e8vkza
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 14, 2011
CHATHAM LODGING TRUST
(Exact name of Registrant as specified in its charter)
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Maryland
(State or Other Jurisdiction
of Incorporation or Organization)
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001-34693
(Commission File Number)
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27-1200777
(I.R.S. Employer Identification No.) |
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50 Cocoanut Row, Suite 216
Palm Beach, Florida
(Address of principal executive offices)
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33480
(Zip Code) |
(561) 802-4477
(Registrants telephone number, including area code)
Not Applicable
(Former name or former address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
This Form 8-K/A amends and supplements the registrants Form 8-K, as filed on July 18, 2011,
to include historical financial statements and unaudited pro forma financial information required
by Item 9.01 (a) and (b).
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Combined financial statements for the following hotels:
Residence Inn Anaheim in Garden Grove, CA
Residence Inn in Mission Valley, CA
Residence Inn in Tysons Corner, VA
Doubletree Guest Suites in Washington, D.C.
Homewood Suites in San Antonio, TX
Report of Independent Certified Public Accountants
Combined Balance Sheets as of June 30, 2011 (Unaudited) and December 31, 2010 and 2009
Combined Statements of Operations for the six-month periods ended June 30, 2011 and 2010
(Unaudited), and for the years ended December 31, 2010, 2009 and 2008
Combined Statements of Owners Equity for the six-month period ended June 30, 2011 (Unaudited),
and for the years ended December 31, 2010, 2009 and 2008.
Combined Statements of Cash Flows for the six-month periods ended June 30, 2011 and 2010
(Unaudited), and for the years ended December 31, 2010, 2009 and 2008
Notes to Combined Financial Statements
(b) Pro Forma Financial Information.
Chatham Lodging Trust
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2011
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended
June 30, 2011
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December
31, 2010
(c) Exhibits.
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Exhibit |
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Number |
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Description |
23.1
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Consent of PricewaterhouseCoopers LLP |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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CHATHAM LODGING TRUST
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Date: September 23, 2011 |
By: |
/s/ Dennis M. Craven
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Dennis M. Craven |
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Executive Vice President and
Chief Financial Officer |
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EXHIBIT INDEX
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Exhibit |
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Number |
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Description |
23.1
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Consent of PricewaterhouseCoopers LLP |
5 SISTERS HOTEL PORTFOLIO
(Debtor-in-Possession)
Unaudited Condensed Combined Financial Statements
June 30, 2011
5 Sisters Hotel Portfolio
(Debtor in Possession)
Condensed Combined Balance Sheets
(in thousands)
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|
|
|
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|
June 30, 2011 |
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December 31, 2010 |
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(unaudited) |
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ASSETS |
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|
|
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|
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|
Investment in hotel properties, net |
|
$ |
177,230 |
|
|
$ |
177,024 |
|
Cash and cash equivalents |
|
|
1,456 |
|
|
|
1,084 |
|
Restricted cash |
|
|
2,549 |
|
|
|
5,255 |
|
Hotel receivable, (net of allowance for doubtful accounts
of $26 and $24, respectively) |
|
|
675 |
|
|
|
548 |
|
Deferred costs, net |
|
|
424 |
|
|
|
560 |
|
Prepaid expenses and other assets |
|
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4 |
|
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|
539 |
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|
|
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Total assets |
|
$ |
182,338 |
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|
$ |
185,010 |
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|
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|
|
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|
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LIABILITIES AND OWNERS EQUITY |
|
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Debt |
|
$ |
6,400 |
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|
$ |
6,400 |
|
Accounts payable and accrued expenses |
|
|
2,604 |
|
|
|
2,878 |
|
Liabilities subject to compromise |
|
|
167,711 |
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|
164,085 |
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|
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Total liabilities |
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176,715 |
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173,363 |
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Owners Equity: |
|
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|
|
|
Owners equity |
|
|
5,623 |
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|
|
11,647 |
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Total owners equity |
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|
5,623 |
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|
11,647 |
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|
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Total liabilities and owners equity |
|
$ |
182,338 |
|
|
$ |
185,010 |
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|
|
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|
|
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|
The accompanying notes are an integral part of these condensed combined financial statements.
5 Sisters Hotel Portfolio
(Debtor in Possession)
Condensed Combined Statements of Operations (Unaudited)
(in thousands)
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For the Six |
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For the Six |
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Months Ended |
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Months Ended |
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June 30, 2011 |
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June 30, 2010 |
|
Revenue: |
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|
|
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|
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Hotel operating revenue: |
|
|
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|
|
|
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Room |
|
$ |
15,593 |
|
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$ |
15,810 |
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Other |
|
|
1,207 |
|
|
|
964 |
|
|
|
|
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|
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Total revenue |
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16,800 |
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16,774 |
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|
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Expenses: |
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|
|
|
|
|
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Hotel operating expenses: |
|
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|
|
|
|
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Room |
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|
3,204 |
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|
|
2,936 |
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Other |
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5,958 |
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5,646 |
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|
|
|
|
|
|
|
Total hotel operating expenses |
|
|
9,162 |
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|
8,582 |
|
Depreciation and amortization |
|
|
2,913 |
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2,973 |
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Property taxes and insurance |
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|
1,168 |
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|
1,465 |
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Total operating expenses |
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13,243 |
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|
13,020 |
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Operating income |
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3,557 |
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3,754 |
|
Interest expense,
including amortization
of deferred fees |
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|
(4,235 |
) |
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(5,000 |
) |
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Net loss |
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$ |
(678 |
) |
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$ |
(1,246 |
) |
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The accompanying notes are an integral part of these condensed combined financial statements.
5 Sisters Hotel Portfolio
(Debtor in Possession)
Condensed Combined Statements of Owners Equity (Unaudited)
For the Six Months Ended June 30, 2011
(in thousands)
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Owners Equity |
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Balance at December 31, 2010 |
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$ |
11,647 |
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Distributions |
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(5,346 |
) |
Net loss |
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(678 |
) |
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Balance at June 30, 2011 |
|
$ |
5,623 |
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The accompanying notes are an integral part of these condensed combined financial statements.
5 Sisters Hotel Portfolio
(Debtor in Possession)
Condensed Combined Statement of Cash Flows (Unaudited)
(In thousands)
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For the six months ended |
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June 30 |
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2011 |
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2010 |
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Cash flows from operating activities: |
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|
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Net loss |
|
$ |
(678 |
) |
|
$ |
(1,246 |
) |
Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |
|
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|
|
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Depreciation and amortization |
|
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2,913 |
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2,973 |
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Interest expense capitalized to debt |
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|
126 |
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Amortization of deferred loan issuance costs |
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128 |
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82 |
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Changes in assets and liabilities: |
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Hotel receivables |
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(127 |
) |
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|
(429 |
) |
Deferred costs |
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(6 |
) |
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Prepaid expenses and other assets |
|
|
535 |
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|
106 |
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Accounts payable and accrued expenses |
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|
3,352 |
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|
2,817 |
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Net cash provided by operating activities |
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|
6,117 |
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|
4,429 |
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|
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Cash flows from investing activities: |
|
|
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|
|
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|
Improvements and additions to hotel properties |
|
|
(3,105 |
) |
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(69 |
) |
Restricted cash |
|
|
2,706 |
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|
(315 |
) |
|
|
|
|
|
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Net cash used in investing activities |
|
|
(399 |
) |
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|
(384 |
) |
|
|
|
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Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Payments of debt |
|
|
|
|
|
|
(619 |
) |
Capital distributions |
|
|
(5,346 |
) |
|
|
(3,455 |
) |
|
|
|
|
|
|
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Net cash used in financing activities |
|
|
(5,346 |
) |
|
|
(4,074 |
) |
|
|
|
|
|
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Net change in cash and cash equivalents |
|
|
372 |
|
|
|
(29 |
) |
Cash and cash equivalents, beginning of period |
|
|
1,084 |
|
|
|
1,123 |
|
|
|
|
|
|
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Cash and cash equivalents, end of period |
|
$ |
1,456 |
|
|
$ |
1,094 |
|
|
|
|
|
|
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|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
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Cash paid for interest |
|
$ |
225 |
|
|
$ |
3,341 |
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Supplemental disclosure of non-cash information: |
|
|
|
|
|
|
|
|
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Accrued improvements and additions to hotel properties |
|
$ |
24 |
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$ |
4 |
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|
During 2011, the company transferred the following: |
|
|
|
|
|
|
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a) $257 from liabilities subject to compromise to accounts
payable and accrued expenses. |
|
|
|
|
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|
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b) $3,883 of accrued interest to liabilities subject to compromise. |
|
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The accompanying notes are an integral part of these condensed combined financial statements.
