Chesapeake Lodging Trust (NYSE:CHSP), a lodging real estate investment
trust (REIT), provided today its 2015 outlook. The Trust’s 2015 outlook
is as follows (in millions, except RevPAR and per share amounts):
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2015 Outlook
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Low
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High
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CONSOLIDATED:
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Net income available to common shareholders
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$
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62.9
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$
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68.2
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Net income per diluted common share
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$
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1.16
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$
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1.25
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Adjusted Corporate EBITDA
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$
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158.0
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$
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163.8
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AFFO available to common shareholders
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$
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119.9
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$
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125.2
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AFFO per diluted common share
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$
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2.20
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$
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2.30
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Corporate cash general and administrative expense
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$
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9.4
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$
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10.2
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Corporate non-cash general and administrative expense
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$
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7.6
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$
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7.6
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Weighted-average number of diluted common shares outstanding
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54.5
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54.5
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HOTEL PORTFOLIO:
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RevPAR
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$
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186.00
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$
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189.00
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Pro forma RevPAR increase over 2014(1)
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7.5
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%
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9.5
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%
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Adjusted Hotel EBITDA
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$
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175.0
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$
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181.5
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Adjusted Hotel EBITDA Margin
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32.5
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%
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33.0
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%
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Pro forma Adjusted Hotel EBITDA Margin increase over 2014(1)
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75 bps
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125 bps
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_____________
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(1)
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The comparable 2014 period includes results of operations for one
hotel prior to its acquisition by the Trust.
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“We expect 2015 to be another strong year for Chesapeake as we benefit
from favorable lodging fundamentals in our key markets and outsized
growth at our hotels that were undergoing major renovations last year,”
said James L. Francis, Chesapeake Lodging Trust’s President and Chief
Executive Officer. “We expect our hotel portfolio will meaningfully
exceed the U.S. hotel industry RevPAR growth rate, despite the negative
impact of guestroom renovations at several of our larger hotels which
will have an impact on RevPAR growth and Adjusted Hotel EBITDA margin
growth in the first quarter.” Mr. Francis continued, “Given our
expectations for another strong year in 2015, we are also pleased to
report that we are increasing our quarterly common share dividend for
the first quarter by 17% to $0.35 per common share.”
The Trust’s 2015 outlook assumes a continuation of favorable U.S.
lodging fundamentals driven by below historical average supply growth
and healthy demand growth resulting from continued improvement in the
U.S. economy and consumer confidence, continued strength in corporate
and leisure transient business, improving group business, and continued
strength of international travel. The Trust’s 2015 outlook assumes no
additional acquisitions, dispositions, or financing transactions.
The Trust’s 2015 outlook contemplates the expected revenue and Hotel
EBITDA displacement from guestroom renovations taking place during the
first quarter at the 502-room Hyatt Regency Boston, the 360-room Le
Meridien San Francisco and the 313-room Hyatt Fisherman’s Wharf. The
Trust estimates that the negative impact on RevPAR growth for the first
quarter and full year 2015 will be approximately 650 basis points and
150 basis points, respectively, and the negative impact on Adjusted
Hotel EBITDA Margin growth for the first quarter and full year 2015 will
be approximately 200 basis points and 25 basis points, respectively,
resulting in Hotel EBITDA displacement of approximately $3.25 million
for the first quarter and full year 2015.
The Trust’s 2015 outlook also includes a 17% increase in estimated real
estate tax expense as a result of actual and expected real estate
reassessments at certain of its hotels for 2015. The Trust estimates
that the negative impact on Adjusted Hotel EBITDA Margin growth for 2015
will be approximately 70 basis points.
COMMON SHARE DIVIDEND INCREASE
The Trust also announced today that its board of trustees has declared a
dividend payment of $0.35 per common share for the first quarter 2015,
an increase of 17% over the fourth quarter dividend. The dividend will
be paid on April 15, 2015 to shareholders of record at the close of
business on March 31, 2015. The dividend represents a 3.6% annualized
yield based on the closing price of the Trust’s common shares on January
23, 2015.
FOURTH QUARTER 2014 EARNINGS UPDATE
The Trust is also providing an update today on its financial results for
the quarter and year ended December 31, 2014. For its 17-hotel
portfolio, the Trust expects fourth quarter and full year 2014 RevPAR to
increase 7.5% and 9.5%, respectively, and fourth quarter and full year
2014 Adjusted Hotel EBITDA to be between the middle and high end of the
guidance ranges previously provided. For its 20-hotel portfolio, the
Trust expects fourth quarter and full year 2014 RevPAR to increase 4.9%
and 5.9%, respectively, and fourth quarter and full year 2014 Adjusted
Hotel EBITDA to be slightly below the guidance range previously
provided. The Trust expects fourth quarter 2014 AFFO per share to be at
the low end of the guidance range previously provided and full year 2014
AFFO per share to be slightly below the guidance range previously
provided. The preliminary results are subject to adjustments that may
result from the completion of the Trust’s annual audit process. The
Trust intends to release final financial results for the fourth quarter
and full year 2014 after the market closes on February 19, 2015.
“Overall, we are pleased with our hotel portfolio’s performance during
the fourth quarter. Our 17-hotel portfolio had another solid quarter
generating strong top-line and bottom-line results,” said Mr. Francis.
