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):
2015 Outlook Low High
CONSOLIDATED: Net income available to common
shareholders $ 62.9 $ 68.2 Net income per diluted common share $
1.16 $ 1.25 Adjusted Corporate EBITDA $ 158.0 $ 163.8
AFFO available to common shareholders $ 119.9 $ 125.2 AFFO per
diluted common share $ 2.20 $ 2.30 Corporate cash general
and administrative expense $ 9.4 $ 10.2 Corporate non-cash general
and administrative expense $ 7.6 $ 7.6 Weighted-average
number of diluted common shares outstanding 54.5 54.5
HOTEL PORTFOLIO: RevPAR $ 186.00 $ 189.00 Pro forma
RevPAR increase over 2014(1) 7.5 % 9.5 % Adjusted Hotel EBITDA $
175.0 $ 181.5 Adjusted Hotel EBITDA Margin 32.5 % 33.0 % Pro forma
Adjusted Hotel EBITDA Margin increase over 2014(1) 75 bps 125 bps
_____________
(1) The comparable 2014 period includes results of
operations for one hotel prior to its acquisition by the Trust.
“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.
CHESAPEAKE LODGING TRUST
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
(in thousands, except per share
data)
(unaudited)
The following table calculates forecasted Hotel EBITDA and
Adjusted Hotel EBITDA for the year ending December 31,
2015:
Year Ending December 31, 2015 Low High Total
revenue $ 537,800 $ 549,300 Less: Total hotel operating expenses
362,480 367,480 Hotel EBITDA 175,320 181,820
Add: Non-cash amortization(1) (320 ) (320 ) Adjusted Hotel EBITDA $
175,000 $ 181,500
_____________
(1) 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, 2015:
Year Ending December 31, 2015 Low High
Net income $ 73,140 $ 78,390 Add: Depreciation and amortization
56,810 56,810 Interest expense 27,100 27,100 Income tax expense 750
1,250 Less: Interest income — — Corporate EBITDA 157,800
163,550 Add: Hotel acquisition costs — — Non-cash
amortization(1) 200 200 Adjusted Corporate EBITDA $ 158,000
$ 163,750
____________
(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, 2015:
Year Ending December 31, 2015 Low High Net income $
73,140 $ 78,390 Add: Depreciation and amortization 56,810
56,810 FFO 129,950 135,200 Less: Preferred share
dividends (9,690 ) (9,690 ) Dividends declared on unvested
time-based awards (530 ) (530 ) Undistributed earnings allocated to
unvested time-based awards — — FFO available to
common shareholders 119,730 124,980 Add: Hotel acquisition
costs — — Non-cash amortization(1) 200 200 AFFO
available to common shareholders $ 119,930 $ 125,180
FFO per common share: Basic $ 2.22 $ 2.31 Diluted $ 2.20 $
2.29 AFFO per common share: Basic $ 2.22 $ 2.32 Diluted $
2.20 $ 2.30 Weighted-average number of common shares
outstanding: Basic 53,990 53,990 Diluted 54,465 54,465
____________
(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 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
Chesapeake Lodging TrustDouglas W. Vicari, 410-972-4142
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