5 Sisters Hotel Portfolio
(Debtor in Possession)
Notes to Condensed Combined Financial Statements (Unaudited)
(1) General
The statements presented herein have been prepared in conformity with accounting
principles generally accepted in the United States of America and should be read in
conjunction with the audited balance sheet as of December 31, 2010, and the related
statements of operations, changes in owners equity, and cash flows for the year ended
December 31, 2010. The 5 Sisters Hotel Portfolio includes the Residence Inn Anaheim,
Residence Inn San Diego Mission Valley, Residence Inn Tysons Corner, Doubletree Guest Suites
Washington, D.C. and Homewood Suites on the Riverwalk San Antonio. In the opinion of
management, all adjustments that are deemed necessary have been made in order to fairly
present the unaudited interim financial statements for the period and accounting policies
have been consistently applied.
(2) Investment in Hotel Properties, net
Investment in hotel properties, net consists of the following at June 30, 2011 and
December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
December 31, 2010 |
|
Land |
|
$ |
27,444 |
|
|
$ |
27,444 |
|
Building and improvements |
|
|
162,086 |
|
|
|
161,328 |
|
Furniture, fixtures, and equipment |
|
|
7,953 |
|
|
|
7,725 |
|
|
|
|
|
|
|
|
Subtotal |
|
|
197,483 |
|
|
|
196,497 |
|
Less: accumulated depreciation |
|
|
(20,253 |
) |
|
|
(19,473 |
) |
|
|
|
|
|
|
|
Investment in hotel properties, net |
|
$ |
177,230 |
|
|
$ |
177,024 |
|
|
|
|
|
|
|
|
(3) Liabilities Subject to Compromise
As a result of the bankruptcy reorganization plan there are certain liabilities that
have been reclassed to Liabilities Subject to Compromise (LSTC) on the accompanying
Condensed Combined Balance Sheets. The following is a detailed list of these liabilities at
June 30, 2011 and December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
December 31, 2010 |
|
Debt |
|
$ |
158,191 |
|
|
$ |
158,191 |
|
Accrued Interest |
|
|
10,223 |
|
|
|
6,340 |
|
Real estate taxes payable |
|
|
|
|
|
|
194 |
|
LSTC Accounts Payable |
|
|
2,347 |
|
|
|
2,253 |
|
LSTC Adequate Protection Pay |
|
|
(3,050 |
) |
|
|
(2,893 |
) |
|
|
|
|
|
|
|
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Total |
|
$ |
167,711 |
|
|
$ |
164,085 |
|
|
|
|
|
|
|
|
LSTC Accounts Payable represents pre petition liabilities to general creditors.
LSTC Adequate Protection Pay represents payments that have been advanced to the lenders
as part of the bankruptcy proceedings.
(4) Interest Expense
The Company filed for bankruptcy on July 19, 2010. As a result of the bankruptcy
reorganization there was no additional interest recognized on the debt related to Residence
Inn Anaheim, Garden Grove, CA after the bankruptcy filing date. The additional contractual
interest for 2011 would have been $1,119.
5 SISTERS HOTEL PORTFOLIO
(Debtor-in-Possession)
Combined Financial Statements
For the Years Ended December 31, 2010, 2009 and 2008
Report of Independent Certified Public Accountants
To the Shareholders of Chatham Lodging Trust
In our opinion, the accompanying combined balance sheets and the related combined statements of
operations, of owners equity and of cash flows present fairly, in all material respects, the
financial position of 5 Sisters Hotel Portfolio (Debtor in Possession) (the Company) at
December 31, 2010 and 2009 and the results of its operations and its cash flows for the years ended
December 31, 2010, 2009 and, 2008 in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
September 23, 2011
5 Sisters Hotel Portfolio
(Debtor in Possession)
Combined Balance Sheets
(in thousands)
|
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|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
December 31, 2009 |
|
ASSETS |
|
|
|
|
|
|
|
|
Investment in hotel properties, net |
|
$ |
177,024 |
|
|
$ |
183,891 |
|
Cash and cash equivalents |
|
|
1,084 |
|
|
|
1,123 |
|
Restricted cash |
|
|
5,255 |
|
|
|
815 |
|
Hotel receivable, (net of allowance for doubtful accounts
of $24 and $20, respectively) |
|
|
548 |
|
|
|
540 |
|
Deferred costs, net |
|
|
560 |
|
|
|
1,380 |
|
Prepaid expenses and other assets |
|
|
539 |
|
|
|
385 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
185,010 |
|
|
$ |
188,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND OWNERS EQUITY |
|
|
|
|
|
|
|
|
Debt |
|
$ |
6,400 |
|
|
$ |
158,049 |
|
Accounts payable and accrued expenses |
|
|
2,878 |
|
|
|
3,248 |
|
Liabilities subject to compromise |
|
|
164,085 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
173,363 |
|
|
|
161,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners Equity |
|
|
|
|
|
|
|
|
Owners equity |
|
|
11,647 |
|
|
|
26,837 |
|
|
|
|
|
|
|
|
Total ownerss equity |
|
|
11,647 |
|
|
|
26,837 |
|
|
|
|
|
|
|
|
Total liabilities and owners equity |
|
$ |
185,010 |
|
|
$ |
188,134 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
5 Sisters Hotel Portfolio
(Debtor in Possession)
Combined Statements of Operations
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
December 31, 2010 |
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Room |
|
$ |
31,533 |
|
|
$ |
30,091 |
|
|
$ |
36,155 |
|
Other |
|
|
2,016 |
|
|
|
1,972 |
|
|
|
2,511 |
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
33,549 |
|
|
|
32,063 |
|
|
|
38,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Hotel operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Room |
|
|
6,108 |
|
|
|
5,345 |
|
|
|
6,197 |
|
Other |
|
|
11,533 |
|
|
|
10,854 |
|
|
|
11,994 |
|
|
|
|
|
|
|
|
|
|
|
Total hotel operating expenses |
|
|
17,641 |
|
|
|
16,199 |
|
|
|
18,191 |
|
Depreciation and amortization |
|
|
5,941 |
|
|
|
5,424 |
|
|
|
6,104 |
|
Property taxes and insurance |
|
|
2,694 |
|
|
|
2,746 |
|
|
|
2,643 |
|
Impairment charges |
|
|
3,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
29,624 |
|
|
|
24,369 |
|
|
|
26,938 |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
3,925 |
|
|
|
7,694 |
|
|
|
11,728 |
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
|
|
|
|
1 |
|
|
|
3 |
|
Interest expense,
including amortization
of deferred fees |
|
|
(10,749 |
) |
|
|
(10,162 |
) |
|
|
(10,160 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(6,824 |
) |
|
$ |
(2,467 |
) |
|
$ |
1,571 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
5 Sisters Hotel Portfolio
(Debtor in Possession)
Combined Statements of Owners Equity
For the years ended December 31,2010, 2009 and 2008
(in thousands)
|
|
|
|
|
|
|
Owners Equity |
|
Balance at January 1, 2008 |
|
$ |
32,980 |
|
Distributions |
|
|
(2,685 |
) |
Net income |
|
|
1,571 |
|
|
|
|
|
Balance at December 31, 2008 |
|
$ |
31,866 |
|
Distributions |
|
|
(2,562 |
) |
Net loss |
|
|
(2,467 |
) |
|
|
|
|
Balance at December 31, 2009 |
|
$ |
26,837 |
|
Distributions |
|
|
(8,366 |
) |
Net loss |
|
|
(6,824 |
) |
|
|
|
|
Balance at December 31, 2010 |
|
$ |
11,647 |
|
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
5 Sisters Hotel Portfolio
(Debtor in Possession)
Combined Statements of Cash Flows
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(6,824 |
) |
|
$ |
(2,467 |
) |
|
$ |
1,571 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
5,941 |
|
|
|
5,424 |
|
|
|
6,104 |
|
Interest expense capitalized to debt |
|
|
1,730 |
|
|
|
253 |
|
|
|
253 |
|
Amortization of deferred loan issuance costs |
|
|
161 |
|
|
|
165 |
|
|
|
142 |
|
Impairment charges on investment in hotels |
|
|
3,348 |
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Hotel receivables |
|
|
(8 |
) |
|
|
75 |
|
|
|
31 |
|
Deferred costs |
|
|
(79 |
) |
|
|
|
|
|
|
375 |
|
Prepaid expenses and other assets |
|
|
(154 |
) |
|
|
100 |
|
|
|
(90 |
) |
Accounts payable and accrued expenses |
|
|
5,138 |
|
|
|
(195 |
) |
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
9,253 |
|
|
|
3,355 |
|
|
|
8,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Improvements and additions to hotel properties |
|
|
(2,008 |
) |
|
|
(1,046 |
) |
|
|
(6,511 |
) |
Restricted cash |
|
|
(4,440 |
) |
|
|
29 |
|
|
|
397 |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(6,448 |
) |
|
|
(1,017 |
) |
