Chatham Lodging Trust Aktie

Good morning, ladies and gentlemen, and welcome to the Chatham Lodging Trust First Quarter 2026 Financial Results Conference Call.

[Operator Instructions]

This call is being recorded on May 7, 2026. I would now like to turn the conference over to Chris Daly. Please go ahead.

Thank you, Annis. Good morning, everyone, and welcome to the Chatham Lodging Trust First Quarter 2026 Results Conference Call.

Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our most recent Form 10-K and other SEC filings.

All information in this call is as of May 7, 2026, unless otherwise noted, and the company undertakes no obligation to update any forward-looking statements to conform these statements to actual results or changes in the company's expectations.

You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website @chathamlodgingtrust.com.

Now, to provide you some insight on Chatham's 2026 first quarter results, allow me to introduce Jeff Fisher, Chairman, President, and Chief Executive Officer; Dennis Craven, Executive Vice President and Chief Operating Officer; and Jeremy Wegner, Senior Vice President and Chief Financial Officer.

Let me turn the session over to Jeff Fisher. Jeff?

All right. Chris, thank you very much, and I certainly appreciate everyone joining us here today on our call. It was really a great quarter, obviously, for us on every front, delivering for our shareholders.

Given our strong operating results, great acquisition, and continued share repurchases, as well as improved outlook for the remainder of the year, we have increased our guidance by approximately 15% since February.

On the corporate side, we increased our common dividend by 11% in the first quarter following a 28% increase in 2025. With a common dividend to FFO payout ratio of only 32%.

Based on our updated guidance, our dividend is well covered with ample room to continue growing in the future. We will reevaluate the quarterly dividend later this year.

Also, we continue to aggressively repurchase shares using free cash flow. Through the end of the first quarter, the company has repurchased 2.2 million shares or approximately 4% of our common equity at an average price of $7.04, which equates to a 10% cap rate based on the updated 2026 guidance.

At current share price levels, we're trading over a turn lower than our select service peers' current EBITDA multiple, which is not reflective of our financial strength or our upward trajectory of our portfolio, especially given the continued strength and increasing strength of our Silicon Valley recovery.

We will continue to repurchase shares given the market disconnect.

Externally, we've been executing a massively successful recycling campaign over the last couple of years, highlighted by the recently acquired portfolio of 6 high-quality Hilton-branded hotels comprising 589 rooms for $92 million that are immediately accretive to Chatham's operating margins, FFO, and FFO per share.

The portfolio diversifies our geographic footprint into areas of the country that are benefiting from expanded investments in manufacturing and distribution.

The hotels are generally the highest quality properties in their respective markets, with an average age of only 10 years, and 66% of the portfolio's rooms are extended stay.

The hotels benefit from very favorable labor dynamics and will enhance Chatham's already industry-leading hotel EBITDA margins. Performance since closing has been great with the portfolio producing RevPAR growth of 6% in the first quarter and an even stronger 7% in April.

Obviously, we're very excited about this acquisition.

Operationally, it was a great quarter for us with RevPAR hotel EBITDA margins and hotel EBITDA easily beating our expectations for the quarter. On a comparable basis, our hotel EBITDA grew 5%, and our hotel EBITDA margins gained 135 basis points.

Facing difficult comps due to the significant amount of wildfire demand last year in our L.A. hotels, our RevPAR went from a decline of 5% in January to growth of 1% in February and up 5% in March, finishing the quarter up 1%, which was well above our expectations for the quarter.

Silicon Valley led the way with RevPAR growth of 23% in the quarter, when you exclude the Mountain View hotel, which was under significant renovation.

We experienced broad demand growth across our portfolio, with over 2/3 of our hotels generating RevPAR growth and approximately 25% of our hotels earning double-digit RevPAR gains.

I do want to spend a few minutes talking about our largest market, Silicon Valley, since these hotels had an incredible start to the year.

Occupancy at our 4 Silicon Valley hotels was 72%, flat to last year despite our Mountain View hotel being under renovation for the entirety of the quarter, and ADR was up 10% to a post-pandemic quarterly high of $210.

Not a first-quarter high, a high mark for all post-pandemic quarters, and our RevPAR of $152 would be the second-best quarter over the last 6 years. These are great results and very encouraging again, especially considering the renovation at Mountain View during the quarter.

For the other 3 hotels, RevPAR was up double digits in each month of the quarter, finishing the quarter with a strong growth of 23%, as I said, and advancing another 12% in April.

As Dennis quoted in the release, demand was up 9% in the first quarter and in April across the entire San Jose Santa Cruz market.

Our hotels did way better than that growth, as our extended-stay Residence Inn hotels, as we've said before, are best suited for the corporate traveler coming to the valley.

RevPAR was up 15% at our San Mateo hotel, and our 2 Sunnyvale hotels shone with RevPAR up 26% in the quarter. Of course, massive capital investment announcements continue in technology from all types of companies.

And seemingly unending these days, major technology companies are engaged in a historic multi-hundred billion dollar investment arms race, as it's been called in 2026, with big tech projected to spend over $650 billion on AI infrastructure alone.

Capital is flowing aggressively into data centers, specialized semiconductors, and energy, with aggregate global AI investment projected to approach trillions. Of course, Silicon Valley is the heart of the tech world.

We don't see that changing anytime soon. And having just been out there last month, I can tell you the energy and overall activity are the most positive I've felt since before the pandemic.

In Sunnyvale, construction of the multibillion-dollar Applied Materials chip facility, our #1 account, by the way, that is near both of our hotels in Sunnyvale, is in full swing.

Actually, they got a permit to build 24 hours a day. We tried to fly a drone over it to share on one of our investor reports, but we kind of got knocked down on that idea by the people in charge there.

Anyway, our 2 Sunnyvale hotels are seeing surging room night production for our largest clients, many of whom are involved in these investments, as I said, such as Applied Materials, Palo Alto Networks, NVIDIA, of course, Google, particularly in Mountain View, Apple, Pure Storage, plug-and-play, and the list goes on and on.

We certainly are encouraged about what finally seems to be happening for sure in the valley.

In the short term, of course, adverse repercussions stemming from the turmoil in the Middle East, especially with respect to gas prices and their impact on travel, so far have yet to make any meaningful impact.

We have easier comps over the last 3 quarters of the year in our 3 D.C. hotels as a result of all the Doge and shutdown events that occurred last year.

And of course, we do have U.S. 250 celebrations. So as to that market, I think we've got some visible upside there. Additionally, we do, as others have mentioned, but we do have some of the highest exposure to the World Cup among lodging REITs.

And in Dallas, our Courtyard downtown is right next to the convention center, which will host up to 5,000 media professionals as it is serving as the international broadcast center for the World Cup.

In addition to Dallas, our hotels are quite close to stadiums in San Francisco and Los Angeles, and our Bellevue Residence Inn is positioned for easy commuter rail access to the stadium in Seattle. And our Residence Inn in Fort Lauderdale should also benefit.

And of course, importantly, business travel demand, especially in our tech markets, recovery in our tech hotels, which accounts for over 20% of our EBITDA, represents a unique opportunity for us to outperform our peers.

Longer term, of course, just looking forward, the supply-demand equation that we've talked about before should still continue to benefit existing hotel owners.

Construction costs, of course, remain quite high, and development is only justified in a few markets. Demand growth is quite encouraging so far, as we've said, in 2026.

Business demand should continue to rise even if a portion of the trillions of dollars of announced investments in technology and reshoring of manufacturing come to fruition in the United States.

Of course, that's where I think our Midwest portfolio that we acquired should also benefit, I think, on an outsized basis, being in the hub of the manufacturing belt in the U.S.

Leisure travel, which is approximately 18% of our hotel EBITDA, will continue to benefit as well from changing consumer demand behavior, as travelers want more experiences and nights away from home.

Finally, on my end, we'll continue to opportunistically sell some older nonperforming assets and with the goal, of course, capital recycling, reinvesting those proceeds into share repurchases or hotel investments.

Also, we expect to commence our Portland, Maine hotel development during the quarter. So, although we've been talking about it for quite some time, they're actually beginning to erect a fence around that portion of the property.

So, it is happening with the opening before the fall season of 2028.

Dennis may say otherwise, but we'll hedge that bet a little bit. We will provide a detailed breakdown of total spend and timing in connection with our second quarter earnings call in August, but I will tell you the unlevered returns are projected to be quite strong, as we've mentioned.

With that, I'd like to turn it over to Dennis.

Thanks, Jeff. Good morning, everyone.

To supplement Jeff's comment regarding using free cash flow to buy back shares, we implemented our $25 million repurchase plan in 2025, and our free cash flow was $15 million in 2025 and is projected to be approximately $20 million in 2026.

Therefore, we intend to finish the entire $25 million program this year, and we'll be reevaluating a new plan in the coming months. After the end of the quarter, in April, we did buy approximately 200,000 shares at approximately $8.34 a share.

Some additional quarterly information.

Our top 5 RevPAR hotels in the quarter were our Residence Inn Fort Lauderdale with RevPAR of $262, our Home to Phoenix Downtown with RevPAR of $191, followed by our Residence Inn Gaslamp, our HGI Marina Del Rey, and our Residence Inn by Marriott White Plains with RevPAR of $164.

Our 2 Sunnyvale and San Mateo Residence Inns were 3 of our top 10 RevPAR hotels for the quarter. Our 7 predominantly leisure hotels generated RevPAR growth of 2% and a little over 2% in the quarter.

6 of our 7 leisure-driven hotels produced RevPAR growth, with our Hyatt Place Pittsburgh leading the way with RevPAR growth of 23%, benefiting from a solid convention calendar, as the convention center is right across the river from our hotel.

And demand related to sporting events, especially the Pittsburgh Penguins' hockey. And of course, in April, the NFL draft was literally located right outside the doors of our hotel between our hotel and the Steelers' Stadium. And we did, of course, really well there with RevPAR up over about 250% during the week.

Our 3 predominantly government-oriented hotels, all in the Greater D.C. area, produced RevPAR growth of 9% despite tough comps in January, comping over the inauguration last year.

As a group, those hotels represent approximately 9% of our EBITDA. Our Springfield and Tysons Corner hotels are recovering from all of the Doge and liberation Day and shutdown activity last year.

San Diego RevPAR grew 5% in the quarter, outperforming our expectation, which was a decline of 5%. We're obviously quite pleased with the quarter.

As a reminder, though, the 2026 convention count is a bit softer than 2025, and we are forecasting a RevPAR decline of about 2% for the rest of the year.

Hopefully, we have some upside there. In other large markets, our coastal Northeast hotels saw RevPAR decline 8% in the quarter. Our Portland and Exeter hotels benefited last year from renovations at hotels in the comp set.

In Texas, our Dallas and Austin hotels have felt the impact of convention demand falloff with convention centers under renovation and ongoing expansions.

