Chatham Lodging Trust, a lodging real estate investment trust (REIT) that invests in upscale, extended-stay hotels and premium-branded, select-service hotels, posted increases in most categories in the second quarter of 2021.
“During the pandemic, we actively managed our way through the worst era in the history of the hotel industry, had significantly less cash burn than most of our peers and took a number of steps to improve our liquidity profile and solidify our financial position,” said Jeffrey H. Fisher, president/CEO, Chatham Lodging Trust. “Our cash burn before capital of $35 million from April 2020 through March 2021 is expected to be more than fully replenished with approximately $25 million of proceeds from the issuance of common shares during 2021 together with the $4 million of cash flow before CapEx generated in the 2021 second quarter and expected cash flow before CapEx in the 2021 third quarter. The $70 million of proceeds from the sales of the Residence Inn Mission Valley and our stake in the INK JV will be fully reinvested into our Home2 Warner Center development. We also repaid a $13 million mortgage maturing in 2021 and now have no debt maturities until 2023. Finally, in June, we completed our first perpetual preferred share offering, raising $116 million.”
Second Quarter 2021 Operating Results
- Portfolio RevPAR—Increased 170% to $87, compared to the 2020 second quarter. ADR rose 32% to $127, and occupancy jumped 105% to 68% for the 39 comparable hotels owned as of June 30. All Chatham hotels remained open throughout the pandemic.
- Net loss—Lessened $18.5 million to a net loss of $8.7 million from a net loss of $27.2 million in the 2020 second quarter. Net loss per diluted share was $0.18 versus net loss per diluted share of $0.57 for the same period last year.
- GOP margin—Generated GOP margins of 43% compared to 30% in the 2021 first quarter, 25% in the 2020 fourth quarter and 19% in the 2020 second quarter.
- Adjusted EBITDA—Produced positive adjusted EBITDA for the fourth consecutive quarter, generating adjusted EBITDA of $12.5 million in the 2021 second quarter, compared to $1.2 million in the 2021 first quarter, $0.2 million in the 2020 fourth quarter and an adjusted EBITDA loss of $3.3 million in the 2020 second quarter.
- Adjusted FFO—Jumped $17.3 million to $4.9 million compared to the 2020 second quarter, the first quarter since the beginning of the pandemic to generate positive adjusted FFO. Adjusted FFO per diluted share was $0.10, compared to an FFO loss of $0.26 in the 2020 second quarter.
- Cash flow/Burn before capital expenditures—Generated second quarter 2021 cash flow before capital expenditures of $4.0 million, an improvement of $11.6 million from first quarter cash burn of $7.6 million. This also compares to cash burn of $9.5 million in the 2020 fourth quarter, burn of $5.1 million in the 2020 third quarter and burn of $12.8 million in the 2020 second quarter. Cash flow/burn includes $2.2 million of principal amortization per quarter.
- Taps capital markets for first preferred issuance, under contract to acquire two hotels—Raised net proceeds of approximately $116 million through the issuance of 6.625% Series A Preferred Shares. Chatham will use a portion of the proceeds to acquire two high-quality, premium-branded, extended-stay hotels in Austin, TX, for $71 million.
“The actions we have taken have enabled us to emerge from the pandemic with a stronger balance sheet and more liquidity than we had going into the pandemic,” Fisher said. “We have the flexibility to go on offense and make acquisitions or other hotel investments. In fact, with proceeds from our recently completed preferred offering, we will acquire two hotels in the thriving market of Austin, TX. Additionally, we will open our extended-stay Home2 Suites in Los Angeles in the fourth quarter. All three hotels will increase further our exposure to high-quality, premium-branded, extended-stay hotels, grow our FFO per share and increase our net asset value.”
He added, “All of our top markets produced significant gains in the second quarter, with the strongest growth coming from our three Coastal Northeastern hotels in Maine and New Hampshire that experienced strong leisure demand. Dallas, Houston and Silicon Valley showed much better growth in the second quarter as business, government and healthcare-related travel picked up, which is encouraging. In Los Angeles, we saw the transition from primarily healthcare-related demand to leisure demand with Disneyland now open. Lastly, our Greater New York market, comprised of three Residence Inns, has produced stable results since the outset of the pandemic as it has been able to draw guests from a diverse set of demand generators, and this summer is benefitting from the uptick in leisure travel.”
Approximately 69% of Chatham’s hotel EBITDA over the last 12 months was generated from its Residence Inn and Homewood Suites hotels. Chatham has the highest concentration of extended-stay rooms of any public lodging REIT at 58%.