ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
MARYLAND | 27-0372343 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1997 Annapolis Exchange Parkway, Suite 410 Annapolis, Maryland | 21401 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ý | Accelerated filer | o | |||
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | o |
Page | ||
PART I | ||
PART II | ||
Item 1. | Financial Statements |
March 31, 2016 | December 31, 2015 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Property and equipment, net | $ | 1,912,310 | $ | 1,926,944 | ||||
Intangible assets, net | 36,269 | 36,414 | ||||||
Cash and cash equivalents | 46,955 | 50,544 | ||||||
Restricted cash | 43,129 | 40,361 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $148 and $172, respectively | 21,587 | 15,603 | ||||||
Prepaid expenses and other assets | 23,662 | 17,900 | ||||||
Total assets | $ | 2,083,912 | $ | 2,087,766 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Long-term debt | $ | 777,512 | $ | 769,748 | ||||
Accounts payable and accrued expenses | 65,409 | 62,683 | ||||||
Other liabilities | 45,794 | 45,778 | ||||||
Total liabilities | 888,715 | 878,209 | ||||||
Commitments and contingencies (Note 11) | ||||||||
Preferred shares, $.01 par value; 100,000,000 shares authorized; Series A Cumulative Redeemable Preferred Shares; 5,000,000 shares issued and outstanding, respectively ($127,422 liquidation preference) | 50 | 50 | ||||||
Common shares, $.01 par value; 400,000,000 shares authorized; 60,083,747 shares and 59,659,522 shares issued and outstanding, respectively | 601 | 597 | ||||||
Additional paid-in capital | 1,300,053 | 1,297,877 | ||||||
Cumulative dividends in excess of net income | (105,060 | ) | (88,675 | ) | ||||
Accumulated other comprehensive loss | (447 | ) | (292 | ) | ||||
Total shareholders’ equity | 1,195,197 | 1,209,557 | ||||||
Total liabilities and shareholders’ equity | $ | 2,083,912 | $ | 2,087,766 |
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
REVENUE | ||||||||
Rooms | $ | 103,772 | $ | 81,594 | ||||
Food and beverage | 30,555 | 23,398 | ||||||
Other | 6,284 | 4,298 | ||||||
Total revenue | 140,611 | 109,290 | ||||||
EXPENSES | ||||||||
Hotel operating expenses: | ||||||||
Rooms | 25,501 | 21,100 | ||||||
Food and beverage | 22,766 | 18,466 | ||||||
Other direct | 1,558 | 1,333 | ||||||
Indirect | 50,580 | 43,005 | ||||||
Total hotel operating expenses | 100,405 | 83,904 | ||||||
Depreciation and amortization | 18,484 | 14,927 | ||||||
Air rights contract amortization | 130 | 130 | ||||||
Corporate general and administrative | 5,266 | 4,577 | ||||||
Hotel acquisition costs | — | 369 | ||||||
Total operating expenses | 124,285 | 103,907 | ||||||
Operating income | 16,326 | 5,383 | ||||||
Interest expense | (8,210 | ) | (7,179 | ) | ||||
Income (loss) before income taxes | 8,116 | (1,796 | ) | |||||
Income tax benefit | 1,954 | 3,348 | ||||||
Net income | 10,070 | 1,552 | ||||||
Preferred share dividends | (2,422 | ) | (2,422 | ) | ||||
Net income (loss) available to common shareholders | $ | 7,648 | $ | (870 | ) | |||
Net income (loss) available per common share–basic and diluted | $ | 0.13 | $ | (0.02 | ) |
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Net income | $ | 10,070 | $ | 1,552 | ||||
Other comprehensive loss: | ||||||||
Unrealized losses on cash flow hedge instruments | (318 | ) | (747 | ) | ||||
Reclassification of unrealized losses on cash flow hedge instruments to interest expense | 163 | 61 | ||||||
Comprehensive income | $ | 9,915 | $ | 866 |