RevPAR at our Courtyard Dallas was down 26% in the quarter, though the good news is that our comps get better in the second quarter as we start to lap over prior weaknesses from the closure.

In Austin, our Residence Inn was under renovation for the bulk of the quarter, and that renovation is finished. Having said that, the entire Austin market has really been weak, with overall RevPAR down 6% over the last 12 months.

Like Dallas, comps start to get easier there towards the second half of the year.

As an update, and this is really a great development, it was officially announced that the planned $3 billion MD Anderson Hospital and Research Center that was previously expected to be built downtown is now expected to be built at the J.J. Pickle Research Campus, and groundbreaking is expected to start this year.

That campus is approximately 1 mile from both of our hotels at the Domain. And because our 2 hotels are both extended stay, we should benefit greatly from this new facility. That will be under construction shortly.

Of course, we only owned the new 6-pack of hotels for most of March. But as Jeff said, we're quite pleased with the performance of that group. RevPAR growth, again, for the quarter was up 6%, and then April was up 7%, slightly above our underwriting guidance.

First quarter occupancy of 74% was 200 basis points higher than our portfolio average for the quarter. And given that this is the first time we've spoken publicly since closing the acquisition, I do want to spend some time just sharing some color on the portfolio that we acquired.

The markets further diversify our geographic footprint into areas of the country that are benefiting from expanded investments in manufacturing and distribution.

Joplin, Missouri is adjacent to the intersection of both Interstates 44 and 49 in Southwest Missouri and benefits from its location between Kansas City, St. Louis, Oklahoma City and the ever-growing Northwest Arkansas area, which is home to, of course, Walmart, J.B. Hunt and Tyson Foods.

Key industries in the Joplin area include manufacturing, with major players there, including General Mills, Frito-Lay, Coca-Cola, Cargill, and the headquarters of Legggan & Platt. And obviously, distribution, given its proximity, is a major driver there.

Additionally, the hotels will benefit from an almost $400 million development called Prospect Village, which will be home to a sports complex that will include a 135,000 square foot indoor athletic center as well as outdoor turf fields.

The sports complex is expected to host 28 indoor tournaments and 22 outdoor tournaments over weekends each year that will generate an extra $12 million of annual spending, visitor spending, and 27,000 annual hotel room nights.

And these will be mostly weekend nights, thus enhancing our full week performance at the hotels. Paduca sits on Interstate 24 and is proximate to the many high-traffic commerce routes between St. Louis, Louisville, Nashville, and Memphis.

Key industries include manufacturing with large-scale facilities in the area operated by Darling Ingredients, Frito-Lay, H.B. Fuller, among many others, as well as the marine industry in Paducah, as it is a major hub for the inland marine industry due to its location at the confluence of the Ohio and Tennessee Rivers with proximity to the Mississippi and Cumberland Rivers.

Like Joplin, Paducah is set to open in the next month, an almost $100 million multisport outdoor sports complex, and that's expected to open here in the next month and is expected to host 35 to 40 tournaments a year.

In 2026, it's projected to host at least 2 full weekend tournaments per month for the next 6 months. Additionally, on the longer-term horizon for Paducah, in March, it was announced that Global Laser Enrichment is planning to build a new nuclear enrichment facility on a 665-acre site in Paducah.

Plans are currently under review by the Nuclear Regulatory Commission. And once approved, construction will take approximately 3 years to open. The project is expected to generate approximately 1,000 jobs over the course of construction and hundreds of jobs upon completion.

And just given the nature of the facility, it's going to be a constant source of demand from, obviously, ongoing visitations from authorities, interested parties, and everything of the like.

So, really good long-term project there. Fham sits at the crossroads of Interstates 57 and 70, midway between Indianapolis and St. Louis, and brings into its area about 200,000 of workers from 8 neighboring counties each week.

Key industries include food and agriculture, with major players such as Archer-Daniels-Midland, Crestige, Pepsi, and Simmer Milling. Manufacturing is also a major player with Flexing Gate, Hitachi Metals, Effingham Machine and Assembly, and Peerless of America.

And then, of course, again, similar to the other 2 markets, distribution, given its relation to many different modes of transportation, is a big player. Shifting my comments back to our operating results.

We grew hotel EBITDA 5% at our 33 comparable hotels as we were able to increase our GOP hotel margins on the back of a decline in labor and benefits per occupied room of over 1%.

Additionally, we drove our other operating profit 6% higher in the first quarter. Looking at guidance for the remainder of the year, our hotel EBITDA margins are up about 100 basis points from our previous guidance.

Continuing the trend since last year, we've stayed laser-focused on our staffing levels and maximizing productivity and efficiencies. As a reminder, in 2025, our labor and benefits costs declined slightly year-over-year, and we were the only lodging REIT to accomplish that.

And like I said, in the first quarter, we were able to reduce our labor and benefits by over 1% or $0.50 per occupied room.

We also benefited from lower property insurance renewal rates and property taxes due to some refunds, and those items we were able to absorb an approximate 12% increase in utility costs in our comparable hotels.

We were particularly impacted by the massive snowstorm across the middle of the country and the Northeast in the early part of the first quarter.

For the quarter, our top 5 producers of GOP were led by our Residence Inn San Diego, our 2 Sunnyvale Residence Inns, our Home2 Phoenix, and lastly, our Residence Fort Lauderdale.

Outside of our top 5, but in our top 10, was also our Residence Inn San Mateo. So again, all 3 of the Silicon Valley hotels that were not under renovation were in our top 10.

Looking at these comparable Silicon Valley hotels, hotel EBITDA grew a remarkable 35% year-over-year on what was a 23% RevPAR increase for a 1.5x flow-through, again, going to show you the upside financial leverage we can get from these hotels starts to grow.

That 35% growth is pro forma for a property tax refund that we received on one of those 3 hotels during the quarter. If you include that, the actual growth was about 50% in hotel EBITDA.

On the CapEx front, we spent approximately $6 million in the quarter. We completed the full renovation of our Residence Inn in Austin and the rooms portion of the Mountain View renovation.

We are completing major interior upgrades to the Mountain View Gatehouse that will be completed here in the next month.

Later this year, we will be completing a significant enhancement to our Gatehouse outdoor amenities that will be fantastic for our guests to enjoy the great weather, as well as to collaborate with other guests in a very nice setting.

Our CapEx budget for 2026 is approximately $27 million. We have 3 hotels scheduled for renovation later this year. That's our Gaslamp Residence Inn, our Hyatt Place Pittsburgh, and our Farmington Homewood Suites, and those are all expected to start in the fourth quarter.

Lastly, I'll add that the 6 recently acquired hotels have very little CapEx required this year. And in fact, only 1 hotel is scheduled for renovation over the next 2 years, the Hampton Inn and Suites Paducah.

With that, I'll turn it over to Jeremy.

Thanks, Dennis. Good morning, everyone. Our Q1 2026 hotel EBITDA was $21.4 million, adjusted EBITDA was $18.4 million, and adjusted FFO was $0.20 per share.

We were able to generate a GOP margin of 40.2% and a hotel EBITDA margin of 31.8% in Q1. GOP margins for the quarter were up 60 basis points from Q1 2025 due to outstanding expense control.

As Dennis mentioned, Q1 labor and benefits costs actually decreased 1% on a per occupied room basis. Q1 hotel EBITDA margins increased by 140 basis points due to both the strong expense control and $500,000 of property tax refunds in the quarter.

In early March, Chatham closed on the acquisition of a portfolio of 6 Hilton-branded hotels for $92 million. The acquisition was funded with borrowings on our revolving credit facility, which currently has a rate of approximately 5.1%.

We are very excited about this acquisition, given the hotel's average age of only approximately 10 years, outstanding margins, strong RevPAR growth, and limited near-term capital needs. We expect this acquisition to be significantly accretive to Chatham's FFO and free cash flow.

After this acquisition, Chatham's leverage ratio, as defined in our credit agreement, was only 32.5%.

Chatham's strong balance sheet puts the company in an excellent position to continue actively repurchasing shares, pursue the planned development of a hotel in Portland, Maine, and to continue to grow opportunistically through accretive acquisitions.

Turning to our 2026 guidance. We expect RevPAR growth of 0% to 2%, adjusted EBITDA of $95.3 million to $99.6 million, and adjusted FFO per share of $1.21 to $1.29 for the full year.

Our guidance reflects the contribution from the $92 million acquisition from March 3 forward. Reflecting the pro forma impact of this acquisition, our 2025 RevPAR would have been $127 in Q1, $153 in Q2, $151 in Q3, $129 in Q4, and $140 for the full year.

We generally expect Chatham's Q2 '26 RevPAR to increase approximately 1% to 2%. While our guidance does not reflect any share repurchases or acquisitions, our plan is to continue repurchasing shares and, over time, to continue to pursue accretive acquisitions.

This concludes my portion of the call. Operator opens the lines for questions.

[Operator Instructions]

Your first question comes from Gaurav Mehta with Alliance Global Partners.

I wanted to ask you about the portfolio acquisition, hoping to maybe get some more color. Was this like an off-market deal or a fully marketed deal? What were the CapEx rates like? And what do you attribute?

It seems like the performance for the portfolio is coming in better than what you underwrote during the acquisition. What do you attribute that outperformance to?

Gaurav, yes, I mean, I think the transaction itself was a brokered transaction sent out to, I guess, a group of parties.

I think one of the things that we liked about the deal and I think there aren't a lot of buyers that are out there that have the ability to take down a $100 million acquisition.

It's too big for a bunch of buyers that we might see on an individual deal. And we were certainly involved in the transaction, and just a lot of the deals that we've looked at over the last couple of years, really excited about some of these other markets that might initially be off the radar of certain other people, but just doing a lot of work and seeing a lot of information like the transaction.

The performance of the portfolio is, I wouldn't say meaningfully above our underwriting, but both in terms of the first quarter performance and the April performance, RevPAR growth, I'd say, is $1 or $2 above where we thought it was going to be.

So, it's not just like significantly outperforming our underwriting, but it is outperforming. So, just very pleased with the 6 hotels, how they've gotten out of the gate so far, and really like what it does for us in terms of diversifying into some other industries and a little bit into the Midwest of the country.

Maybe on the acquisition market in general, are you guys seeing more activity now in the transaction market compared to maybe even last quarter?

I think it's similar to last quarter, Gaurav. I think it's still a challenging market, especially when you look at individual-type transactions.

I think thankfully, the public, at least the public companies, their multiples, thankfully, we're starting to adjust a little bit here. So it's going to make it, I think, allows people to have a little bit of a lower cost of capital, which might generate some additional interest.

But at the moment, I think it's pretty consistent in terms of deal flow from last quarter to this quarter. But then that's certainly more than what we saw a year ago.

And then maybe on the asset recycling disposition side, are there any more assets that you guys may sell, or have you sold asset that you guys sold in the last few quarters? Is that about it for now?

We are still looking at that, Gaurav. I think we'll probably end up trying to sell 1 or 2, the balance of the year.

