2014 (1) 2014A RevPAR of $ (9.0% y-o-y growth) and 2014 Hotel EBITDA margin of 44% which should improve with the change in management of the hotel to Island Hospitality Opened in November 2009 and located in the heart of San Diego s downtown Gaslamp district within two blocks of the San Diego Convention Center, home field of the San Diego Padres - Petco Park, as well as shopping, restaurants and nightclubs Pacific Hwy Seaport Village Core Columbia Santa Fe Depot (Union Station) G St Market St C St Broadway Northblock Lofts Gaslamp Quarter 7th Ave Westfield Horton Plaza 10th St Park Blvd G St Market St East Village The 12-story property features street-level retail space with two leased restaurants and a three level, 123-space structured parking garage located beneath the hotel that caters to the pedestrian traffic of the popular Gaslamp Quarter Embarcadero Marina Park North San Diego Convention Center Petco Park Sources: Smith Travel Research, and Company information. 1. San Diego market data as per Smith Travel Research dated December

19 Silicon Valley Residence Inn Portfolio ( SV 4-Pack ) Market Overview Four Residence Inn hotels (751 rooms) South San Francisco 580 Hayward Mountain View (112 rooms), San Mateo (160 rooms), Silicon Valley I (231 rooms) and II (248 rooms) San Mateo San Mateo 280 Redwood City Palo Alto 880 Fremont SV II A RevPAR of $166 and 2014A Hotel EBITDA margin of 57% New 20 year franchise agreements upon redevelopment (1) One of the fastest growing employment markets Low risk of new supply given high cost of real estate and development Limited new developments of upscale extended stay hotels constructed in region over past 10 years 20 prime acres of land across the 4 properties provide substantial expansion opportunity Mountain View SV I Sunnyvale San Jose Adobe Systems Notable Silicon Valley Companies Intel Apple Inc. Cisco Systems LinkedIn Netflix 85 ebay Oracle Corporation Electronic Arts Salesforce.com Facebook Twitter Google Source: HVS, Smith Travel Research and Wall Street research. Note: Please refer to the Company s Current Reports on Form 8-K filed on May 14, 2014, May 28, 2014 and June 10, Conditional upon redevelopment; 15 year agreement if properties are not redeveloped. Yahoo! 18

20 Upside Opportunity in SV 4-Pack Acquisition Opportunity Potential to expand room base (at all 4 hotels) by total of 272 rooms (36%) from 751 rooms to 1,023 rooms Silicon Valley I (+79 rooms) and II (+114 rooms), Mountain View (+36 rooms), San Mateo (+43 rooms) Minimal disruption at each property Approximately 20 acre footprint across the four properties provides expansion space that meets city density and parking requirements Mountain View (3.2 acres), San Mateo (4.3 acres), Silicon Valley I (5.8 acres) and II (6.1 acres) Each redevelopment and expansion is expected to take approximately 12 months once construction starts Expected completion in Q (Mountain View) and Q (San Mateo, SV I and II) Opportunity for additional future expansion SV 4-Pack Expansion Opportunity Assumptions Room Expansion 272 Room Expansion (%) +36% Expansion Investment $59 MM % Increase +17% Per Key ~$215,000 Incremental Est. EBITDA $12 13 M (1) % return on invested capital ~21% (1) Chatham believes future the room expansion of of the the Silicon Valley 4-Pack will will generate significant incremental value for shareholders 1. Based on Company projected 2016E stabilized SV 4-Pack EBITDA. 19