|
|
(6,114 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of debt |
|
|
6,400 |
|
|
|
|
|
|
|
|
|
Payments of debt |
|
|
(619 |
) |
|
|
(221 |
) |
|
|
|
|
Payment of deferred financing fees |
|
|
(259 |
) |
|
|
|
|
|
|
|
|
Capital distributions |
|
|
(8,366 |
) |
|
|
(2,562 |
) |
|
|
(2,685 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(2,844 |
) |
|
|
(2,783 |
) |
|
|
(2,685 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
(39 |
) |
|
|
(445 |
) |
|
|
(219 |
) |
Cash and cash equivalents, beginning of period |
|
|
1,123 |
|
|
|
1,568 |
|
|
|
1,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
1,084 |
|
|
$ |
1,123 |
|
|
$ |
1,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
3,341 |
|
|
$ |
9,738 |
|
|
$ |
9,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash information: |
|
|
|
|
|
|
|
|
|
|
|
|
Accrued improvements and additions to hotel properites |
|
$ |
386 |
|
|
$ |
8 |
|
|
$ |
291 |
|
During 2010, the company transferred the following:
a) $2,421 from accounts payable and accrued expenses to liabilities subject to compromise.
b) $158,191 of debt to liabilities subject to compromise.
c) $3,473 of accrued interest to liabilities subject to compromise.
The accompanying notes are an integral part of these combined financial statements.
5 Sisters Hotel Portfolio
(Debtor in Possession)
Notes to Combined Financial Statements
(in thousands, except share data)
1. Business and Basis of Presentation
These financial statements represent the 5 hotels (collectively, the 5 Sisters Hotel
Portfolio or the Hotels) that were sold to affiliates of Chatham Lodging Trust as part of the
bankruptcy reorganization plan of affiliates of Innkeepers USA Trust (which we refer to herein as
Innkeepers or the Company). The reorganization plan was approved on June 24, 2011. All of the
hotels were acquired or developed by Innkeepers prior to January 1, 2008 and under Innkeepers
control for all periods presented. Following the filing for bankruptcy, under Chapter 11 on July
19, 2010, Innkeepers became a debtor in possession. This term refers to a debtor that will
retain ownership and control of its assets and continue to operate the business during the
bankruptcy proceedings.
As of December 31, 2010, the 5 Sisters Hotel Portfolio included 5 hotels with an aggregate of
764 rooms/suites (the Hotels). A series of indirect, wholly-owned taxable REIT subsidiaries (the
TRSs) lease the hotels from Innkeepers USA Limited Partnership (the Partnership). Island
Hospitality Management Inc. (the IH Manager) manages all of the hotels. The hotels are comprised
of three Residence Inn hotels, one Homewood Suites by Hilton hotel and one Doubletree Guest Suites
hotel. The hotels are located in 3 states and Washington, D.C., with two hotels located in
California, one in Virginia and one in Texas.
Innkeepers operates for federal income tax purposes as a real estate investment trust
(REIT). Generally a REIT does not incur tax liabilities assuming it complies with certain
provisions of the Internal Revenue Code, The 5 Sisters Hotel Portfolio is leased to wholly owned
TRSs of Innkeepers. The rent, which is eliminated in connection with the preparation of these
combined financial statements, has the effect of offsetting the majority of any taxable income
generated by the Hotels operating activities, or for certain hotels in certain periods, generating
taxable losses.
Debt balances and related interest expense are allocated based on consideration of the Hotels
as collateral for specific debt. The Hotels are expected to have a capital structure different
than Innkeepers post acquisition; accordingly, interest expense and amortization of loan issuance
costs is not necessarily indicative of the interest expense that the Hotels would have incurred as
a separate, independent company.
2. Summary of Significant Accounting Policies
Basis of Presentation. The combined financial statements have been prepared on the accrual
basis of accounting and in accordance with accounting principles generally accepted in the United
States of America. All inter-company accounts and transactions have been eliminated. These
financial statements are being presented on a combined basis as the 5 Sisters Hotel Portfolio and
the TRSs are under common management and control.
Use of estimates. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. Significant estimates
include the purchase price allocations, the allowance for doubtful accounts, fair value of hotels
that are held for sale or impaired, and future taxable income to assess the valuation allowance for
deferred taxes.
Investment in hotel properties. Hotel properties are recorded at cost and are depreciated
using the straight-line method over the estimated useful lives of the assets (1 to 5 years for
furniture and equipment and 20 to 40 years for buildings and improvements). Costs directly related
to the acquisition and development of hotels are capitalized. Property taxes and insurance, and
interest incurred, are also capitalized during the development period. Maintenance and repairs are
charged to operations as incurred.
5 Sisters Hotel Portfolio
(Debtor in Possession)
Notes to Combined Financial Statements
(in thousands, except share data)
The Company reviews its hotels for impairment on an annual basis or when events or changes in
business circumstances indicate that the value of the assets on its books may be impaired. If
circumstances support the possibility of
impairment, the Company prepares an analysis of the fair value of the hotel properties by
using the estimated cash flows excluding interest charges over the shorter of the estimated
remaining holding periods or the useful life of the hotel.
To calculate the estimated cash flows, the Company uses a combination of historical and
projected cash flows and other available market information, such as recent sales prices for
similar assets in specific markets. Management uses considerable subjective and complex judgments
in determining the assumptions used to estimate the fair value and undiscounted cash flows, and
believes these are assumptions that would be consistent with the assumptions of market
participants. The evaluation of anticipated cash flows is highly subjective and is based in part
on assumptions regarding future occupancy, average daily rates and capital requirements that could
differ materially from actual results in future periods. In addition, changes in market conditions
or other circumstances which affect the Companys intent or ability to hold and use a hotel
property may result in the recognition of an impairment loss and such loss could be material.
Cash and cash equivalents. All highly liquid cash investments with a maturity of three months
or less when purchased are considered to be cash equivalents. Cash equivalents are placed with
reputable institutions and the balances may at times exceed federally insured deposit levels;
however, the Company has not experienced any losses in such accounts.
Restricted cash reserves. Restricted cash reserves include amounts required to be held in
escrow by certain lenders for the payment of debt service, property taxes and insurance and
additional capital expenditures.
Post petition accounting. The Company is required to separate liabilities incurred between
pre petition and post petition bankruptcy filing for all periods subsequent to July 19, 2010. The
pre petition liabilities are segregated on the balance sheet under the title Liabilities Subject to
Compromise. These liabilities have the possibility of not being repaid at the full claim amount.
Accounts receivable. Accounts receivable consists of amounts owed by guests staying in the
hotels at December 31, 2010 and 2009 and amounts due from business customers or groups. The
allowance for doubtful accounts is maintained at a level believed to be adequate to absorb
estimated losses. Evaluation of the adequacy of the allowance is primarily based on past loss
experience, current economic conditions, and other relevant factors. The allowance for doubtful
accounts is $24 and $20 at December 31, 2010 and 2009, respectively.