Preferred Shares | Common Shares | Additional Paid-In Capital | Cumulative Dividends in Excess of Net Income | Accumulated Other Comprehensive Loss | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Total | ||||||||||||||||||||||||||
Balances at December 31, 2015 | 5,000,000 | $ | 50 | 59,659,522 | $ | 597 | $ | 1,297,877 | $ | (88,675 | ) | $ | (292 | ) | $ | 1,209,557 | ||||||||||||||
Repurchase of common shares | — | — | (7,854 | ) | — | (194 | ) | — | — | (194 | ) | |||||||||||||||||||
Issuance of restricted common shares | — | — | 431,276 | 4 | (4 | ) | — | — | — | |||||||||||||||||||||
Issuance of unrestricted common shares | — | — | 803 | — | 21 | — | — | 21 | ||||||||||||||||||||||
Amortization of deferred compensation | — | — | — | — | 2,353 | — | — | 2,353 | ||||||||||||||||||||||
Declaration of dividends on common shares | — | — | — | — | — | (24,033 | ) | — | (24,033 | ) | ||||||||||||||||||||
Declaration of dividends on preferred shares | — | — | — | — | — | (2,422 | ) | — | (2,422 | ) | ||||||||||||||||||||
Net income | — | — | — | — | — | 10,070 | — | 10,070 | ||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (155 | ) | (155 | ) | ||||||||||||||||||||
Balances at March 31, 2016 | 5,000,000 | $ | 50 | 60,083,747 | $ | 601 | $ | 1,300,053 | $ | (105,060 | ) | $ | (447 | ) | $ | 1,195,197 |
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 10,070 | $ | 1,552 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 18,484 | 14,927 | ||||||
Air rights contract amortization | 130 | 130 | ||||||
Deferred financing costs amortization | 466 | 474 | ||||||
Share-based compensation | 2,374 | 1,792 | ||||||
Other | (221 | ) | (146 | ) | ||||
Changes in assets and liabilities: | ||||||||
Accounts receivable, net | (5,984 | ) | (3,711 | ) | ||||
Prepaid expenses and other assets | (2,562 | ) | (5,973 | ) | ||||
Accounts payable and accrued expenses | 2,323 | (2,531 | ) | |||||
Other liabilities | (11 | ) | (10 | ) | ||||
Net cash provided by operating activities | 25,069 | 6,504 | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of hotel, net of cash acquired | — | (153,592 | ) | |||||
Deposit on hotel acquisition | — | (6,150 | ) | |||||
Improvements and additions to hotels | (3,850 | ) | (12,917 | ) | ||||
Change in restricted cash | (2,768 | ) | 2,631 | |||||
Net cash used in investing activities | (6,618 | ) | (170,028 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from sale of common shares, net of underwriting fees | — | 153,962 | ||||||
Payment of offering costs related to sale of common shares | — | (184 | ) | |||||
Borrowings under revolving credit facility | 25,000 | 190,000 | ||||||
Repayments under revolving credit facility | (15,000 | ) | (155,000 | ) | ||||
Scheduled principal payments on mortgage debt | (2,649 | ) | (2,584 | ) | ||||
Payment of deferred financing costs | — | (2,321 | ) | |||||
Deposit on loan application | (3,200 | ) | — | |||||
Payment of dividends to common shareholders | (23,575 | ) | (16,281 | ) | ||||
Payment of dividends to preferred shareholders | (2,422 | ) | (2,422 | ) | ||||
Repurchase of common shares | (194 | ) | (1,690 | ) | ||||
Net cash provided by (used in) financing activities | (22,040 | ) | 163,480 | |||||
Net decrease in cash | (3,589 | ) | (44 | ) | ||||
Cash and cash equivalents, beginning of period | 50,544 | 29,326 | ||||||
Cash and cash equivalents, end of period | $ | 46,955 | $ | 29,282 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 7,755 | $ | 6,327 | ||||
Cash paid for income taxes | $ | 91 | $ | 17 | ||||
Assumption of mortgage debt related to hotel acquisition | $ | — | $ | 125,000 |
Hotel | Location | Rooms | Net Assets Acquired | Acquisition Date | |||||||