21 Financial Update 20

22 Q Business Update Portfolio RevPAR Increased hotel RevPAR 6.5 percent y-o-y to $112 for Chatham s 34 wholly owned hotels. Excluding the Maitland, FL, hotel which had significant rooms out of service due to the unexpected replacement of its copper water supply lines, RevPAR increased 7.5 percent (1) Adjusted EBITDA Rose 68 percent y-o-y to $21.4 million Adjusted FFO Climbed 68 percent y-o-y to $12.7 million. Adjusted FFO per diluted share rose 28 percent to $0.37 from $0.29. Adjusted FFO per share was adversely impacted approximately $0.01 due to the delay in closing the Inland transactions in late November and $0.01 related to the displacement in Maitland, FL. Operating Margins Enhanced hotel EBITDA margins 370 basis points to an industry-leading 39.7 percent Investment & Financing Activity Invested $107 million to acquire four hotels comprising 575 rooms, plus an additional $28 million into a joint venture between Chatham and NorthStar Realty Finance Corp. (NYSE: NRF) which acquired a 48-hotel, 6,401-room portfolio of upscale, extended-stay and premiumbranded, select-service hotels for a cash purchase price of approximately $1.0 billion from Inland American Real Estate Trust, Inc. In February 2015 (post fourth quarter 2014 earnings release), Chatham acquired the 240-suite Residence Inn San Diego Downtown- Gaslamp District for $90.0 million Monthly Dividend Chatham s board of trustees approved in January 2015 a dividend increase of 25% from an annualized rate of $0.96 per share to $1.20 per share, or a monthly rate of $0.10 per share (2) The annualized dividend represents a dividend yield of 4.1%, one of the highest in the hotel industry, based on the Company s common share closing price of $29.46 on April 1, 2015 Common Equity Offering In January 2015, the Company completed a follow-on common share offering that resulted in the sale of 4,025,000 common shares (including the exercise of the underwriters option to purchase additional shares) at $30.00 per share, resulting in net proceeds of $119.0 million to the Company Mortgage Loan Financing During Q4 2014, the Company closed on three mortgage loans totalling $54.5 million. Proceeds were used to pay down borrowings under the Company s senior secured revolving credit facility Note: All figures for the three month period ended December 31, 2014, unless indicated otherwise. 1. Excludes results of the San Diego Gaslamp Residence Inn, which was acquired on February 26, Future declaration of dividends are at Board of Trustees discretion. 21

23 Summary Capitalization Chatham s capital structure is well positioned with long-term, fixed rate debt Pro Forma Capitalization (1) 12/31/2014 Offering / Acq. 12/31/2014 ($ in millions) As Reported Adj. (1) Pro Forma Share Price (as of 04/17/2015) $28.86 $28.86 Common Shares Market Capitalization $1,105.3 $1,105.3 Revolving Credit Facility 22.5 (22.5) - Mortgage Debt Total Consolidated Debt $550.2 $527.7 Less: Unrestricted Cash (15.1) (6.0) (21.1) Net Debt $535.1 $506.6 Enterprise Value $1,640.4 $1,611.9 Highlights (1) Weighted average cost of total debt is 4.7% 100% of debt outstanding is fixed rate Currently no borrowings under Senior Secured Revolving Credit Facility Weighted average debt maturity of approximately 9 years Only 2.1% of mortgage debt maturing through 2019 Attractive Debt Maturity Schedule (1) ($ in millions) $375 $300 $322 $225 $150 $75 $0 % of Total: $161 $5 $6 $15 $ % 1.2% --% --% --% --% 2.8% --% 30.6% 61.1% 3.5% Sources: Company filings and announcements. Note: Common shares as of March 16, K filling which reflect the Company s January 27, 2015 equity offering. Debt maturity schedule represents principal balances only and excludes amortization. Revolver maturity excludes the one year extension option available to the Company. 1. Assumes $119.0mm of net proceeds from Chatham s January 27, 2015 equity offering used to finance the San Diego Gaslamp Residence Inn acquisition and paydown borrowings on the Company s Senior Secured Revolving Credit Facility. 22

24 Safe Harbor Disclosure We make forward-looking statements in this presentation that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, cash flow and plans and objectives. When we use the words believe, expect, anticipate, estimate, plan, continue, intend, should, may or similar expressions, we intend to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: the size, pricing and net proceeds of this offering, market trends in our industry, interest rates, real estate values, the debt financing markets or the general economy or the demand for commercial real estate loans; our business and investment strategy; our projected operating results; actions and initiatives of the U.S. government and changes to U.S. government policies and the execution and impact of these actions, initiatives and policies; the state of the U.S. economy generally or in specific geographic regions; economic trends and economic recoveries; our ability to obtain and maintain financing arrangements; changes in the value of our hotel portfolio; the degree to which our hedging strategies may or may not protect us from interest rate volatility; impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters; our ability to satisfy the REIT qualification requirements for U.S. federal income tax purposes; availability of qualified personnel; estimates relating to our ability to make distributions to our shareholders in the future; general volatility of the capital markets and the market price of our common shares; and degree and nature of our competition. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Included in this presentation are certain non-gaap financial measures, within the meaning of Securities and Exchange Commission (SEC) rules and regulations, that are different from measures calculated and presented in accordance with GAAP (generally accepted accounting principles). The company considers the following non-gaap financial measures useful to investors as key supplemental measures of its operating performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) Adjusted EBITDA and (5) Hotel EBITDA. These non-gaap financial measures could be considered along with, but not as alternatives to, net income or loss, cash flows from operations or any other measures of the company s operating performance prescribed by GAAP. 23