I think with the whole purpose of, again, I think, as we noted, reinvesting those dollars into either share repurchases or new acquisitions.

But certainly, that last program was really a pretty high volume for us, but I think it will just be 1 or twosies for the foreseeable future.

Your next question comes from Aryeh Klein with BMO Capital Markets.

Maybe just a follow-up on the acquisitions. These are somewhat different markets from the rest of your portfolio. Just curious, any supply growth to speak of in these markets that we should be aware of?

Supply growth? Yes, very little. There's one hotel that just recently, I believe, opened in Paducah. But outside of that, really, no new supply that's coming to the 3 markets.

And maybe shifting gears a little bit. You mentioned that some of your markets will benefit from the World Cup. What are your World Cup expectations? And how is that factored into the guidance?

And then just on the guide in general, it seems like you're assuming somewhat slower growth in the second half of the year. You do have some easier comps. Is that just factoring some level of conservatism on your part?

Yes, listen, we do have some conservatives in there in general. The World Cup, we're being pretty conservative in regards to that as well.

There's a lot of publicity and media attention around international travelers coming in, and the fact that tickets are really expensive on top of just trying to get to the country. So, we're taking a pretty measured approach when it comes to our forecast for most of those markets.

Obviously, we're projecting growth. But hopefully, we see some upside, not only with the World Cup, but I think just in general, as you said, we have some easier comps with a lot of the shutdown activity.

But I think if you look at our guidance of 1% to 1.5% to 2% for the rest of the year, hopefully, we outperform.

And maybe just one last one. In Silicon Valley, previously, you used to get a decent amount of interim business. It has faded, maybe a little bit, in the last couple of years. How are you seeing that play out, I guess, over the course of the summer?

Yes. In general, the interim business has come down significantly from pre-pandemic, and especially, it was the summer of 2022, I believe, when we had a tremendous amount of business.

There is some still out there. We do have one block of interns on the books at one of our hotels, not taking it to the bank yet, but we do have some interim business coming back this summer. So hopefully, that does end up happening. That will be from late May to mid-August.

Your next question comes from Tyler Batory with Oppenheimer.

A lot of good detail here, and congrats on the really strong results. Really nice to see the execution here. A couple of cleanup questions for me, and share repurchases, capital allocation first.

It's been a while since your stock price was in the double digits. I guess we're starting to approach that. Share repurchases still make sense up here? I mean, you mentioned the stock still being undervalued in your mind.

Any help in terms of what the portfolio might be worth, what you think might be a fair multiple for your assets?

Well, that's a very interesting question. To talk about the share repurchases, I think if you look at where we're trading at as of literally right the second, we're around the 9% cap on our corporate NOI, around the 10% cap on our hotel NOI.

So listen, it's still on a historical basis, even at $9.45 is an attractive investment for, again, what we determine a use of proceeds from our obviously, free cash flow and our capital recycling, so I think we'll continue to buy shares within our $25 million repurchase plan.

And that probably takes us through the end of the third quarter, which is most likely at the rate that we've been buying shares at. I think as far as what we're worth, that's a different loaded question.

But I think certainly, we feel our portfolio, and most, our peers would say the same, our underlying value is much better from a cap rate perspective and EBITDA multiple than where we're trading.

We're still all trading at multiples that are in the history of lodging REITs fairly low. So I think there's a lot of upside.

Yes. I think even outside of the question of valuation multiple or cap rate, we just see a ton of upside in the EBITDA and NOI, in particular, of our Silicon Valley assets.

So, even if the multiples weren't to rerate at all, I think we still see a bunch of upside in the portfolio and the stock.

My follow-up on operations, and just to hit on Silicon Valley a little bit more.

The RevPAR growth there is tremendous. And I'm trying to get a sense of, in terms of your guide talking about the rest of the year, just what's included in that outlook for Silicon Valley.

And just if you could also just frame too, I think you got one of the assets there under renovation, too. I'm not sure if that's a catalyst in terms of driving further upside to that portfolio in the years ahead.

I mean, listen, I think the Mountain View renovation, and like I said, the Gate House has been completely closed, and check-in has been using our lobby, which is, in essence, 2 guest rooms. So it's been pretty disruptive there.

But I think if you look at the balance of the year for the 4 hotels, and I'm just pulling up some information for you, Tyler. Obviously, we talked about the 3 hotels being up 12%.

But when you look at coming out of the renovation, the 4 hotels, we're projecting mid- to upper single digits RevPAR growth for the balance of the year from essentially May to December.

So that's a little bit, I think, obviously conservative compared to what the first 4 months of the year have done. Hopefully, we continue to see that demand growth, but there potentially could be some upside there as well.

There are no further questions on the phone line. I will turn the call back to Mr. Fisher for some closing remarks.

Well, again, I just want to thank everybody for being on the call. We are pretty pleased here with not only the top-line results, but frankly, I'm very pleased with how the operator has been able to flow those top-line results to the bottom line.

And as Denis mentioned, actually experiencing some reduction in some labor costs and otherwise due to some really strict controls that have been enforced very well.

So, we look forward to continuing to put up some good results for the rest of the year. I think conservatism, obviously, is reflected in our peers as well. It is probably the best bet for the time being, given that there is a war going on in the Middle East.

And I don't think we mentioned that yet, but it's certainly worth keeping in mind. But again, we think the hotels themselves and the overall trends bode very well. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.

Good morning, ladies and gentlemen, and welcome to the Chatham Lodging Trust Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference call over to Chris Daly, owner of Daly Gray, Inc. Please go ahead.

Thank you, Jenny. Good morning, everyone, and welcome to the Chatham Lodging Trust Fourth Quarter 2025 Results Conference Call. Please note that many of our comments today are considered forward-looking statements as defined by federal securities law. These statements are subject to risks and uncertainties, both known and unknown, as described in our most recent Form 10-K and other SEC filings. All information in this call is as of February 25, 2026, unless otherwise noted, and the company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at chathamlodgingtrust.com. Now to provide you with some insights into Chatham's 2025 fourth quarter results, allow me to introduce Jeff Fisher, Chairman, President and Chief Executive Officer; Dennis Craven, Executive Vice President and Chief Operating Officer; and Jeremy Wegner, Senior Vice President and Chief Financial Officer.

Let me turn the session over to Jeff Fisher. Jeff?

Okay, Chris, thank you very much, and I certainly appreciate everyone joining us here for our call today. Before talking about the fourth quarter specifically and our outlook for this year, I'd like to spend just a few minutes highlighting some noteworthy accomplishments as we look back at the last year. Operationally, it was a really good year for us despite the extreme volatility that adversely impacted the industry and our top line.

On the top line, for the fourth consecutive year, though, our RevPAR performance beat the industry, and we continued pushing our other operating profits, other department operating profits higher as well. Despite essentially flat RevPAR and for this, we are really proud, we were able to limit our GOP margin decline to only 20 basis points by staying laser-focused on our staffing levels and improving productivity.

Our labor and benefits costs actually declined slightly in 2026, offsetting wage increases of almost 4% in the year. And most importantly, for the first time since the pandemic, we generated the highest operating margins in the industry, reclaiming our top spot among the rankings that we held for an entire decade from 2010 to 2019. Looking ahead to this year, our hotel wages are reassessed in July each year, and our wage increase for the second half of 2025 is up only 2% versus the first half of the year, which means wage pressures are moderating throughout 2026.

Strategically, we sold 4 of our older lower RevPAR hotels at an approximate cap rate of 6% and used those proceeds to reduce debt and to acquire shares under the repurchase plan we initiated in 2025. Since announcing the plan, we've repurchased approximately 1.8 million shares or approximately 4% of our outstanding shares at an average price of $6.87 per share for a total repurchase of almost $13 million or just over half of our $25 million plan.

At our average acquisition price, those shares were acquired at an approximate 9.5% cap rate based on our 2026 corporate NOI guidance and might be the only lodging REIT with an average repurchase price below current trading levels since peers initiated their repurchase plans. Using average multiples for the last 25 years, these repurchases certainly are going to be accretive.

On the corporate side, we added 10 rooms to our portfolio by converting excess meeting space and other available spaces, which will deliver the best returns for those spaces in the hotels. We continue to participate in the GRESB sustainability benchmark and ranked 29th out of 95 listed companies. We completed the largest and most attractive financing in Chatham's history with total capacity of $0.5 billion while reducing our overall borrowing costs, and we used proceeds from the sale of assets and free cash flow to reduce our net debt by $70 million and further reduce our leverage ratio to a mere 20%.

By the way, that leverage compares to almost 35% in 2019. All of these accomplishments allowed us to increase returns to our shareholders, and we're able to increase our common dividend by 2020 -- excuse me, by 28% in 2025, including our repurchase plan and both common and preferred dividends, we returned approximately $35 million to our shareholders. It was truly a great job by our teams at Island Hospitality and Chatham, staying in constant communication and on the same page, delivering solid results throughout a very volatile year.

As we move forward, we're confident in the industry long term. The supply-demand equation should benefit existing owners as construction costs remain quite high and development is only justified in certain markets. GDP growth is healthy and should accelerate if even a portion of the trillions of dollars of announced investments in technology and reshoring of manufacturing come to fruition in the United States.

Existing hotel owners should benefit via stronger RevPAR growth in the years ahead. We obviously need to be able to push those incremental revenue dollars down to GOP. And really for the first time in almost a decade, wage pressures are mitigating to the lower single-digit range, which is vital given that labor costs are our largest expense.

As we sit here today, we're in a great position to deliver earnings growth and shareholder returns in multiple ways. First, we will continue to repurchase shares and intend to utilize most, if not all, of our $25 million plan this year. Second, operationally, we are positioned to outperform the industry on both top and bottom line. There was a lot of noise in 2025 that impacted RevPAR in some of our key markets. So hopefully, things calm down this year. And if they do, our operating model is best at driving profits higher as we've demonstrated over and over again.

Third, we'll continue to opportunistically sell older nonperforming assets with the goal of reinvesting those proceeds into share repurchases or hotel investments. And on that front, we were disappointed not to make any external acquisitions in 2025, but sometimes the best deals are the ones that you don't do, and we never had enough conviction on any deals and chose to remain patient with significant financial flexibility. We are confident that we can make some acquisitions in 2026 as financing costs have lessened and seller pricing expectations have adjusted somewhat from where we were a year ago.

The markets, though, of course, will have to make sense for us, and we are looking for some continued diversification, both in markets and demand generators. And of course, yields have to approximate the implied yield on buying our own stock. We want to invest in markets that are going to benefit from increased business investments, which is generally the Central and Southeastern U.S.

Lastly, we do expect to commence our Portland, Maine hotel development in the coming months with opening before the 2028 summer. As I stated earlier in my comments, hotel development really only makes sense in certain markets and Downtown Portland happens to be one of them, especially considering we have no cost basis in the land. Our focus is on increasing shareholder returns. And in addition to the share repurchase program, we believe our initiatives should enable us to return even more money to our shareholders via further increased dividends this year.