Royal Palm South Beach Miami, a Tribute Portfolio Resort(1) | Miami Beach, FL | 393 | $ | 153,662 | March 9, 2015 | ||||||
Ace Hotel and Theater Downtown Los Angeles | Los Angeles, CA | 182 | 101,687 | April 30, 2015 | |||||||
575 | $ | 255,349 |
(1) | As part of the acquisition, the Trust assumed a $125.0 million term loan with a carrying value that approximated its fair value at the date of acquisition. See Note 6, "Long-Term Debt," for additional information related to the term loan. |
2015 Acquisitions | ||||
Land and land improvements | $ | 64,462 | ||
Buildings | 294,498 | |||
Furniture, fixtures and equipment | 20,518 | |||
Cash | 100 | |||
Accounts receivable, net | 1,823 | |||
Prepaid expenses and other assets | 3,162 | |||
Accounts payable and accrued expenses | (4,089 | ) | ||
Other liabilities | (125 | ) | ||
Mortgage loan | (125,000 | ) | ||
Net assets acquired | $ | 255,349 |
March 31, 2016 | December 31, 2015 | |||||||
Land and land improvements | $ | 319,755 | $ | 319,702 | ||||
Buildings and leasehold improvements | 1,629,003 | 1,628,124 | ||||||
Furniture, fixtures and equipment | 192,528 | 191,092 | ||||||
Construction-in-progress | 4,758 | 3,276 | ||||||
2,146,044 | 2,142,194 | |||||||
Less: accumulated depreciation and amortization | (233,734 | ) | (215,250 | ) | ||||
Property and equipment, net | $ | 1,912,310 | $ | 1,926,944 |
March 31, 2016 | December 31, 2015 | |||||||
Intangible assets: | ||||||||
Air rights contract(1) | $ | 36,105 | $ | 36,105 | ||||
Favorable ground leases(2) | 3,568 | 3,568 | ||||||
39,673 | 39,673 | |||||||
Less: accumulated amortization | (3,404 | ) | (3,259 | ) | ||||
Intangible assets, net | $ | 36,269 | $ | 36,414 | ||||
Intangible liability: | ||||||||
Unfavorable contract liability(2) | $ | 14,236 | $ | 14,236 | ||||
Less: accumulated amortization | (1,766 | ) | (1,668 | ) | ||||
Intangible liability, net (included within other liabilities) | $ | 12,470 | $ | 12,568 |
(1) | In conjunction with the acquisition of the Hyatt Regency Boston on March 18, 2010, the Trust acquired an air rights contract which expires in September 2079 and that requires no payments through maturity. The Trust recorded the fair value of the air rights contract of $36.1 million as an intangible asset and is amortizing the value over the term of the contract. |
(2) | In conjunction with the acquisition of the Denver Marriott City Center on October 3, 2011, the Trust assumed three lease agreements for land parcels underlying a portion of the hotel with initial terms ending July 2068, February 2072 and April 2072. The Trust concluded that the terms of two of |
Origination | Original Principal Amount | Interest Rate | Principal Amortization Period | March 31, | December 31, | ||||||||||||
Maturity | 2016 | 2015 | |||||||||||||||
Revolving credit facility(1) | July 2010 | n/a | March 2019 | Floating | n/a | $ | 120,000 | $ | 110,000 | ||||||||
Term loan: | |||||||||||||||||
Royal Palm South Beach Miami, a Tribute Portfolio Resort(2) | March 2015 | $125,000 | March 2017 | Floating | n/a | 125,000 | 125,000 | ||||||||||
Other mortgage loans: | |||||||||||||||||
Hyatt Regency Boston | June 2011 | $95,000 | July 2016 | 5.01% | 30 | 88,190 | 88,601 | ||||||||||
Courtyard Washington Capitol Hill/Navy Yard(3) | June 2011 | $37,497 | November 2016 | 5.90% | 30 | 34,294 | 34,491 | ||||||||||
Boston Marriott Newton | May 2013 | $60,000 | June 2020 | 3.63% | 25 | 55,822 | 56,221 | ||||||||||
Le Meridien San Francisco | July 2013 | $92,500 | August 2020 | 3.50% | 25 | 86,357 | 86,979 | ||||||||||
Denver Marriott City Center(4) | July 2012 | $70,000 | August 2022 | 4.90% | 30 | 65,982 | 66,285 | ||||||||||