Prepaids. Prepaids consist primarily of prepaid insurance and are expensed over the term of
the insurance contracts on a straight line basis.
Deferred and other. Deferred and other are recorded at cost and consist of the following at
December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Deferred loan costs |
|
$ |
259 |
|
|
$ |
1,466 |
|
Franchise fees |
|
|
390 |
|
|
|
390 |
|
Other |
|
|
80 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
729 |
|
|
|
1,856 |
|
Accumulated amortization |
|
|
(169 |
) |
|
|
(476 |
) |
|
|
|
|
|
|
|
|
|
$ |
560 |
|
|
$ |
1,380 |
|
|
|
|
|
|
|
|
Deferred loan costs are amortized using the interest method over the original terms of the
related indebtedness. Franchise fees represent cash paid to apply for and obtain franchise
licenses. Amortization of franchise fees is computed using the straight-line method over the life
of the franchise agreements. Deposits on acquisitions and pre-development costs are included in
deferred expenses until the respective hotel is acquired or opened. Costs for hotels ultimately not
acquired or development projects that do not occur are written off in the period such determination
is made. For the periods ended December 31, 2010, 2009 and 2008, the Company did not write off any
costs for cancelled projects. The Pre-petition debt at December 31, 2010 was reclassed from
deferred loan costs to liabilities subject to compromise. The 2010 deferred loan costs represent
the costs associated with the post petition debt.
5 Sisters Hotel Portfolio
(Debtor in Possession)
Notes to Combined Financial Statements
(in thousands, except share data)
Revenue recognition. Hotel operating revenue is recognized as earned on an accrual basis
consistent with the hotel operations. Other revenue is mainly comprised of guaranteed no-show,
meeting rooms, parking, in-room entertainment, and laundry. Additionally, the Company collects
sales, use, occupancy and similar taxes at our hotels which we present on a net
basis (excluded from revenues) on the statement of operations.
Fair value of financial instruments. The carrying amounts of cash and cash equivalents,
accounts receivable, accounts payable and accrued expenses approximate fair value due to the short
maturity of these instruments. In determining the current market interest rate, the Company adds
its estimate of a market spread to the quoted yields on federal government treasury securities with
maturities similar to its debt. See Note 4.
Interest Expense. The Company filed for bankruptcy on July 19, 2010. As a result of the
bankruptcy reorganization there was no additional interest recognized on the debt related to
Residence Inn Anaheim, Garden Grove, CA after the bankruptcy filing date. The additional
contractual interest for 2010 would have been $1,001.
3. Investment in Hotel Properties, net
Investment in hotel properties, net consists of the following at December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
December 31, 2009 |
|
Land |
|
$ |
27,444 |
|
|
$ |
27,444 |
|
Building and improvements |
|
|
161,328 |
|
|
|
162,305 |
|
Furniture, fixtures, and
equipment |
|
|
7,725 |
|
|
|
9,115 |
|
|
|
|
|
|
|
|
Subtotal |
|
|
196,497 |
|
|
|
198,864 |
|
Less: accumulated
depreciation |
|
|
(19,473 |
) |
|
|
(14,973 |
) |
|
|
|
|
|
|
|
Investment in hotel
properties, net |
|
$ |
177,024 |
|
|
$ |
183,891 |
|
|
|
|
|
|
|
|
5 Sisters Hotel Portfolio
(Debtor in Possession)
Notes to Combined Financial Statements
(in thousands, except share data)
4. Debt
Debt is comprised of the following at December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre Petition Debt |
|
Interest Rate |
|
|
Interest Rate |
|
|
Monthly Payment |
|
|
|
|
|
|
Collateralized by Hotels |
|
|
Principal Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/10 |
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Beginning |
|
|
Maturity |
|
|
# of Hotels |
|
|
Carrying Value |
|
|
2010 (4) |
|
|
2009 |
|
Fixed rate debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans |
|
|
6.03 |
|
|
|
6.03 |
|
|
|
451 |
|
|
|
11/2009 |
(1) |
|
|
09/2016 |
|
|
|
3 |
|
|
|
88,493 |
|
|
|
74,575 |
|
|
|
74,864 |
|
Mortgage loans |
|
|
5.98 |
|
|
|
5.98 |
|
|
|
508 |
|
|
|
12/2009 |
(1) |
|
|
11/2016 |
|
|
|
2 |
|
|
|
88,531 |
|
|
|
84,585 |
|
|
|
84,915 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
$ |
177,024 |
|
|
|
159,160 |
|
|
|
159,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage adjustment (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/2009 |
|
|
|
11/2016 |
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
(1,730 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
159,160 |
|
|
$ |
158,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Petition Debt |
|
Interest Rate |
|
|
Interest Rate |
|
|
Monthly Payment |
|
|
|
|
|
|
Collateralized by Hotels |
|
|
Principal Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/10 |
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Beginning |
|
|
Maturity |
|
|
# of Hotels |
|
|
Carrying Value |
|
|
2010 |
|
|
2009 |
|
Variable rate debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Five Mile Debtor in Possession |
|
|
7.00 |
|
|
|
0 |
% |
|
|
19 |
|
|
|
09/2010 |
(3) |
|
|
09/2011 |
|
|
|
2 |
|
|
$ |
76,711 |
|
|
$ |
6,400 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Interest only is due monthly until principal amortization begins at the date indicated in
the Beginning column. |
|
(2) |
|
Principal balance excludes $1,730 at December 31, 2009 comprised of a fair market value
adjustment on five mortgage
loans which are amortized over the term of the loans. The adjustment was reduced to zero when the
company filed for bankruptcy. |
|
(3) |
|
Interest only is due monthly until the principal becomes due on the maturity date as indicated. |
|
(4) |
|
Debt balance in 2010 comprised of pre petition debt reclassed to liabilities subject to
compromise. See Note 5. |
Future scheduled principal payments for the Companys debt at December 31, 2010 are as
follows:
|
|
|
|
|
Year |
|
Amount |
|
2011 |
|
$ |
8,513 |
|
2012 |
|
|
2,244 |
|
2013 |
|
|
2,382 |
|
2014 |
|
|
2,529 |
|
2015 |
|
|
2,685 |
|
Thereafter |
|
|
147,207 |
|
|
|
|
|
|
|
$ |
165,560 |
|
|
|
|
|
For purposes of disclosure, the Company presents the estimated fair value of its debt.
At December 31, 2010, the estimated fair value of the pre petition fixed rate debt was
approximately $134 million. The fair value of the debt was determined based on one or more of the
following factors: (i) interest rates and/or interest rate spreads for loans of
comparable quality and maturity, (ii) the value of the underlying collateral, (iii) the credit
risk of the borrower and (iv) discussions with existing lenders regarding pricing to obtain similar
borrowings. At December 31, 2010, the estimated fair value of the post petition debt was estimated
to approximate the carrying value given the recent origination of the post-petition debt and
discussions with existing lenders regarding pricing to obtain similar borrowings. Considerable
judgment is required in interpreting market data to develop the estimates of fair value and,
accordingly, the estimates are not necessarily indicative of the amounts that the Company could
realize in a market exchange.
5 Sisters Hotel Portfolio
(Debtor in Possession)
Notes to Combined Financial Statements
(in thousands, except share data)
5. Liabilities Subject to Compromise
As a result of the bankruptcy reorganization plan there are certain liabilities that have been
reclassed to Liabilities Subject to Compromise on the accompanying Combined Balance Sheets. The
following is a detailed list of these liabilities at December 31, 2010:
|
|
|
|
|
Debt |
|
$ |
158,191 |
|
Accrued Interest |
|
|
6,340 |
|
Real estate taxes payable |
|
|
194 |
|
LSTC Accounts Payable |
|
|
2,253 |
|
LSTC Adequate Protection Pay |
|
|
(2,893 |
) |
|
|
|
|
Total |
|
$ |
164,085 |
|
|
|
|
|
LSTC Accounts Payable represents pre petition liabilities to general creditors. LSTC
Adequate Protection Pay represents payments that have been advanced to the lenders as part of the
bankruptcy proceedings.