Before Dennis gets into the fourth quarter details, I do want to spend a few minutes talking about our largest market, Silicon Valley, its performance in 2025 and our outlook beyond. Silicon Valley is our largest market and RevPAR grew only 1% in 2026, but it was a tale of 2 halves as RevPAR was up 5% in the first half of the year, and then we were off 4% in the third quarter and less than 1% in the fourth. Our Mountain View Residence Inn was under renovation for the last 2 months of 2025 and will remain under reno through March of this year.

Also, if you recall from our third quarter call, we lost some business related to pricing strategies around a single corporate client at our 2 Sunnyvale hotels. Third quarter RevPAR was down 9% in the third quarter, and we did a great job replacing that business or some of it in the fourth with RevPAR only down 1%. We'll continue to feel some impacts in the first quarter of this year as to that account. But as the year progresses, our comps will get better, and we'll benefit from the World Cup schedule, and that sets up very well for our 2 Sunnyvale hotels.

And of course, we remain very constructive on the Valley and Mountain View, particularly, of course, is anchored by Google, Waymo, LinkedIn, Intuit and several other firms that certainly provide a good steady source of demand for that hotel. Sunnyvale is quickly rebounding from the post-pandemic slumber. Sunnyvale's office market is rebounding faster than any other Silicon Valley market and had 1.4 million square feet of positive absorption last year.

In 2025, Apple increased its square footage by over 1 million feet and LinkedIn added to its campuses and Applied Intuition, which is a $15 billion software company for self-driving cars moved into Sunnyvale. And of course, our largest client, Applied Materials, is building a $4 billion chip facility that's only a block or 2 away from our 2 Sunnyvale hotels. So we certainly look forward to continued better times over the next few years in the Valley.

With that, I'd like to turn it over to Dennis.

Thanks, Jeff. Good morning, everyone. Some additional RevPAR information. Occupancy at our 4 Silicon Valley hotels was 72% and ADR was up 2.5% in the quarter despite that shift in business that Jeff talked about in Sunnyvale from the third and fourth quarters.

Our 6 predominantly leisure hotels, which account for approximately 20% of our EBITDA, produced RevPAR growth of 50 basis points in the quarter. And the shutdowns impact on our 3 D.C. area hotels accounted for about 60% of our quarterly RevPAR decline. Some more color on our larger markets, California, which is home to 2 of our -- 2 more of our top 8 markets in addition to Silicon Valley, Los Angeles and San Diego.

San Diego RevPAR declined 8% in 2025 as the market retracted from an all-time best convention calendar in 2024. Additionally, demand slipped due to the opening of the nearby Gaylord as well as the shutdown of the border, which reduced our government business at our hotel. The 2026 convention calendar sets up similarly to 2025 with 43 conventions in '26 versus 46 in '25.

In L.A., RevPAR at our 3 hotels was up 4% in 2025 due in part to the significant fire-related business we received, especially at our Woodland Hills Home2, which benefited basically from January through the early parts of May. And then obviously, in the L.A. area for the balance of the year, it was generally softer of 2025 due to the general unrest in the L.A. area. Hopefully, that also settles down in 2026. And similar to Sunnyvale, we should benefit from World Cup demand given the proximity of our Marina del Rey and Anaheim hotels to the stadium in L.A.

In other large markets, our Coastal Northeast hotels have better 2026 comps due to renovation impacts in '25 and our D.C. area hotels have much easier comps after January due to all the shutdown-related businesses or pauses in 2025. Our Bellevue Residence Inn also should continue to benefit from increasing corporate demand.

In Texas, all 3 markets have felt the impact of convention demand falloff, with Dallas and Austin convention centers under renovation and expansion, while San Antonio just didn't have a great convention calendar in 2025. Dallas will have tough convention comps through the first quarter, but we will see demand from the World Cup in the second and third quarters as Dallas not only hosts 9 games, which is the most of any city, but the nearby Kay Bailey Convention Center will host up to 5,000 media professionals as it's serving as the international broadcast center for the World Cup.

And then in a very encouraging development for our 2 Austin hotels at The Domain, a planned $3 billion MD Anderson Hospital and Research Center that was previously expected to be built downtown is now expected to be built at The Domain with groundbreaking starting in 2026. Outside of our top markets at our Home2 in Phoenix, as a reminder, it opened in 2024, and we acquired the hotel in May of 2024, RevPAR was up approximately 17% in the quarter as we continue to gain market share as we've been able to partner with the nearby baseball stadium, the Arena and the convention center to participate in business blocks that were generally reserved far in advance of the stay dates.

Charleston and Savannah continued to grow due to rising corporate demand in South Carolina. And in Savannah, coming out of a really great renovation, it's really done well with getting additional corporate demand and leisure demand to the hotel. Our top 5 RevPAR hotels in the quarter were our Residence Inn White Plains with RevPAR of $200, our Residence Inn Fort Lauderdale at $186 and Residence Inn New Rochelle, New York at $185, followed by our Residence Inn Anaheim and our Hampton Inn Portland with RevPAR of $166.

For 2025, our top RevPAR hotels were the Hampton Inn, Portland with RevPAR over $200. And of course, that's great news for our pending development, followed by our Hilton Garden Inn Marina del Rey, Residence Inn and White Plains, Fort Lauderdale and San Diego Gaslamp, all 5 with RevPAR over $185. As Jeff remarked in his opening comments, we were pleased with our ability to mitigate our margin loss throughout 2025. During the fourth quarter, our GOP margins only declined 30 basis points despite RevPAR declining almost 2%.

We were able to hold the year-over-year increase in labor and benefit costs to just under 2% in the quarter and which was the primary driver behind limiting the decline in that department's profit to only 1%. Most other operating line items were relatively stable year-over-year with nondepartmental expenses flat at approximately $21 million. And the only other major item to note was that guest acquisition-related commission costs were down a couple of hundred thousand dollars and aided our margins by approximately 20 bps.

Our hotel EBITDA margins benefited from some onetime property tax refunds, and they actually grew 70 basis points in the quarter. Property insurance was down 3% in the quarter and great news on our renewal is that those premiums are projected to decline a further 15% on a same-store basis in 2026. For the year, our GOP margin decline was limited to a mere 40 basis points. Labor and benefits only increased 1.2% on a per occupied room basis in the quarter and actually declined slightly from last year to 2025.

For the 33 comparable hotels, our headcount decreased 13% from a year ago. For the quarter, our top 5 producers of GOP were all Residence Inns. In fact, the top 7 were all Residence Inns, but leading the way was Residence Inn Gaslamp with $1.6 million, followed by our Residence Inns in Anaheim, both Sunnyvales and White Plains. For the year, our Gaslamp Residence Inn led the way, followed by our Residence Inn Sunnyvale #2 and Bellevue hotels and then rounding out the top 5 were our Embassy Suites Springfield despite all of the government shutdown impacts and threats. And lastly, our other Sunnyvale hotel.

So just to point out, despite a volatile last 2 quarters in Sunnyvale, the fact that both of those hotels as well as our Bellevue Residence Inn were in our top 5 of GOP producers in the year is pretty encouraging from a corporate demand standpoint.

On the CapEx front, we spent approximately $4 million in the quarter. And during the quarter, we had commenced renovations at our Residence Inn in Austin and Mountain View, California, and those will be wrapping up, as Jeff talked about shortly. Our CapEx budget for 2026 is approximately $26 million, basically the same as 2025 and includes 3 renovations at a cost of approximately $17 million. The 3 hotels scheduled for renovation in 2026 are our Gaslamp Residence Inn, our Hyatt Place Pittsburgh and our Homewood Suites Farmington, all 3 scheduled to commence in the fourth quarter.

Lastly, when you look at our guidance, I wanted to note the projected performance of our top markets. Silicon Valley RevPAR is projected up 3% to 5% in 2026 with increasing business travel demand as well as a favorable World Cup schedule as nearby Levi's Stadium is hosting 6 games. Los Angeles is down 1% to 3%, again, primarily due to the tough comps caused by the L.A. wildfire demand in our hotels in 2025.

Our Coastal Northeast portfolio is projected to be up -- or between flat to up 2%, with our Greater New York hotels essentially projected to finish flat for 2026. And in D.C., we're projected up 2% to 4% as we lap over all the shutdown effects. San Diego is projected to be down slightly, again due to the decline in conventions from 46 to 43. And Dallas is projected to be down mid-single digits due to the lost business related to the convention center expansion and renovation that's ongoing.

And lastly, of our top markets, Bellevue is expected to grow mid- to upper single digits as it laps over renovation comps, but also increased business travel demand and a little bit of World Cup as well. Jeremy?

Thanks, Dennis. Good morning, everyone. Our Q4 2025 hotel EBITDA was $22.4 million. Adjusted EBITDA was $20.2 million and adjusted FFO was $0.21 per share. We were able to generate a GOP margin of 40.2% and hotel EBITDA margin of 33.2% in Q4. GOP margins for the quarter were only down 30 basis points from Q4 2024 despite the 1.8% RevPAR decline in the quarter due to outstanding expense control and stabilizing inflationary increases and hotel EBITDA margins increased by 70 basis points due to $550,000 of property tax refunds in the quarter.

In late December, Chatham closed the sale of the Homewood Billerica for $17.4 million. And over the course of 2025, Chatham completed 4 asset sales for a total of $71.4 million. These asset sales, together with the successful refinancing and upsizing of Chatham's revolving credit facility and term loan in late September, have helped Chatham achieve its lowest ever leverage level and highest ever level of liquidity.

Chatham's strong balance sheet puts the company in an excellent position to continue actively repurchasing shares and to grow opportunistically through accretive acquisitions.

Turning to our 2026 guidance. We expect RevPAR of minus 0.5% to plus 1.5%, adjusted EBITDA of $84 million to $89 million and adjusted FFO per share of $1.04 to $1.14 for the full year. This guidance reflects our decision to exclude noncash stock-based compensation expense from our adjusted FFO effective January 1, 2026, so that our presentation is comparable to how the majority of lodging REIT peers report this measure.

Our guidance reflects the sales of the Homewood Brentwood, Courtyard Houston -- Hampton Houston and Homewood Billerica, which closed in 2025 and collectively contributed $2.1 million to Chatham's 2025 EBITDA. You should also note that Chatham's 2025 EBITDA and FFO included approximately $2.6 million or $0.05 per share of onetime benefits from property tax refunds, workers' compensation refunds and payroll tax refunds, which are not expected to repeat in 2026.

Reflecting the asset sales completed in 2025, our 2025 RevPAR would have been $130 in Q1, $156 in Q2, $154 in Q3, $131 in Q4 and $142 for the full year. In 2025, our RevPAR increased 4.4% in Q1 before declining 0.4% in Q2, 0.9% in Q3 and 1.8% in Q4. So year-over-year comparisons will generally be challenging in Q1 2026 before getting easier over the rest of the year. We generally expect that Chatham's Q1 2026 RevPAR will decline low single digits and then be positive for the rest of the year.