“Our 20-hotel portfolio RevPAR and Adjusted Hotel EBITDA were slightly
below our guidance ranges predominantly due to slower than expected ramp
at the Hyatt Herald Square New York which re-opened for business in
October. In addition, our per share metrics for the fourth quarter and
full year 2014 were negatively impacted from a higher than expected
diluted share count as a result of our relative total shareholder return
exceeding our expectations which required us to include additional
unvested performance-based awards in our diluted share count."
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, 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.
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 forward-looking statements include, but are not limited
to, the preliminary expected financial results for the three months and
year ended December 31, 2014, and the Trust’s expectations regarding the
future Hotel EBITDA and Adjusted Hotel EBITDA of its existing hotels and
the Trust’s 2015 outlook. 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 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 January 26, 2015, 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.
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CHESAPEAKE LODGING TRUST
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
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(in thousands, except per share data)
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(unaudited)
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The following table calculates forecasted Hotel EBITDA and Adjusted
Hotel EBITDA for the year ending December 31, 2015:
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Year Ending December 31, 2015
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Low
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High
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Total revenue
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$
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537,800
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$
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549,300
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Less: Total hotel operating expenses
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362,480
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367,480
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Hotel EBITDA
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175,320
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181,820
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Add: Non-cash amortization(1)
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(320
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)
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(320
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)
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Adjusted Hotel EBITDA
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$
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175,000
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$
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181,500
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_____________
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(1)
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Includes non-cash amortization of ground lease asset, deferred
franchise costs, deferred key money, and unfavorable contract
liability.
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The following table reconciles forecasted net income to Corporate EBITDA
and Adjusted Corporate EBITDA for the year ending December 31, 2015:
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Year Ending December 31, 2015
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Low
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High
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Net income
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$
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73,140
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$
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78,390
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Add: Depreciation and amortization
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56,810
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56,810
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Interest expense
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27,100
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27,100
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Income tax expense
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750
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1,250
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Less: Interest income
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—
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—
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Corporate EBITDA
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157,800
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163,550
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Add: Hotel acquisition costs
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—
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—
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Non-cash amortization(1)
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200
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200
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Adjusted Corporate EBITDA
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$
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158,000
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$
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163,750
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____________
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(1)
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Includes non-cash amortization of ground lease asset, deferred
franchise costs, deferred key money, unfavorable contract liability,
and air rights contract.
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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, 2015:
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Year Ending December 31, 2015
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Low
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High
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Net income
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$
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73,140
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$
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78,390
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Add: Depreciation and amortization
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56,810
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56,810
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FFO
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129,950
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135,200
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Less: Preferred share dividends
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(9,690
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)
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(9,690
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)
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Dividends declared on unvested time-based awards
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(530
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)
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(530
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)
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Undistributed earnings allocated to unvested time-based awards
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—
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—
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FFO available to common shareholders
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119,730
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124,980
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Add: Hotel acquisition costs
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—
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—
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Non-cash amortization(1)
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200
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|
200
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AFFO available to common shareholders
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$
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119,930
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$
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125,180
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FFO per common share:
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Basic
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$
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2.22
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$
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2.31
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Diluted
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$
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2.20
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|
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$
|
2.29
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AFFO per common share:
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Basic
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$
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2.22
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$
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2.32
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Diluted
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$
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2.20
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$
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2.30
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|
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Weighted-average number of common shares outstanding:
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Basic
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53,990
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53,990
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Diluted
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54,465
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54,465
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|
|
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____________
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(1)
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Includes non-cash amortization of ground lease asset, deferred
franchise costs, deferred key money, unfavorable contract liability,
and air rights contract.
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CHESAPEAKE LODGING TRUST
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CURRENT HOTEL PORTFOLIO
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Hotel
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Location
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Rooms
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Acquisition Date
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1
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Hyatt Regency Boston
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Boston, MA
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502
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March 18, 2010
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2
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|
Hilton Checkers Los Angeles
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|
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Los Angeles, CA
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193
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June 1, 2010
|
3
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Boston Marriott Newton
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|
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Newton, MA
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|
430
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July 30, 2010
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4
|
|
Le Meridien San Francisco
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|
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San Francisco, CA
|
|
360
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|
December 15, 2010
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5
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|
Homewood Suites Seattle Convention Center
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Seattle, WA
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|
195
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May 2, 2011
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6
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|
W Chicago – City Center
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Chicago, IL
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403
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|
May 10, 2011
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7
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|
Hotel Indigo San Diego Gaslamp Quarter
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|
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San Diego, CA
|
|
210
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|
June 17, 2011
|
8
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|
Courtyard Washington Capitol Hill/Navy Yard
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|
|
|
Washington, DC
|
|
204
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|
June 30, 2011
|
9
|
|
Hotel Adagio San Francisco, Autograph Collection
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|
|
|
San Francisco, CA
|
|
171
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|
July 8, 2011
|
10
|
|
Denver Marriott City Center
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|
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|
Denver, CO
|
|
613
|
|
October 3, 2011
|
11
|
|
Hyatt Herald Square New York
|
|
|
|
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
|
|
Le Meridien 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
|
|
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Copyright Business Wire 2015