6. Commitments and Contingencies
The hotels are directly responsible under the franchise agreements. The Company has guaranteed
the TRSs obligations under their hotel franchise agreements with Marriott and Hilton, and the
Companys subsidiaries that own hotels subject to franchise agreements have effectively guaranteed
those franchise agreements.
The hotels are currently managed by Island Hospitality Management. The management agreements
expire on April 30, 2011 and will extend for successive 30 day periods unless either party provides
a 30 day written notice to terminate. Management fees were 2% of gross revenue until October 31,
2010 and could be increased to 2.5% of gross revenue. If certain financial thresholds are met or
exceeded, an incentive management fee equal to 30% of the hotels net operating income is also due
subject to a maximum incentive fee equal to 1% of gross revenue.
The Company is not presently a defendant to any other material litigation, nor, to its
knowledge, is any material litigation threatened against the Company or its properties, other than
routine litigation arising in the ordinary course of business and which is expected to pose no
material financial risk to the Company and/or is expected to be covered by insurance policies.
7. Impairment Charges
The Companys evaluation of the properties for impairment in 2010 using the usual methods as
described in Note 2, did not identify any impairments, however, in light of the pending sale and
the shortened holding period there were two properties that had a carrying value in excess of fair
value. The following table presents the hotel properties measured at fair value and the related
impairment charges recorded for the year ended December 31, 2010 which represents the excess of the
carrying value over the fair value:
5 Sisters Hotel Portfolio
(Debtor in Possession)
Notes to Combined Financial Statements
(in thousands, except share data)
|
|
|
|
|
|
|
Total Impairment |
|
December 31, 2010 |
|
Charges |
|
Homewood Suites on the Riverwalk, San Antonio |
|
$ |
842 |
|
Residence Inn Anaheim Garden Grove, CA |
|
|
2,506 |
|
|
|
|
|
|
|
$ |
3,348 |
|
|
|
|
|
There were no impairments recorded in 2009 or 2008.
8. Fair Value Measurements
The Company adopted the applicable accounting guidance for fair value measurements. This
guidance clarifies the definition of fair value, describes the method used to appropriately measure
fair value in accordance with generally accepted accounting principles and expands fair value
disclosure requirements. This statement applies whenever other accounting pronouncements require or
permit fair value measurements.
The fair value hierarchy established under this guidance prioritizes the inputs used to
measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to
unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1Quoted prices are available in active markets for identical assets or liabilities as of
the reporting date. Active markets are those in which transactions for the asset or liability occur
in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2Pricing inputs are other than quoted prices in active markets included in Level 1, which
are either directly or indirectly observable as of the reporting date. Level 2 includes those
financial instruments that are valued using models or other valuation methodologies. These models
are primarily industry-standard models that consider various assumptions, including quoted forward
prices for commodities, time value, volatility factors, and current market and contractual prices
for the underlying instruments, as well as other relevant economic measures. Substantially all of
these assumptions are observable in the marketplace throughout the full term of the instrument, can
be derived from observable data or are supported by observable levels at which transactions are
executed in the marketplace.
Level 3Pricing inputs include significant inputs that are generally less observable from
objective sources. These inputs may be used with internally developed methodologies that result in
managements best estimate of fair value from the perspective of a market participant.
The following tables show the Companys assets and liabilities carried at fair value on a
non-recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2010 |
|
|
|
Balance at |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties carried
at fair value |
|
$ |
70,007 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
70,007 |
|
The following information details the changes in the fair value measurements using significant
unobservable inputs (Level 3) for the twelve months ended December 31, 2010:
5 Sisters Hotel Portfolio
(Debtor in Possession)
Notes to Combined Financial Statements
(in thousands, except share data)
|
|
|
|
|
|
|
Assets |
|
Beginning balance |
|
$ |
|
|
Transfers into Level 3 |
|
|
73,355 |
|
Recognized losses (included in statement of operations): |
|
|
|
|
Impairment provision |
|
|
(3,348 |
) |
|
|
|
|
Ending Balance |
|
$ |
70,007 |
|
|
|
|
|
9. Shared Services
Innkeepers entered into a shared services agreement with the IH Manager pertaining to certain
(i) shared services, (ii) shared facilities and (iii) the engagement of certain of each of the
Innkeepers or IH Managers employees. Costs incurred under the shared services agreement are based
on each specific underlying shared service. The shared services agreement may be terminated by
either party upon giving thirty (30) days notice. These costs are included in general and
administrative expenses on the Combined Statement of Operations through the allocation of such
expenses from Innkeepers to the 5 Sisters Hotel Portfolio.
10. Liquidity and Capital Resources
The Company is obligated under its franchise agreements to maintain a minimum condition level
of its hotels. In order to maintain certain condition levels, the Company must renovate its hotels
to meet existing franchisor standards or implement franchisor required standards such as flat panel
televisions. The timing of the renovations is agreed-upon between the Company and the franchisor
and the franchisor will typically mandate a date upon which required standards are due. The Company
is currently in negotiations with certain of its franchisors to extend the due dates upon which
certain renovations are due. Although the Company is required to fund into restricted cash
accounts 4%-5% of gross revenues for future improvements at hotels under certain mortgage loans,
this money may not be sufficient to complete the renovations and there may be insufficient capital
to fund any shortfall. The Company may default under its franchise agreements if it fails to
complete the renovations in accordance with the timelines required by the franchisors. If defaults
remain uncured, the Company could lose significant revenue if hotels had to operate without a
franchise license from Marriott or Hilton.
11. Subsequent Events
On July 14, 2011, the sale of the 5 Sisters Hotel Portfolio was completed for $195.0 million
plus customary pro-rated amounts and closing costs. At closing the loans were paid down $25.0
million and the purchaser assumed five individual loans aggregating $134.2 million at a weighted
average interest rate of 6 percent and with maturity dates in 2016. The portfolio included the
following hotels: Residence Inn Anaheim Garden Grove, Residence Inn San Diego, Residence Inn
Tysons Corner, Doubletree Guest Suites Washington, D.C. and Homewood Suites on the Riverwalk San
Antonio. The five hotels were purchased by Chatham Lodging Trust.
The Company has evaluated subsequent events from the balance sheet date through September 23, 2011,
the date the financial statements were available to be issued, and concluded there were no other
events or transactions during this period that required recognition or disclosure in its financial
statements.
\
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION OF CHATHAM LODGING TRUST
Chatham Lodging Trust (Chatham) was formed as a Maryland real estate investment trust
(REIT) on October 26, 2009. Chatham completed its initial public offering (IPO) and concurrent
private placement of common shares of beneficial interest on April 21, 2010. Chatham raised
approximately $158.7 million, net of underwriting discounts and commissions and other offering
costs. On February 8, 2011, Chatham completed a second public offering of common shares, raising
approximately $69.4 million, net of underwriting discounts and commissions and other offering
costs.
On April 23, 2010, Chatham acquired six Homewood Suites by Hilton® hotels (the Initial
Hotels) for an aggregate purchase price of $73.5 million, plus customary pro-rated amounts and
closing costs from wholly owned subsidiaries of RLJ Development, LLC (RLJ). The Initial Hotels
which contain an aggregate of 813 rooms are as follows:
|
|
Homewood Suites by Hilton® Boston Billerica/Bedford/Burlington; Billerica, Mass.; 147 rooms. |
|
|
|
Homewood Suites by Hilton® Hartford Farmington; Farmington, Conn.; 121 rooms. |
|
|
|
Homewood Suites by
Hilton® Minneapolis Mall of America; Bloomington, Minn.; 144 rooms. |
|
|
|
Homewood Suites by Hilton® Dallas Market Center; Dallas, Texas; 137 rooms. |
|
|
|
Homewood Suites by Hilton® Orlando Maitland; Maitland, Fla.; 143 rooms. |
|
|
|
Homewood Suites by Hilton® Nashville Brentwood; Brentwood, Tenn.; 121 rooms. |
On July 2, 2010, Chatham acquired the 120-room Hampton Inn & Suites® Houston-Medical Center in
Houston, Texas for a cash purchase price of $16.2 million, plus customary pro-rated amounts and
closing costs, from Moody National 1715 OST Houston S, LLC and Moody National 1715 OST Houston MT,
LLC.