Also note that our capital structure includes $200 million of floating rate debt, and our guidance assumes that SOFR will decline based on the current forward curve, which reflects the assumption of rate cuts in 2026. So our guidance assumes quarterly interest expense will decline over the course of 2026. While our guidance does not reflect any share repurchases or acquisitions, our plan is to continue repurchasing shares and over time to reinvest asset sale proceeds into accretive acquisitions.

This concludes my portion of the call. Operator, please open the line for questions.

[Operator Instructions] Your first question is from Gaurav Mehta from Alliance Global Partners.

I wanted to ask you on some of the dispositions that you have made in '25. As you look into your portfolio, do you think there's room to sell any more assets in '26.

Gaurav, this is Dennis. Nice to talk to you. Listen, I think we probably have 1 or 2 more that we'll opportunistically look at selling. But I think certainly, the half a dozen hotels we've sold over the last 18 months or so kind of did a good bit of trimming. So we'll always look to do a couple here and there, but with the purpose of certainly reinvesting those dollars.

Okay. And maybe on the, I guess, acquisition side, I think in the prepared remarks, you said maybe there's some improvement in the pricing. I'm just wondering if you could maybe provide some more color on, I guess, deploying some of the disposition proceeds from last year and maybe taking leverage up back to historical levels?

Yes. This is Jeff. Gaurav. Certainly, we're comfortable since we've been at this for a long time with leverage levels that we've had from 2010, for example, to 2020. So yes, we are -- we have been digging in here and doubling down on our efforts. I think generally, what we're seeing in the market, since RevPAR has flattened out, and this always seems to be the case, sellers seem to get a little bit more realistic about what their hotel may or may not really be worth and have a little more incentive, I think, to transact if they've got flat RevPAR and EBITDA going down a little bit, such as occurred during 2025 and the prospect by most companies in the category that we like -- as you know, is kind of a flattish RevPAR outlook. Again, we think for us and maybe for others, that's a very conservative outlook, but we're going to take advantage of that outlook by owners as well and try to make a few deals.

All right. Great. Maybe on, I guess, the expense and margin side, where do you expect to see some pressures in '26. I think on the wage side, it seems like it's coming down to mid-single digits, maybe outside of wages, other expense line items?

Yes. I mean, listen, I think especially early in 2026, utilities have a little bit of pressure on them just because of the cold storms that have hit, whether it was the Central and Southeast last month and now -- or earlier this month, but also now you have the Northeast.

So I think you probably -- all of us will have a little bit of utility pressures here in the first quarter. But really outside of that, Gaurav, I mean, I think it's really how much you can control the labor on a wage increase basis. So really, everything else is fairly stable from an operating expense standpoint.

Your next question is from Aryeh Klein from BMO Capital Markets.

Maybe just following up on the expense side. You've had a lot of success there, and you've generated some real productivity improvements. Just curious how much room you think is left on that front and the ability to kind of keep a lid on costs just from those productivity improvements.

Aryeh, I mean, listen, I think we'd certainly love to say there's always more. But I think as I talked about in my prepared remarks, our headcount is down about 13% year-over-year. Both Chatham and Island are spending a lot of time literally adjusting models every day based on trends, and it was very volatile in 2025. So I think given the fact that we're hopeful that, as Jeff talked about, with wage increases kind of averaging right at 2% from the first half of the year to the last half of 2025, that we haven't seen anything that has changed that over the first almost 2 months of 2026.

So for us, it's all about controlling wages and headcount. And we're going to continue to do that throughout the year. And hopefully, that helps us do a little bit better down the road.

Yes. I mean the focus there is not trying to continue to find cuts that probably don't exist, but it is to flow -- if it's a nominal RevPAR increase, it's to flow that money to the GOP and to the bottom line. And I think we have proven that Island has been pretty successful in doing that. So really, that's for this year. If we get some upside, we want to see that flowing right to the bottom line to enhance those returns for everybody.

I appreciate that color. And then maybe just a couple of quicker ones. You gave a lot of detail on your market level expectations for 2026. Curious just overall, the impact from the World Cup and your expectations around that, given that you do have a number of markets that seem well positioned there. And then -- just on the Portland, Maine development, just the costs associated with that. I don't believe that's included with CapEx. Just wanted to confirm that.

Yes. So I'll start with Portland. The cost is not included in our CapEx number. We'll come out with official guidance on that probably at our next earnings call, Aryeh, with respect to dollars and especially the timing of the flow of those dollars over the project to make sure everybody at least has it modeled correctly.

And then with respect to the World Cup, I mean, listen, I think we've -- certainly when you look at it by market, we're going to be fairly conservative at the outset. And just to give you a specific example, the International Broadcast Center at the Kay Bailey Convention Center in Dallas, just within the last few months, we had a smaller group that basically canceled for the hotel. I think you probably -- you hear that in some locations, there's concerns about demand and tickets and who's coming in and everything like that.

So yes, it's going to be very good for the markets in general. But at least where we sit here today, we're going to be -- we're still going to be a little bit conservative about how that ultimately translates because there is still some uncertainty over demand related to events in certain cities, whether that's L.A., Seattle and even at the -- even in Dallas.

[Operator Instructions] And your next question is from Tyler Batory from Oppenheimer.

Just wanted to expand on the RevPAR guide a little bit, and you gave some details on markets and whatnot. But just really trying to get a good sense on the cadence that we should expect for the year. I think you said down low single digits in Q1 and then up the rest of the year. I mean how much of that is just the comps? Maybe remind us some company-specific building blocks this year that are contributing to the growth in the last 3 quarters of the year compared with the first quarter?

Yes. I mean I think basically, if you look at first quarter this year, tough comps due to, one, inauguration last year and the wildfires. And then for the last 3 quarters of the year, you're kind of looking at a 0 to 2-ish, 1.5-ish RevPAR growth for the balance of the last 3 quarters. A lot of that is due to the effects of whether that was in D.C. with the 3 hotels with all the shutdowns. You had a lot of uncertainty and unrest in L.A. that really pulled back some demand that I think should aid us this year.

We have a couple of like onetime events. Obviously, Pittsburgh is hosting the NFL draft in the second quarter right outside the doors of our hotel. So that's going to be a plus in the second quarter. And I think from a summer perspective, if you look at it, we're trading off a Ryder Cup out on Long Island with a U.S. -- I believe it's U.S. open at Shinnecock. So that really shouldn't affect much. But I think in general, across some of our larger markets where there was some -- should be some easier comps the last 3 quarters of the year.

Okay. Great. From a revenue management perspective, how are you thinking about the mix of occupancy, ADR in 2026? And how is that influencing your margin expectations for the year.

Yes. I mean I think, generally speaking, it's mostly ADR growth for 2026. I think it might be just a -- yes, it's basically kind of flattish occupancy. So strictly ADR.

Okay. So switching gears to capital allocation. You've been pretty active repurchasing shares. I assume you still view the stock as undervalued, given where shares are today, how aggressively do you expect to deploy the rest of that authorization? And just help us think about balancing potential buybacks with what you might do in terms of acquisitions?

Yes. I think, Tyler, I'll start. I mean, I think with respect to the repurchase plan, we intend to utilize most, if not all of it in 2025. If you look at kind of the portfolio and the free cash flow from '25 and 2026 after CapEx and after dividends, it's -- essentially, we're using all of that over the last -- between those 2 years to utilize the entire repurchase, which we think is just -- it's how it should be done, right? You're generating excess cash flow after dividends, and we believe we're undervalued there, and we're going to buy it back.

So -- and I think, listen, from an external perspective, buying hotels, as we've talked, we haven't really done -- the last hotel we bought was Phoenix in May of 2024. So it's been almost 2 years. We've been very just patient in understanding not only from the financing and what Jeremy did with the balance sheet over the last couple of years, that was a lot of work. But we're in a great position from a debt perspective to hopefully do some deals. And of course, it's got to be at a cap rate that makes money, especially and makes sense in light of where we're trading. But that's why we've been pretty patient. So we're hopeful to be able to execute on that a bit more here in 2026.

There are no further questions at this time. Please proceed.

Well, I think we can wrap it up by saying thank you all for being on the call and being attentive, good questions. As I said, hopefully, this guidance is conservative, and we do have the benefit of some, as Dennis explained, some positive attributes for this year on the top line that should come to fruition and flow that to the bottom line is the focus. So we will look forward to talking to you for the next quarter. Thanks.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may now disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the Chatham Lodging Trust Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, November 5, 2025.

I would now like to turn the call over to Mr. Chris Daly. Please go ahead.

Thank you, Kelsey. Happy Wednesday, everybody, and welcome to the Chatham Lodging Trust Third Quarter 2025 Results Conference Call. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our most recent Form 10-K and other SEC filings. All information in this call is as of November 5, 2025, unless otherwise noted, and the company undertakes no obligation to update any forward-looking statements conform the statement to actual results or changes in the company's expectations.

You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at chathamlodgingtrust.com. Now to provide you with some insight into Chatham's 2025 3rd quarter results, allow me to introduce Jeff Fisher, Chairman, President and Chief Executive Officer; Dennis Craven, Executive Vice President and Chief Operating Officer; and Jeremy Wegner, Senior Vice President and Chief Financial Officer.

Let me turn the session over to Jeff Fisher.

Jeff?

Thanks, Chris. Good morning, everyone. I certainly appreciate everybody being on our call today. Before I comment on our third quarter operating results, I'd like to update some of our key corporate initiatives. Earlier this year, we completed the sale of 5 hotels with an average age of 25 years at an approximate 6% capitalization rate and each of these 5 hotels were among the sixth lowest RevPAR hotels in our portfolio.

In the fourth quarter, we are under contract to close on the sale of another hotel for $17 million with similar characteristics and had similar returns to the previously sold 5 hotels. These opportunistic sales add liquidity to execute on other value-enhancing opportunities for the company. On that note, we've now repurchased approximately [ 500,000 ] or 1% of our outstanding shares of our stock at an average price of $6.85 and Included in that amount is approximately 230,000 shares that we have repurchased since the end of the third quarter.

We intend to remain active repurchasers of shares moving forward. since we believe we are trading at a meaningful discount. Lastly, we committed an upsized and recast syndication of our credit facility and term loan further enhancing our financial condition and lowering overall borrowing costs. We are one of the lowest leveraged lodging REITs and have great flexibility to create value by using that capacity to repurchase shares acquire hotels and fund our upcoming home to Portland main development. With respect to acquiring hotels, we are somewhat more bullish on our ability to grow externally than we've been in the last 18 months.

Deal flow underwriting has been steady here and it seems like seller pricing expectations in some cases are becoming more reasonable. We have been and will continue to exercise great patience and discipline as operating fundamentals are quite volatile. But of course, it is that volatility that I think is partially the catalyst for some movement in cap rates upward.

