Chatham Lodging Trust Q2 FY2025 earnings call

• Asset sales: Completed sale of 5 hotels in Q4 2024, with an average age of 25 years, 6% capitalization rate on 2024 NOI levels, and proceeds of $83 million. 2 additional hotels are listed for sale. - Share buyback: Board approved a $25 million share buyback plan in May; repurchased approximately 20,000 shares at a weighted average price of $7.02 during the quarter and intend to be more active in Q3. - Balance sheet: Leverage reduced to 21%, projected $20 million of free cash flow in 2025 after dividends. Plan to launch an upsized and recast syndication of credit facility and term loan in Q3. - Operational results: Q2 RevPAR and FFO per share were at the top of guidance range. Occupancy 82% matched last year's Q2 and was a post-pandemic high. ADR and RevPAR hit all-time highs in May. GOP margins were driven higher for the third consecutive quarter. - CapEx: Spent approximately $9 million in Q2; added 8 rooms to the portfolio by converting spaces, with renovations at Residence Inn Austin and Residence Inn Mountain View planned for Q4.

Silicon Valley: 4 hotels had RevPAR growth of 3%, and hotel EBITDA increased 3% to almost $5 million. April was soft due to holidays, but May and June saw RevPAR improvements. Home2 Phoenix: Opened early 2024, acquired in late May 2024, RevPAR was up over 60% in the quarter. L.A.: RevPAR was up 1% in the quarter; the Woodland Hills Hotel was affected by California wildfires. Residence Inn Anaheim was up 6%, Marina del Rey Hilton Garden Inn was up 3%, and Home2 Woodland Hills was down 5%. Leisure hotels: 6 predominantly leisure hotels account for about 20% of EBITDA, with RevPAR surging 4% when excluding the Portsmouth Hilton Garden Inn under renovation. Top RevPAR hotels in the quarter included Residence Inn Washington, D.C. (RevPAR $239), Gaslamp Residence Inn, Hilton Garden Inn Marina del Rey, Residence Inn White Plains, New York, and Hampton Portland (all with RevPAR over $200).

• Q3 2025: Expect RevPAR of minus 1.5% to plus 0.5%, adjusted EBITDA of $24.7 million to $26.8 million, and adjusted FFO of $0.29 to $0.33 per share. - Full-year 2025: Project RevPAR growth of flat to plus 1%, adjusted EBITDA of $89 million to $93 million, and adjusted FFO per share of $0.95 to $1.03 per share. Guidance assumes no further asset sales, capital markets activity, or changes in floating interest rates.

• Market weakness: Weakness in convention demand in Austin, Dallas, and San Diego; decline in travel from Canada and Europe impacting leisure demand. - Operational: Labor and benefits are the largest expense, and guest acquisition-related commission costs were up approximately 15% in the quarter, impacting margins by ~30 basis points.

Q: I wanted to go back to your comments around asset recycling. I think in the prepared remarks, you mentioned that you're looking to sell 2 more assets in addition to 5 that have been sold. For the 2 additional hotels that you're looking to sell, are they going to be similar, lower CapEx, lower RevPAR order hotels?

A: Gaurav, this is Dennis. I think in 1 of the 2 instances, yes, it's kind of one of the older lower RevPAR assets, another one is really just an opportunistic transaction we're looking at that I think would minimize some capital requirements here in the next few years. But we're certainly just in the early phases of that process and hope to have something to talk about a little bit more on our next earnings call.

Q: And then maybe in terms of deploying the capital, I think you mentioned development in Portland and then acquisitions. Can you maybe remind us the time line for development in the Portland? And then what kind of opportunities are you seeing in the acquisition market?

A: Yes. I'll start on the development side on the timing, then I'll let Jeff chime in on acquisitions. But generally speaking, it's going to be around the 21- to 24-month construction time line. We still have some work to do there with respect to just understanding soils and all that kind of good stuff. So ideally, we'd like to get started on that sometime within the next 6 months or so. But again, probably as we kind of get to the next call, we'll have a little more information on kick off and all that kind of stuff. Jeffrey H. Fisher: And relative to acquisitions, I think it continues to be the same story for most of us. We're always looking. We're always underwriting. We're always talking to owners that we've dealt with before and/or the brokerage community. I still think there's a pretty wide kind of bid-ask scenario going on. But I think over time, that gap should lessen. In the meantime, we've got our stock buyback program. And we certainly -- as we indicated earlier, probably going to ramp that up just a little bit more given the stock price today.