On August 3, 2010, Chatham acquired the 124-room Residence Inn by Marriott® Holtsville in
Holtsville, New York for a cash purchase price of $21.3 million, plus customary pro-rated amounts
and closing costs, from Holtsville Hotel Group, LLC.
On August 24, 2010, Chatham acquired the 105-room Courtyard by Marriott® Altoona in Altoona,
Pennsylvania for a cash purchase price of $11.0 million, plus customary pro-rated amounts and
closing costs, from Moody National CY Altoona PA, LLC and the 86-room SpringHill Suites by
Marriott® Washington in Washington,
Pennsylvania for a cash purchase price of $11.7 million, plus customary pro-rated amounts and
closing costs, from Moody National SHS Washington PA, LLC. On September 23, 2010, Chatham acquired
the 133-room Residence Inn by Marriott® White Plains in White Plains, New York for a cash purchase
price of $20.9 million, plus customary pro-rated amounts and closing costs, from Moody National
White Plains S, LLC and Moody National White Plains MT, LLC. The acquisitions of the Altoona,
Washington and White Plains Hotels are hereafter referred to as the Moody Acquisition.
On October 5, 2010, Chatham acquired the 124-room Residence Inn by Marriott® New Rochelle in
New Rochelle, New York for a cash purchase price of $20.7 million, plus customary pro-rated amounts
and closing costs, from New Roc Hotels, LLC.
On November 3, 2010, Chatham acquired the 145-room Homewood Suites by Hilton® in Carlsbad,
California for a cash purchase price of $32.0 million, plus customary pro-rated amounts and closing
costs, from Royal Hospitality Washington, LLC and Lee Estates, LLC.
On July 14, 2011, Chatham acquired five hotels for an aggregate purchase price of
$195.0 million, plus customary pro-rated amounts and closing costs from affiliates of Innkeepers
USA Trust (the 5 Sisters) Chatham funded the 5 Sisters with available cash, restricted cash, the
assumption of debt and borrowings under Chathams secured revolving credit facility. The 5 Sisters
are as follows:
|
|
Residence Inn by Marriott® Anaheim Garden Grove, CA.; 200 rooms. |
|
|
|
Homewood Suites by Hilton® San Antonio Riverwalk San Antonio, TX.; 146 rooms. |
|
|
Residence Inn by
Marriott® Tysons Corner Vienna, VA.; 121 rooms. |
|
|
|
Doubletree Guest Suites by Hilton® Washington DC Washington, DC; 105 rooms. |
|
|
|
Residence Inn by Marriott® San Diego Mission Valley San Diego, CA.; 192 rooms. |
The unaudited pro forma financial information is not necessarily indicative of what Chathams
results of operations or financial condition would have been assuming such transactions had been
completed at the beginning of the periods presented, nor is it indicative of Chathams results of
operations or financial condition for future periods. In managements opinion, all material
adjustments necessary to reflect the effects of the significant acquisitions described above have
been made. In addition, the unaudited pro forma financial information is based upon available
information and upon assumptions and estimates, some of which are set forth in the notes to the
unaudited pro forma financial information, which we believe are reasonable under the circumstances.
The unaudited pro forma financial information and accompanying notes should be read in conjunction
with the historical financial statements and notes thereto of Chatham in Chathams 2010 Form 10-K
and the Quarterly Reports on Form 10-Q for the six months ended June 30, 2011.
CHATHAM LODGING TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2011
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chatham |
|
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
Lodging |
|
|
|
|
|
|
Pro Forma |
|
|
Chatham |
|
|
|
Trust (1) |
|
|
5 Sisters (2) |
|
|
Adjustments (3) |
|
|
Lodging Trust |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in hotel properties, net |
|
$ |
210,543 |
|
|
$ |
193,394 |
|
|
$ |
|
|
|
$ |
403,937 |
|
Cash and cash equivalents |
|
|
14,971 |
|
|
|
2,059 |
|
|
|
(1,634 |
) |
|
|
15,396 |
|
Restricted cash |
|
|
15,637 |
|
|
|
(8,540 |
) |
|
|
|
|
|
|
7,097 |
|
Hotel receivables (net of allowance for doubtful accounts of approximately $6) |
|
|
1,351 |
|
|
|
144 |
|
|
|
|
|
|
|
1,495 |
|
Deferred costs, net |
|
|
4,546 |
|
|
|
1,510 |
|
|
|
|
|
|
|
6,056 |
|
Prepaid expenses and other assets |
|
|
1,794 |
|
|
|
134 |
|
|
|
|
|
|
|
1,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
248,842 |
|
|
$ |
188,701 |
|
|
$ |
(1,634 |
) |
|
$ |
435,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt |
|
$ |
12,174 |
|
|
$ |
188,071 |
|
|
$ |
|
|
|
$ |
200,245 |
|
Accounts payable and accrued expenses |
|
|
5,645 |
|
|
|
630 |
|
|
|
|
|
|
|
6,275 |
|
Distributions payable |
|
|
2,464 |
|
|
|
|
|
|
|
|
|
|
|
2,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
20,283 |
|
|
|
188,701 |
|
|
|
|
|
|
|
208,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares, $0.01 par value, 100,000,000 shares
authorized and unissued at December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares, $0.01 par value, 500,000,000 shares authorized;
13,820,854 and 9,208,750 shares issued and outstanding at June 30, 2011 and
December 31, 2010, respectively |
|
|
138 |
|
|
|
|
|
|
|
|
|
|
|
138 |
|
Additional paid-in capital |
|
|
238,928 |
|
|
|
|
|
|
|
|
|
|
|
238,928 |
|
Retained earnings (deficit) |
|
|
(11,233 |
) |
|
|
|
|
|
|
(1,634 |
) |
|
|
(12,867 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
227,833 |
|
|
|
|
|
|
|
(1,634 |
) |
|
|
226,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interests: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in Operating Partnership |
|
|
726 |
|
|
|
|
|
|
|
|
|
|
|
726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
228,559 |
|
|
|
|
|
|
|
(1,634 |
) |
|
|
226,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
248,842 |
|
|
$ |
188,701 |
|
|
$ |
(1,634 |
) |
|
$ |
435,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
The accompanying Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2011 is based
on the unaudited historical consolidated balance sheet of Chatham as of June 30, 2011, adjusted to
reflect the purchase of the 5 Sisters.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet assumes the following occurred on
June 30, 2011
Completion of the 5 Sisters
Payment of costs and expenses of approximately $1,634 after June 30, 2011 related to the 5
Sisters.
Notes and Management Assumptions:
1) Represents Chathams unaudited historical consolidated balance sheet as of June 30, 2011.
Included in retained earnings (deficit) at June 30, 2011 are expenses of $900 related to the
acquisition of the 5 Sisters that was expensed prior to June 30, 2011.
2) The following adjustment records the allocation of the purchase price for the 5 Sisters based on
the estimated fair value of the assets received, the liabilities assumed and the consideration
transferred which was partially funded through use of restricted cash amounts and borrowings.