The market will have to make sense for us. And of course, yields have to approximate the implied yield on buying our own stock. We want to invest in markets that are going to benefit from continued population migration and business investment. The U.S. is poised to benefit from this potential capital expenditure as they're calling it super cycle based on the announced investments from companies based here and abroad. And more specifically, it's expected that the Central and Southeastern U.S. will be the biggest beneficiaries and some of these investments and additions of employment.

Operationally, despite RevPAR growing -- excuse me, we'd like it to be growing 2.5% and declining 2.5%. We were able to minimize our margin decline to less than 100 basis points and we're able to deliver hotel EBITDA and FFO per share towards the upper end of our guidance range and beating consensus estimates. Looking at RevPAR performance in our largest markets, I want to address our Silicon Valley performance because on the surface, the decline appears weak. RevPAR at our hotels in Mountain View and San Mateo produced RevPAR growth of 2.5% in the quarter, while RevPAR growth at the 2 Sunnyvale hotels fell 9%.

The underlying fundamentals in Sunnyvale are healthy with the third quarter submarket and competitive set RevPAR up as opposed to our 2 hotels, RevPAR was up 3% and 6%, respectively, in the market. Given the underlying health of the market when one of our larger corporate accounts asked us to substantially discount our room rates we declined to participate. We believe the better long-term option for us is to maintain our rate integrity, and that will benefit us in the future as the market outlook, as we've discussed, continues to remain strong and the market is growing and recovering.

Our coastal Northeast and Greater New York markets experienced RevPAR growth of 2% and 8% in the quarter, and the coastal Northeastern portfolio remains fantastic, benefiting from long-term supply growth restrictions in those markets, combined with the balance of leisure business and government demand. In fact, third quarter RevPAR at our Hampton in Portland, Maine, showed an all-time record high for quarterly RevPAR and any of our hotels. Just fantastic and another reason why we are excited about our upcoming development in downtown Portland on the waterfront.

All 3 hotels in Greater New York grew RevPAR in the quarter, led by our residents in Holtsville Long Island, which had growth of 28%, due in part to having the Ryder Cup on Long Island in September; however, that hotel was still having a great year through August with year-to-date RevPAR up 17% as corporate demand has greatly improved really for the first time in that market post COVID. And 3 of our top markets, San Diego, Austin and Dallas were adversely impacted by convention-related demand losses. The Austin and Dallas convention centers are basically closed for renovation, as we've discussed and expansions while San Diego is coming off a record year in convention business in 2024 and our 24th third quarter RevPAR was the second highest quarter ever at that hotel. So the comp is difficult and the softening relative to 2024 in San Diego is really no surprise to us.

Our 6 predominantly leisure hotels, which account for approximately 20% of our EBITDA produced RevPAR growth of 3% in the quarter. Within that group, our SpringHill Suites Savannah had a great quarter with RevPAR up over 30% and as it has really surged after completing a fantastic renovation that was very well received by our guests and customers. Our fourth quarter RevPAR guidance assumes that our current RevPAR trend of a decline of approximately 3% continues for the rest of the year, unfortunately. It's really been a crazy year, a volatile year, hotel room demand and thus revenue has certainly seen its share of ups and downs this year. encouraging business demand growth across the portfolio in the first quarter has been adversely impacted. Since then, by Dodge travel spending, halt tariff threats, liberation day impacts and, of course, inbound international travel and especially from Canada being down substantially. And now with the government shutdown certainly doesn't help matters.

Many of these challenges should be short term; however, and the impact primarily on 2025 performance. But looking forward, lodging dynamics are very favorable. Forecast for super cycle capital investments, limited supply growth and moderating wage increases all tilt in favor of RevPAR and margin expansion as we look forward to next year. Add to this, what is projected to be a favorable interest rate curve and thus lower borrowing costs should enable us to accretively grow as we move forward. good years are ahead.

With that, I'd like to turn it over to Dennis.

Thanks, Jeff. Good morning, everyone. Continuing on with some color related to Silicon Valley. Excluding our 2 Sunnyvale hotels, portfolio RevPAR would have been down 1.7% in the quarter. Occupancy at the 4 Silicon Valley hotels was still a solid 75%, and with a range of 73% to 83% occupancy in the quarter between the 4 hotels. Importantly, October RevPAR at our 4 Silicon Valley hotels was flat to last year compared to the down 4% trend for the quarter. RevPAR was down approximately 5% at the 2 Sunnyvale hotels and up 7% at the other 2 hotels. So just adding on to what Jeff talked about earlier in the call, our Silicon Valley hotels were essentially able to, over the last few months, replace approximately half of the business that we chose to pass on related to one of our larger corporate clients. So good trend developing as we move into the fourth quarter. with respect to Silicon Valley and those 2 hotels.

Obviously, our 3 Washington D.C. hotels have been for quite a ride this year as evidenced by the following trends, which was First quarter RevPAR was up 6%. Second quarter RevPAR was down 2%, feeling the effects of [indiscernible] when April RevPAR was down 9%. Our third quarter RevPAR really shows the impact of just the threat of a shutdown as we typically see just the threat of shutdown start to impact government travel into those markets. Our RevPAR for those 3 hotels was flat in July, then down approximately 9% in August and September.

The government shutdown impacted the third quarter portfolio RevPAR by approximately 40 basis points. In October, the effect of those 3 hotels which were down 19% actually impacted RevPAR by 170 basis points. And when you just take out those 3 hotels, our RevPAR was down only about 1% for October. Outside of our top markets, our other tech heavy hotel, our Bellevue Residence Inn produced RevPAR growth of 1% in the quarter. As we've talked about for the last really 2 quarters, vehicle border crossings and inbound travel from Canada has been an impact, specifically in that region. If you look at vehicle border crossings from British Columbia into Washington State, they were down approximately 35% in the third quarter compared to last year. Having said that, that's better than the 47% and that vehicle crossings were down in the second quarter. So at least from a trend perspective, that crossing decline is moderating.

And our Home 2 in Phoenix, As a reminder, it opened in early 2024, and we acquired the hotel in late May of 2024. RevPAR was up approximately 6% in the quarter. The fourth quarter looks quite strong in Phoenix and our October RevPAR at that hotel was up another 8% year-over-year. Hotels in the Sunbelt continue to perform well for us. In addition to the previously mentioned Savannah Hotel, our 2 Charleston hotels had another solid quarter with RevPAR up 4%. Our 2 Florida hotels in Destin and Florida -- excuse me, Destin in Fort Lauderdale, had flat RevPAR growth in the quarter.

Our top 5 RevPAR hotels in the quarter where our Hampton in Portland, Maine, as Jeff mentioned, with an all-time high of $354 followed by our residents in Washington, D.C. with RevPAR $247 and our Hilton Garden Inn Portsmouth with RevPAR of $239, followed by our Hilton Garden Inns, Marina Del Rey, residents in White Plains and Holtsville, New York with [indiscernible] of approximately $204. Just to clarify, the second hotel was our Hilton Garden Portsmouth, not our residents in Washington, D.C.

On the operations front, our gross operating profit margins declined 70 points in the quarter to a still strong 44%. As we all know, labor and benefits are by far our largest expense and on a per occupied room basis, those costs were up only 2% in the quarter. Head count is down approximately 3% from year-end at our comparable 34 hotels. With so much top line volatility, it is imperative that we closely monitor our staffing levels and productivity. Outside of labor and benefits, our other operating profit was up slightly year-over-year and improved margins by 30 basis points.

Most other operating line items were basically stable year-over-year, though guest acquisition-related commission costs were up approximately 15% or $0.5 million. Our expenses there have increased really just due to the different booking channels year-over-year in the quarter. We had 16 hotels produced over $1 million of GOP in the third quarter compared to 17% in the second quarter, with the only difference related to a DC area hotel. What is quite incredible is that for the first time ever, following an all-time RevPAR high, the Hampton and Portland led all hotels with GOP of $2.5 million in the quarter unseating our Gaslamp Residence in that has led the way for the past 14 quarters.

What's even more incredible is that the Hampton and Portland only has 125 rooms, while the Gaslamp Residence Inn has 240 rooms. Gas Line President in did finish second in the quarter. And rounding out the top 5 were 2 of our Tectum hotels are Bellevue and Sunnyvale 2 residents and our Hilton Garden Inn in Portsmouth, New Hampshire. On the CapEx front, we spent approximately $4 million in the quarter. Our last 2 renovations planned for 2025 are commencing in the fourth quarter and that being the residence in Austin, Texas, which starts this week, and our resident in Moulton View, California, which starts next month.

Our common dividend, which was increased almost 30% earlier in the year, is currently $0.09 per share per quarter, and we will continue and we'll reevaluate our common dividend in early 2026.

With that, I'll turn it over to Jeremy.

Thanks, Dennis. Good morning, everyone. Our Q3 2025 hotel EBITDA was $28.8 million, adjusted EBITDA was $26.2 million and adjusted FFO was $0.32 per share. Our GOP margin for the quarter of 43.6% was only down 90 basis points from Q3 2024 and despite the challenging RevPAR environment due to continued strong expense control and moderating inflationary cost pressures. In Q3, we were able to hold year-over-year increase in labor and benefits cost per occupied room to 1.7%.

In Q3, we continue to strengthen our balance sheet by refinancing our revolving credit facility and term loan, which were our only near-term debt maturities. With this transaction, we upsized our revolving credit facility from $260 million to $300 million and upsized our term loan from $140 million to $200 million.

Our low leverage of 3.5x net debt to EBITDA and the liquidity provided by our $300 million undrawn revolving credit facility provide us with significant capacity to pursue investment opportunities. In Q3, we ramped up utilization of our share repurchase program and repurchased 255,000 shares for $1.8 million and subsequent to the end of Q3 and early October, we repurchased an additional 230,000 of shares for $1.5 million. At current price levels, we believe acquiring [indiscernible] stock is a very attractive investment, and we continue to expect to actively repurchase our shares in the future.

Turning to our Q4 and full year 2025 guidance, we expect RevPAR of minus 3.5% to minus 2.5% and adjusted EBITDA of $16.7 million to $18.3 million and adjusted FFO per share of $0.14 to $0.17 in Q4 and RevPAR growth of minus 0.7% to minus 0.3%, adjusted EBITDA of $89.2 million to $90.8 million and adjusted FFO per share of $0.96 to $0.99 for the full year. This guidance assumes no further asset sales, capital market activity or changes in floating interest rates. This concludes my portion of the call.

Operator, please open the line for questions.

[Operator Instructions] And your first question comes from Gaurav Mehta from Alliance Global Partners.

I wanted to I wanted to ask you on investment opportunities. Can you maybe provide some more color on what you guys are seeing in the acquisition market as you're selling hotels? Are there any opportunities to redeploy that capital into acquisition in the future?

Yes. I think I'll take that, guar. It feels certainly, and we've been consistently like a lot of companies looking at deals, talking to owners, -- but with RevPAR turning in a negative direction, I think that there's -- does present and usually has in the past some opportunities. I feel like the overall ask is certainly now north even on the asking side, north of 8% on a cap rate basis, whereas everybody was hanging on to a lower number, notwithstanding what the hotel REITs trade at as an implied cap rate or otherwise.

And I think what we're seeing in a few cases, is perhaps the opportunity, as I said, and the goal is to try to create long-term shareholder value here with great hotels that will grow at least as good, if not better than the existing portfolio that are newer that are in the brands that we all we specialize in, and I think we might be able to do that with some yields that will approximate what we can do by buying our own stock as Jeremy was talking about.

Yes. And Gaurav, I think I'll just add 1 thing to add on to Jeff, is when you combine all that with some of these newer assets are coming up on their next wave or really, in a lot of cases, first waves of renovations -- and as an owner who might have been relatively new to the industry now has to look at an environment that's a bit choppy and has to come up with $2 million to $3 million to renovate a hotel that decision might spur a little bit more activity as well. So we're in a great financial position to be able to take on some of these opportunities in a market that might make others a little bit nervous, too. .

Great. Second question on the development. Can you remind us on the timing of the Portland main development?

Yes. I mean, Gaurav, I think we're kind of proceeding as we'll start site work on that in 2026, probably be a 21- to 24-month construction time line. So kind of an early 2028 opening.

I think the seasonality and the results that Dennis was talking about in the existing asset really dictate. We have to be very careful about when we start digging up the parking lot because it's the same land parcel as Portland has continued, it seems beyond obviously, summer months, well into the month of October to achieve ADRs, particularly on weekends that are over $300 a night. So we're going to look at that carefully and skirt those time frames as well.

Yes. I mean I think October RevPAR at our Hampton in Portland was, I believe, around $380. So just to add on to Jeff's comment. That hotel does really well in almost every month except for the late December and January and early February when just weather is a little tricky. .

And your next question comes from Tyler Batory from Oppenheimer.

So I wanted to really dive into the RevPAR performance for a little bit, if I could. And you missed the midpoint of the guide. Just isolate for us what really drove the variance? Just trying to understand what surprised you in the quarter? And what caused that shortfall?

Yes. Tyler, it really comes down to 2 things. our decision on the 2 hotels in Sunnyvale and basically the government shutdown impact on August and September. So you had the 2 Sunny May hotels are basically 10% of our room count. And for those 2 hotels to be down 9% in the quarter, following a first and second quarter with growth in the mid-single digits was a very significant impact that I think, as Jeff talked about, is really, for us, we decided yes, it ultimately was a short-term hit to us, but maintaining that rate integrity. And I think as I spoke about, we were able to, in essence, replace half of that business in October already, I think, ultimately is going to prove to be a pretty good decision long term.

And then obviously, in Washington, D.C., it was flat RevPAR growth in July. And then what we historically see. And by the way, we saw this back in -- late in the first and early in the second quarter with the [indiscernible] cuts and the threat of a government shutdown is that as soon as the threat of a government shutdown starts or is kind of out there. Generally speaking, that government travel pulls back. And we saw that leading into the actual shutdown with RevPAR at our 3 D.C. hotels down 9% in August and September. That's it.

Awesome. So thinking about the outlook and the guide for Q4, our RevPAR down in Q3, you're guiding down 2.5% to down 3.5% in Q4. So the decline is getting worse. Last time that we spoke last time you reported, just looking at kind of some of the industry forecast, there was an expectation that Q4 is going to be a little bit better compared with Q3 just from a year-over-year perspective. So just kind of unpack what's implied in that Q4 and kind of why things on a sequential basis getting deteriorating and getting a little bit worse.

Yes, absolutely. That really has all to do with essentially the same answer, but just to really put a nail in it is the 3 DC hotels reduced our October RevPAR by approximately almost 200 basis points, 170 basis points. So just those 3 alone in essence, if you excluded those, our RevPAR was off 1% for the month of October. So we obviously have -- we improved Silicon Valley in fourth quarter to flat RevPAR -- I mean, in October to flat RevPAR. But the moderating and lessening range of RevPAR is strictly due to the shutdown in D.C. .

Okay. And then taking a step back and also trying to think about 2026, the convention calendar and some of the disruption in Austin and Dallas, San Diego coming off of a record year in 2024. How are -- how is the convention business shaping up for next year in some of those markets. And then the supply picture, I think, has been pretty favorable for lodging. So not sure if you can comment on just supply growth in your markets, whether it's next year or the next couple of years?

Yes. I mean with respect to the convention calendars, I mean, listen, I think Austin and Dallas are essentially going to maintain kind of where they are until -- and with respect to San Diego, you had an all-time year last year. It came down this year, it will be something similar next year. So I think what you also have in San Diego is one thing that did happen that had a little bit more of an impact as well this year. is you had the new Ryman property that opened up just outside of San Diego, and that obviously had an impact on smaller conventions that might have chosen to go there instead of the primary San Diego Convention Center.

So I think as you move forward on that respect for '26, you probably have no incremental adverse impact from those 3 hotels. And then I think if you look at the supply outlook for our markets, supply is less than 1%. And and is projected to remain that way for next year as well. So I think I was just adding on to Jeff's concluding comment, which was -- when you look out into '26 and '27 and the overall macro looks really good, not only to the industry, but specifically to us, with respect to some of these key markets. And I think just adding to what Jeff said, 2025 has just been a nut job of a year in terms of just all these things that have impacted the industry and us. And I think when we can get past a lot of these short-term things, which I think are primarily focused here in 2025.

I think the outlook for not only the industry, but for us, and I think just with our upside to some of these markets should be pretty rosy at this point. So -- It's a little choppy.

So switching gears to the margin side of things. I think the performance in the quarter was really quite strong. all things considered. Just talk a little bit more about how you're able to do that, or thing you want to call out that was just kind of driving the performance there?

Yes. I mean, it's -- listen, we're putting a lot of focus and energy on day-to-day and week-to-week management of head count and productivity specifically with respect to anything related to housekeeping. And obviously, that's very that fluctuates based on occupancy levels. So the key is to really keep a laser eye on those items and really just managing incoming and current wage levels. As you look at where we project moving forward, generally speaking, our hospitality staff, their annual wages are generally up for review every July 1.

As you look at the wages we put in place across the portfolio, the average wage increase for us post July 1 year-over-year is about 2% as well. So I think kind of as wages have kind of stabilized, we've been able to maximize efficiencies in our housekeeping department. And I think the availability to hire labor for our hotels has really been fairly stable for the past 12 to 18 months. So we're able to, I think, have a 2% wage increase across the board is, again, pretty favorable when you look forward for us.

So last question for me, just capital allocation and balance sheet is in great shape. -- plenty of liquidity, just given the backdrop, given where the stock trades, just rank order for us your priorities for your capital here?

Yes. I mean, listen, I think the first is I think it's what Jeff had in his comment in order, which was we're active repurchasing shares and we will be and we'll continue to be active purchasing shares. We have a $25 million plan in place, which is about or it's just a little bit less than 10% of our current equity market cap. So we'll continue to be really active there. And then I think the next priority is obviously, acquiring hotels if we can do it. And we obviously have our Home to Portland development. So I'd say #2 and #3 are kind of about the same, but in the meantime, we're going to be active purchasing shares. .

[Operator Instructions], Your next question comes from John Sangani from Britney Holdings.

Good morning, and thank you for the overview here. My question is primarily related to capital deployment as well. From my kind of calculations here, it looks like the stock is trading around $140,000 a key any kind of development right now, what we've been seeing is $300 a key. Can you walk me through the decision-making process on why to pursue the Portland development when the stock is trading probably around half of what that cost per key would be.

Sure. This is Dennis. Nice to talk to you. I mean, listen, where are our equity price is trading at whether it's $140,000 or $150,000 or $160,000 a key, that's made up of -- that's comprised of a valuation based on the entirety of our 34 hotels this specific hotel, you have to look at that deal individually and look and see what the returns project out to be for that specific asset and whether that's going to add value to the overall portfolio. And if you look at we're only going to do the deal if we believe it's going to make long-term sense. And based on a lot of factors, which is the market is very restrictive on new hotel development. The market is very popular. The RevPARs and margins we're able to obtain and able to achieve on our existing Hampton but also what we project for this particular hotel will -- based on where we are at the moment and where we believe we'll be after developing that asset, we'll drive and earn returns well above where the portfolio is returning.

So would certainly add value to not only the company but obviously then ultimately to our shares and be accretive to that value. So you have to look at each opportunity individually, whether it's buying a hotel developing a hotel or selling a hotel. And if those add value ultimately to what you want to do with that with your capital dollars, that's how we assess it.

Got it. And then I think just on the acquisition side, you mentioned potentially looking for acquisitions. How would you allocate that discuss that and review that against the share price because that's more of an immediate hit 1 way or the other with respect to buying shares or acquiring an existing property?

Yes. I mean, I think for us, it's -- what we're trading at on an equity share price. You look at the acquisition, are the yields similar? Does the acquisition provide growth, either consistent with or higher than your portfolio? And does it ultimately drive incremental distributable cash flow that ultimately, you'd bring back and deliver to your shareholders via dividend. So yes. .

And there are no further questions at this time. You can proceed with the conference.

Well, thank you all for the questions. Thank you all for being here today with us, and we will talk to you as time goes by for better times, I think, as we move into next year. .

Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation and ask you please disconnect.

Have a great day.

Ladies and gentlemen, good morning, and welcome to the Chatham Lodging Trust Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Chris Daly, President of DG Public Relations.

Thank you, Ryan. Good morning, everyone, and welcome to the Chatham Lodging Trust Second Quarter 2025 Results Conference Call.

Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our most recent Form 10-K and other SEC filings. All information in this call is as of August 6, 2025, unless otherwise noted, and the company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at chathamlodgingtrust.com.

Now to provide you with some insight in Chatham's 2025 second quarter results, allow me to introduce Jeff Fisher, Chairman, President and Chief Executive Officer; Dennis Craven, Executive Vice President and Chief Operating Officer; and Jeremy Wegner, Senior Vice President and Chief Financial Officer. Let me turn the session over to Jeff Fisher. Jeff?

Thanks, Chris. Good morning, everyone. I certainly appreciate everybody being on our call today. Before I comment on our second quarter, I want to update some of our key corporate initiatives. We completed the sale of all 5 hotels we listed in the fourth quarter and are very happy with the results. We sold 5 hotels, as a reminder, with an average age of 25 years at an approximate 6% capitalization rate on 2024 NOI levels for proceeds of $83 million. Each of these 5 hotels were among the 6 lowest RevPAR hotels in our portfolio at cap rates lower than our cost of debt and are value enhancing.