|
|
|
|
|
Investment in hotel properties |
|
|
193,394 |
|
Cash and cash equivalents |
|
|
2,059 |
|
Restricted cash |
|
|
(8,540 |
) |
Hotel receivables |
|
|
144 |
|
Deferred costs |
|
|
1,510 |
|
Prepaid expenses |
|
|
134 |
|
Accrued expenses |
|
|
(630 |
) |
Debt assumed |
|
|
(134,160 |
) |
Borrowing under revolver |
|
|
(53,911 |
) |
3) Represents the costs incurred by Chatham after June 30, 2011 to complete the purchase of the 5
Sisters:
|
|
|
|
|
Closing costs |
|
$ |
644 |
|
Accounting fees related to audit and review |
|
|
200 |
|
Legal fees |
|
|
790 |
|
|
|
|
|
|
|
$ |
1,634 |
|
|
|
|
|
CHATHAM LODGING TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30 , 2011
(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chatham |
|
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
Lodging |
|
|
|
|
|
|
Pro Forma |
|
|
Chatham |
|
|
|
Trust (1) |
|
|
5 Sisters(2) |
|
|
Adjustments |
|
|
Lodging Trust |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel operating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room |
|
$ |
26,628 |
|
|
$ |
15,593 |
|
|
$ |
|
|
|
$ |
42,221 |
|
Other |
|
|
762 |
|
|
|
1,207 |
|
|
|
|
|
|
|
1,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
27,390 |
|
|
|
16,800 |
|
|
|
|
|
|
|
44,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room |
|
|
6,212 |
|
|
|
3,204 |
|
|
|
|
|
|
|
9,416 |
|
Other |
|
|
10,032 |
|
|
|
5,958 |
|
|
|
82 |
(3&4) |
|
|
16,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total hotel operating expense |
|
|
16,244 |
|
|
|
9,162 |
|
|
|
82 |
|
|
|
25,488 |
|
|
Depreciation and amortization |
|
|
5,249 |
|
|
|
2,913 |
|
|
|
(482) |
(5) |
|
|
7,680 |
|
Property taxes and insurance |
|
|
2,100 |
|
|
|
1,168 |
|
|
|
|
|
|
|
3,268 |
|
General and administrative |
|
|
2,852 |
|
|
|
|
|
|
|
|
|
|
|
2,852 |
|
Hotel property acquisition costs |
|
|
1,483 |
|
|
|
|
|
|
|
(1,368) |
(6) |
|
|
115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
27,928 |
|
|
|
13,243 |
|
|
|
(1,768 |
) |
|
|
39,403 |
|
|
Operating income (loss) |
|
|
(538 |
) |
|
|
3,557 |
|
|
|
1,768 |
|
|
|
4,787 |
|
Interest and other income |
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
Interest expense, including amortization of deferred fees |
|
|
(1,415 |
) |
|
|
(4,235 |
) |
|
|
(1,199) |
(7) |
|
|
(6,849 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income tax expense |
|
|
(1,941 |
) |
|
|
(678 |
) |
|
|
569 |
|
|
|
(2,050 |
) |
Income tax expense |
|
|
(14 |
) |
|
|
|
|
|
|
(100) |
(8) |
|
|
(114 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income(loss) from continuing operations |
|
$ |
(1,955 |
) |
|
$ |
(678 |
) |
|
$ |
469 |
|
|
$ |
(2,164 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted continuting operations |
|
|
(0.15 |
) |
|
|
|
|
|
|
|
|
|
$ |
(0.16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares |
|
|
12,784,515 |
|
|
|
|
|
|
|
|
(9) |
|
|
13,820,854 |
|
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(in thousands, except share data)
1) |
|
Represents the unaudited historical results of operations of Chatham for the six
months ended June 30, 2011. |
2) |
|
Represents the combined unaudited results of operations of the 5 Sisters for the six
months ended June 30, 2011. |
3) |
|
Reflects the adjustment to amortization of franchise fees of ($2) based on the
franchise application fees paid of $389 and the remaining terms of the new franchise
applications, which are 10 years from the closing of the purchase of the Doubletree Suites
Washington DC hotel, 15 years from the closing of the Homewood Suites San Antonio Hotel and
20 years from the closing of the Residence Inn San Diego, Residence Inn Tysons Corner and
Residence Inn Anaheim hotels. |
4) |
|
Reflects the adjustment to base management fees for contractual differences on the 5
Sisters of $84. The previous management agreement required a 2% base management fee
through October 31, 2010 which could be increased to 2.5%, but was not increased. The new
base management fee is 2.5% of gross revenues. |
5) |
|
Reflects net decrease to depreciation expense based on Chathams cost basis in the 5
Sisters and their accounting policy for depreciation of ($482). Depreciation is computed
using the straight-line method over the estimated useful lives of the assets, 5 years for
furniture and equipment, 15 years for land improvements and 40 years for buildings and
improvements. |
6) |
|
Reflects the adjustment for one-time hotel acquisition costs related to the 5
Sisters which are not recurring and thus excluded from the pro forma results of operations. |
7) |
|
Reflects the increase to interest expense and loan amortization costs associated
with assumption of the existing loans upon the purchase of the 5 Sisters of ($1,199).
Chatham assumed five loans for $134,160 after it repaid $25,000 of the loans outstanding.
The loans mature in October 2016 and bear an average interest rate of 6.0%. The loan
origination costs are approximately 1% of the loan value. |
8) |
|
Reflects the adjustment to recognize income tax expense at an effective rate of 40%
on the taxable income of Chathams TRS for the 5 Sisters of $100. |
9) |
|
Reflects number of common shares issued and outstanding as if Chathams secondary
offering on February 8, 2011 had occurred on January 1, 2011. |
CHATHAM LODGING TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chatham |
|
|
2010 Material Acquisitions |
|
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
Lodging |
|
|
Initial |
|
|
Houston |
|
|
Holtsville |
|
|
Moody |
|
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
Chatham |
|
|
|
Trust (1) |
|
|
Hotels (2) |
|
|
Hotel (3) |
|
|
Hotel (4) |
|
|
Acquisition (5) |
|
|
New Rochelle (6) |
|
|
5 Sisters (7) |
|
|
Adjustments |
|
|
Lodging Trust |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel operating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room |
|
$ |
24,743 |
|
|
$ |
6,634 |
|
|
$ |
1,931 |
|
|
$ |
2,651 |
|
|
$ |
7,656 |
|
|
$ |
4,422 |
|
|
$ |
31,533 |
|
|
$ |
|
|
|
$ |
79,570 |
|
Other operating |
|
|
727 |
|
|
|
170 |
|
|
|
46 |
|
|
|
67 |
|
|
|
307 |
|
|
|
219 |
|
|
|
2,016 |
|
|
|
|
|
|
|
3,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
25,470 |
|
|
|
6,804 |
|
|
|
1,977 |
|
|
|
2,718 |
|
|
|
7,963 |
|
|
|
4,641 |
|
|
|
33,549 |
|
|
|
|
|
|
|
83,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room |
|
|
5,989 |
|
|
|
1,352 |
|
|
|
368 |
|
|
|
595 |
|
|
|
1,687 |
|
|
|
1,028 |
|
|
|
6,108 |
|
|
|
|
|
|
|
17,127 |
|
Other operating |
|
|
9,036 |
|
|
|
2,893 |
|
|
|
876 |
|
|
|
1,020 |
|
|
|
3,338 |
|
|
|
1,857 |
|
|
|
11,533 |
|
|
|
33 |
(8&9) |
|
|
30,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total hotel operating expense |
|
|
15,025 |
|
|
|
4,245 |
|
|
|
1,244 |
|
|
|
1,615 |
|
|
|
5,025 |
|
|
|
2,885 |
|
|
|
17,641 |
|
|
|
33 |
|
|
|
47,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
2,564 |
|
|
|
|
|
|
|
218 |
|
|
|
225 |
|
|
|
1,225 |
|
|
|
776 |
|
|
|
5,941 |
|
|
|
761 |
(10) |
|
|
11,710 |
|
Property taxes and insurance |
|
|
1,606 |
|
|
|
525 |
|
|
|
144 |
|
|
|
144 |
|
|
|
645 |
|
|
|
496 |
|
|
|
2,694 |
|
|
|
|
|
|
|
6,254 |
|
General and administrative |
|
|
3,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77 |
|
|
|
|
|
|
|
|
|
|
|
676 |
(11) |
|
|
4,300 |
|
Hotel property acquisition costs |
|
|
3,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,189 |
)(12) |
|
|
|
|
Impairment costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,348 |
|
|
|
|
|
|
|
3,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
25,931 |
|
|
|
4,770 |
|
|
|
1,606 |
|
|
|
1,984 |
|
|
|
6,972 |
|
|
|
4,157 |
|
|
|
29,624 |
|
|
|
(1,719 |
) |
|
|
73,325 |
|
Operating income (loss) |
|
|
(461 |
) |
|
|
2,034 |
|
|
|
371 |
|
|
|
734 |
|
|
|
991 |
|
|
|
484 |
|
|
|
3,925 |
|
|
|
1,719 |
|
|
|
9,797 |
|
Gain on insurance proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149 |
|
|
|
|
|
|
|
|
|
|
|
(149 |
)(13) |
|
|
|
|
Interest and other income |
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193 |
|
Interest expense, including amortization of deferred fees |
|
|
(932 |
) |
|
|
(1,084 |
) |
|
|
(402 |
) |
|
|
(422 |
) |
|
|
(1,527 |
) |
|
|
(705 |
) |
|
|
(10,749 |
) |
|
|
3,128 |
(14) |
|
|
(12,693 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income tax expense |
|
|
(1,200 |
) |
|
|
950 |
|
|
|
(31 |
) |
|
|
312 |
|
|
|
(387 |
) |
|
|
(221 |
) |
|
|
(6,824 |
) |
|
|
4,698 |
|
|
|
(2,703 |
) |
Income tax expense |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(300 |
)(15) |
|
|
(317 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income(loss) from continuing operations |
|
$ |
(1,217 |
) |
|
$ |
950 |
|
|
$ |
(31 |
) |
|
$ |
312 |
|
|
$ |
(387 |
) |
|
$ |
(221 |
) |
|
$ |
(6,824 |
) |
|
$ |
4,398 |
|
|
$ |
(3,020 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted continuting operations |
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares |
|
|
6,377,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16) |
|
|
13,820,854 |
|
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
(in thousands, except share data)
1) |
|
Represents Chathams historical operating expense for the period from April 21, 2010
to December 31, 2010. There were no results of operations for Chatham for the period from
January 1, 2010 to the closing of the IPO on April 21, 2010. |
2) |
|
Represents the combined unaudited historical results of operations of the Initial
Hotels from January 1, 2010 to the acquisition date of April 23, 2010. |
3) |
|
Represents the unaudited historical results of operations of the Houston Hotel from
January 1, 2010 to the acquisition date of July 2, 2010. |
4) |
|
Represents the unaudited historical results of operations of the Holtsville Hotel
January 1, 2010 to the acquisition date of August 3, 2010. |
5) |
|
Represents the combined unaudited historical results of operations of the Moody
Acquisition from January 1, 2010 to the acquisition date of August 24, 2010 for the Altoona
and Washington Hotels and September 23, 2010 for the White Plains Hotel. |
6) |
|
Represents the unaudited historical results of operations for the New Rochelle Hotel
from January 1, 2010 to the acquisition date of October 3, 2010. |
7) |
|
Represents the combined audited results of operations of the 5 Sisters for the year
ended December 31, 2010. |
8) |
|
Reflects the adjustment to amortization of franchise fees of $44 based on the
franchise application fees paid of $1,138 and the remaining terms of the new franchise
applications, which are 15 years from the closing of the purchase of the Initial Hotels,
Holtsville Hotel and 1 of the 5 Sisters, 10 years from the closing of the Houston Hotel and
1 of the 5 Sisters and 20 years from the closing of the Moody Acquisition Hotels, New
Rochelle Hotel and 3 of the 5 Sisters. |
9) |
|
Reflects the adjustment to management fees of ($11) for contractual differences
between the fees required to be paid under the old management agreements vs. the new
contracted fees as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description |
|
|
New Fees |
|
|
Old Fees |
|
|
Adjustment |
|
Houston Hotel |
|
Management fee |
|
|
59 |
|
|
|
99 |
|
|
|
(40 |
) |
Moody Acqusition |
|
Accounting Fee |
|
|
6 |
|
|
|
32 |
|
|
|
(26 |
) |
Moody Acqusition |
|
Asset management fee |
|
|
|
|
|
|
113 |
|
|
|
(113 |
) |
5 Sisters |
|
Management fee |
|
|
839 |
|
|
|
671 |
|
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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904 |
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915 |
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(11 |
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10) |
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Reflects net increase to depreciation expense based on Chathams cost basis in the
Initial, Houston, Holtsville, Moody Acquisition and New Rochelle Hotels and their
accounting policy for depreciation and a net decrease to depreciation expense for the 5
Sisters. Depreciation is computed using the straight-line method over the estimated useful
lives of the assets, 5 years for furniture and equipment, 15 years for land improvements
and 40 years for buildings and improvements. |
11) |
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Chatham was formed on October 26, 2009 and completed its IPO on April 21, 2010 and
thus there was no corresponding corporate general and administrative expense until April
21, 2010. Reflects the adjustment
to include corporate general and administrative expenses for the period from January 1, 2010
to April 20, 2010, including: |
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a. |
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Salaries and benefits of $337, of which $298 is to be paid to Chathams
executive officers, who are currently Jeffrey H. Fisher, the Chairman, President
and Chief Executive Officer, Peter Willis, Executive Vice President and Chief
Investment Officer, Dennis Craven, Executive Vice President and Chief Financial
Officer. |
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b. |
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Amortization of restricted shares of $67 to Messrs. Fisher, Willis and
Craven based on a three-year vesting period. The aggregate estimated value of the
restricted share awards are $295 to Mr. Fisher, $197 to Mr. Willis and $176 to Mr.
Craven. |
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c. |
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Amortization of LTIP unit awards of $236 to Messrs. Fisher, Willis and
Craven based on a five-year vesting period. The aggregate undiscounted estimated
value of the LTIP unit awards are $3,979 for Mr. Fisher, $652 for Mr. Willis and
$525 for Mr. Craven. After applying the share-based payment accounting guidance,
the estimated discounted values of the LTIP awards are $3,020 for Mr. Fisher, $495
for Mr. Willis and $398 for Mr. Craven. The discounted value is used for the
purposes of determining the amortization. |
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d. |
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Cash compensation of $100 and restricted share compensation of $170 to
the Trustees. |
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e. |
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Directors and officers insurance of $86. |
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f. |
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General office expenses including rent of $25. |
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g. |
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Adjustment to remove insurance claim costs associated with the Maitland
hotel of $25. |
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h. |
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Adjustment to remove severance costs associated with the departure of
the former CFO of $320. |
12) |
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Reflects the adjustment for one-time hotel acquisition costs which are not
recurring and thus excluded from the pro forma results of operations. |
13) |
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Reflects the adjustment for one-time gain on an insurance claim at the White Plains
Hotel which is not recurring and excluded from the pro forma results of operations. |
14) |
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Reflects the net decrease to interest expense, including amortization of deferred fees of $3,128. $4,669
represents the adjustment to interest expense and ($1,541) represents additional expense related to
the amortization of loan costs for the assumed loans at Altoona, Washington and the 5 Sisters along with the
loan costs associated with Chathams secured line of credit. The interest expense adjustment is associated
with defeasing the existing loans upon the purchase of the Initial, Houston, Holtsville, Moody Acquisition and New
Rochelle Hotels except for loans on the Altoona and Washington hotels, two of the three hotels comprising the Moody
Acquisition Hotels and the assumption of the loans for the 5 Sisters, which were assumed by Chatham.
Except for the seven assumed loans, RLJ, Moody, the Holtsville Group, Moody Acquisition and New Rochelle Hotel,
are required under the terms of the purchase and sale agreements to cause the defeasance of the loans to occur on or
before the closing of the purchase of the hotels. Except for the seven assumed loans, the purchase price for the
Initial, Houston, Holtsville, Moody Acquisition and New Rochelle Hotels was fully funded from equity proceeds of the
IPO. Chatham assumed the $6,979 loan on the Altoona hotel. The loan matures on April 1, 2016 and bears interest
at a rate of 5.96%. Chatham also assumed the $5,455 loan on the Washington hotel.
The loan matures on April 1, 2015 and bears interest at a rate of 5.84%. Chatham assumed five loans for $134,160
for the 5 Sisters after it repaid $25,000 of the loans outstanding. The loans mature in October 2016 and carry an
average interest rate of approximately 6.0%. Chatham has borrowings on the Line of Credit of $57 million.
The loan matures in October 2013 and bears interest at a rate of 4.5%.
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15) |
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Reflects the adjustment to recognize income tax expense at an effective rate of 40%
on the taxable income of Chathams TRS. |
16) |
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Reflects number of common shares issued and outstanding as if Chathams IPO,
private placements and secondary offering transactions had occurred on January 1, 2010. |