We currently have 2 additional hotels listed for sale. And of course, it's too early in the process to comment on the specifics of each transaction, but these would be further opportunistic sales. We intend to use the proceeds from the 5 asset sales as well as those currently listed if we sell them to fund our Home2 Portland development, acquire hotels and repurchase shares of our stock, and we look forward to being opportunistic on all those accounts to continue to add shareholder value where we can.

Our Board of Trustees approved a $25 million share buyback plan in May. And during the quarter, we repurchased approximately 20,000 shares at a weighted average price of $7.02. We intend to be a bit more active in the third quarter given current share price levels. And our balance sheet continues to get stronger as we've reduced our leverage to now only 21% and are projected to create almost $20 million of free cash flow in 2025 after dividends. We positioned ourselves to add value in multiple ways.

During the third quarter, we intend to launch an upsized and recast syndication of our credit facility and term loan further enhancing our financial condition and lowering overall borrowing costs. We're hopeful that process is complete by the time we speak again in November.

Operationally, we're pretty pleased with the results of our second quarter, delivering RevPAR and FFO per share at the top of our guidance range. Second quarter occupancy of 82% matched last year's second quarter occupancy and is a post-pandemic high. Additionally, we hit an all-time high in ADR and RevPAR in May. We grew our operating margins this year. And yes, we did benefit from nonrecurring refunds. But even excluding those onetime impacts, margins would have declined less than 1%, not bad considering the RevPAR results for the quarter.

I believe our Island operating team will do even better in the third and fourth quarters in that regard. After a challenging start to the quarter when April RevPAR was down 4%, we grew RevPAR in May and June to essentially finish with flat RevPAR for the quarter. Our core business segment, business traveler remains healthy and growing as we are seeing our highest occupancies during the week. When comparing us to our peers, I want to reiterate that we've beaten industry RevPAR growth for now 14 consecutive quarters or 3.5 years.

Our largest market, Silicon Valley, continued its recovery to pre-pandemic levels, and it was good to see our occupancy at all 4 hotels reach 80% in the quarter, which is an important hurdle. The amount of investments being committed by tech companies, combined with the Applied Materials expansion and the [ NVIDIA ] Innovation Center will certainly help facilitate additional demand growth in the valley, and those demand generators are around the corner from our 2 large hotels in Sunnyvale.

Another good sign of the underlying momentum in Silicon Valley is that multifamily rental growth rates are accelerating. For example, in their recent quarterly report, Essex Property Trust pointed out that their highest growth rates are in the Northern California regions. Our press release included details on our largest market performance, and Dennis will expand further on those, but I want to highlight some interesting tidbits from other markets.

Our Sun Belt markets are performing well with our 2 Charleston hotels showing strong growth. And encouragingly, our 2 Florida hotels experiencing RevPAR growth in the quarter after being down last year and in the first quarter this year. Texas, as a reminder, 3 of our 5 hotels are being adversely impacted due to the closure of their cities, respective convention centers or expansion and that being specifically Downtown Dallas and Austin. RevPAR in the entire Austin market is down 6% year-to-date and down 14% in the quarter, with the only good news being the domain market is less bad than that at down 5% in the quarter and 11% year-to-date.

In Seattle, the entire market, including Bellevue is soft and feeling the effects of reduced Canadian travel with RevPAR down 2% year-to-date and 4% in the second quarter. The automobile border crossings in the region were down 47% in the second quarter. And lastly, driven by some great events, our second quarter in Pittsburgh was huge with growth of 23% and a second quarter RevPAR of $161 was its highest second quarter in history. Second quarter events -- special events included its first Motocross Championship in April, 3 concerts and the Monster Jam in May and then the U.S. Open in June. Next year, during the second quarter, we have the NFL draft right outside our front door, which should be great for the hotel.

As we look forward ahead to the balance of the year, we are essentially leaving our guidance unchanged. Growing business travel demand across a good portion of our portfolio is encouraging. Yet offsetting that is weakness in the convention demand in Austin, Dallas and San Diego, which had an all-time best year in 2024. Leisure demand has held up well for us, yet the decline in travel from Canada and Europe is certainly impacting the industry overall. For us, government travel rebounded post Liberation Day after our 3 D.C. hotels saw RevPAR decline 9% in April. RevPAR was up approximately 2% for the balance of that quarter.

As an industry, I believe we're poised for some better performance in the coming years. Supply, demand, that's the key here. And of course, we all know that new supply should continue to be muted for some time as we look forward. It's expensive to build, and it's my belief that development only makes sense in some very special markets in the U.S.

Looking past 2025, current GDP growth rates are encouraging, and the outlook is even more so given the massive investments being made by companies across the U.S., including the substantial commitments made to the technology advancements and all things, AI. Adding to this is all the announced foreign investment coming in the U.S. in the coming years. Historically speaking, we all know there's a strong correlation between GDP growth and RevPAR growth.

Operationally, as a reminder, we've got great internal growth potential with the recovery -- continued recovery of the Silicon Valley hotels. There's quite a bit happening in the market, not only with the largest companies in the world that are based there and the future continues to look bright. Silicon Valley once again took over the #1 ranking for start-ups and as the global epicenter of innovation with abundant capital and continuously creating groundbreaking technologies.

In conclusion, I'm excited about our prospects going forward. We've executed on most all strategic fronts and sit in a great position to grow and add value with a very strong balance sheet. With that, I'd like to turn it over to Dennis.

Thanks, Jeff. Good morning, everyone. Some additional RevPAR color. RevPAR growth at our 4 Silicon Valley hotels like Jeff said, was up 3%, and we are able to grow hotel EBITDA an additional 3% to almost $5 million. Our Silicon Valley hotels were really no different than our portfolio and that April was quite soft due to the consecutive Easter and Passover holidays, along with the initial reactions from Liberation Day.

Within the quarter, RevPAR at our 4 Silicon Valley hotels was down 2% in April, then up 3% in May and a strong 6% in June. At our Home2 in Phoenix, as a reminder, it opened in early 2024. We acquired the hotel in late May of 2024, and RevPAR was up over 60% in the quarter. As we enter the fall, we are encouraged with our sales efforts there, especially related to the convention center and other group-related business that often has to be targeted at least a year in advance.

L.A. RevPAR was up 1% in the quarter as demand related to the California wildfires pretty much left the market and especially our Woodland Hills Hotel, where we had a significant amount of business there in the quarter. Within our L.A. market, our 3 hotels, our Residence Inn Anaheim was up 6% and our Marina del Rey Hilton Garden Inn was up 3% with our Home2 Woodland Hills down 5%. Our 6 predominantly leisure hotels account for about 20% of our EBITDA and they had a great quarter with RevPAR surging 4% when you exclude our Portsmouth Hilton Garden Inn that was under renovation into the quarter.

Our top 5 RevPAR hotels in the quarter were our Residence Inn Washington, D.C. with RevPAR of $239, followed by our Gaslamp Residence Inn and both of those RevPARs were the highest second quarter RevPARs in each of their respective histories. Rounding out our top 5 were our Hilton Garden Inn, Marina del Rey, our Residence Inn White Plains, New York and our Hampton Portland, all 3 with RevPAR over $200 in the quarter.

On the operations front, for the third consecutive quarter, we drove our gross operating profit margins higher, 30 basis points above last year's levels. Although we benefited from about $800,000 workers' compensation-related refund, it was really attributable to very good claims experiences and kudos to our operating team for minimizing those costs. As we all know, labor and benefits are by far our largest expense and on a per occupied room basis, these costs were down 7%. But when you take out the impact of that refund labor and benefits, we're still down year-over-year on a per occupied room basis.

We continue to allocate meaningful energy closely monitoring our productivity at that level. Most other operating line items were relatively stable year-over-year, though guest acquisition-related commission costs were up approximately 15% has increased -- our exposure has increased really due to just different channels of booking business in the quarter. That increase impacted margins by approximately 30 basis points in the quarter. We had 17 hotels produce over $1 million of GOP in the quarter. And for the 14th consecutive quarter, our Gaslamp Residence Inn led the way with GOP of almost $3 million.

Our 2 Sunnyvale Residence Inns made the top 5 for the first time since the heavy intern summer of 2021, coming in at second and fifth respectively. And not to be outdone, our Embassy Suites Springfield, Virginia delivered GOP of $2 million in the quarter and coming in fourth despite a tough market was our Bellevue Residence Inn with GOP of $1.6 million. On the CapEx front, we spent approximately $9 million in the quarter. And importantly, so far in 2025, we've added 8 rooms to our existing portfolio, converting meeting and other spaces into more profitable guest rooms. Those rooms include 5 rooms at the Hilton Garden Inn, Portsmouth, 2 rooms at the Residence Inn White Plains in a suite at the Hampton Inn Exeter. Within these locations at any reasonable valuation we've added probably $3 million to $4 million in value to our portfolio at a fraction of the cost. Our last 2 renovations of 2025 are to commence later this year in the fourth quarter, with those being at the Residence Inn Austin and the Residence Inn Mountain View, California.

With that, I'll turn it over to Jeremy.

Thanks, Dennis. Good morning, everyone. Our Q2 2025 hotel EBITDA was $30.9 million. Adjusted EBITDA was $28.5 million, and adjusted FFO was $0.36 per share.

Our GOP margin for the quarter of 46.3% was up 30 basis points from Q2 2024 despite the flattish RevPAR environment due to continued strong expense control, moderating inflationary cost pressures and the benefit of approximately $1.3 million of workers' compensation insurance and tax refunds.

In Q2, we continued our asset recycling by completing the sale of the Courtyard Houston for $23.5 million, which represents an LTM cap rate of 5.8% including $3.6 million of required capital expenditures. Our successful asset recycling over the past few years has reduced the age and improved the quality of our hotel portfolio and significantly reduced our leverage. The reduction in leverage along with the successful refinancing of our material debt maturities over the last couple of years has significantly enhanced our financial flexibility.

This added flexibility gave us the confidence to announce our first ever share repurchase program in Q2, which we started utilizing in June. With leverage of 3.5x net debt to EBITDA as of June 30, we have significant capacity to pursue attractive investment opportunities, whether in the form of acquisitions or share repurchases.

Turning to our Q3 and full year 2025 guidance. We 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 in Q3 and 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 for the full year. This guidance assumes no further asset sales, capital markets activity, changes in floating interest rates.

This concludes my portion of the call. Operator, please open the line for questions.

[Operator Instructions] The first question comes from the line of Gaurav Mehta from Alliance Global Partners.

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?

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.

Okay. 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?

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.

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.

[Operator Instructions] As there are no further questions, I would now hand the conference over to Jeff Fisher for his closing comments. Jeff?

Thank you very much. Well, it was a short call there. Maybe there's a little vacation time involved. But nonetheless, we will continue on our course and look forward to talking to you for the next call. Thanks.

Thank you. Ladies and gentlemen, the conference of Chatham Lodging Trust has now concluded. Thank you for your participation. You may now disconnect your lines.