Hilton Checkers Los Angeles | February 2013 | $32,000 | March 2023 | 4.11% | 30 | 30,331 | 30,480 | ||||||||||
W Chicago – City Center | July 2013 | $93,000 | August 2023 | 4.25% | 25 | 87,440 | 88,008 | ||||||||||
Hyatt Herald Square New York/Hyatt Place New York Midtown South(5) | July 2014 | $90,000 | July 2024 | 4.30% | 30 | 90,000 | 90,000 | ||||||||||
783,416 | 776,065 | ||||||||||||||||
Unamortized premium(3) | 123 | 176 | |||||||||||||||
Unamortized deferred financing costs | (6,027 | ) | (6,493 | ) | |||||||||||||
Long-term debt | $ | 777,512 | $ | 769,748 |
(1) | The Trust may exercise an option to extend the maturity by one year, subject to certain customary conditions. As of March 31, 2016, the interest rate in effect was 2.00%. See below for additional information related to the revolving credit facility. |
(2) | On March 9, 2015, in connection with the acquisition of the Royal Palm South Beach Miami, a Tribute Portfolio Resort, the Trust assumed an existing loan agreement with an outstanding principal balance of $125.0 million. The term loan was amended and restated at the time of assumption and provides for a new two-year term and, subject to certain customary conditions, an option to extend the maturity by one year. The term loan bears interest equal to one-month LIBOR plus 2.40%. Contemporaneous with the assumption of the term loan, the Trust entered into an interest rate swap to effectively fix the interest rate on the term loan for the new two-year term at 3.34% per annum. Under the terms of this interest rate swap, the Trust pays fixed interest of 0.94% per annum on a notional amount of $125.0 million and receives floating rate interest equal to one-month LIBOR. The effective date of this interest rate swap is March 9, 2015 and it matures on March 9, 2017. |
(3) | On June 30, 2011, in connection with the acquisition of the Courtyard Washington Capitol Hill/Navy Yard, the Trust assumed an existing loan agreement with an outstanding principal balance of $37.5 million. Based on interest rates on similar types of debt instruments at the time of assumption, the Trust recorded the loan at its estimated fair value of $38.6 million, which included a premium on mortgage loan of $1.1 million. Amortization of premium on mortgage loan is computed using a method that approximates the effective interest method over the term of the loan agreement and is included in interest expense in the interim consolidated statements of operations. |
(4) | The loan has a term of 30 years, but is callable by the lender after 10 years, and the Trust expects the lender to call the loan at that time. The indicated maturity is based on the date the loan is callable by the lender. |
(5) | The loan requires interest-only payments for the first two years and principal and interest payments thereafter. |
Year | Amounts | |||
2016 | $ | 129,260 | ||
2017 | 135,074 | |||
2018 | 10,493 | |||
2019 | 130,930 | |||
2020 | 132,393 | |||
Thereafter | 245,266 | |||
$ | 783,416 |
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Numerator: | ||||||||
Net income (loss) available to common shareholders | $ | 7,648 | $ | (870 | ) | |||
Less: Dividends declared on unvested time-based awards | (144 | ) | (137 | ) | ||||
Less: Undistributed earnings allocated to unvested time-based awards | — | — | ||||||
Net income (loss) available to common shareholders, excluding amounts attributable to unvested time-based awards | $ | 7,504 | $ | (1,007 | ) | |||
Denominator: | ||||||||
Weighted-average number of common shares outstanding–basic | 58,681,525 | 54,178,494 | ||||||
Effect of dilutive unvested performance-based awards | 565,694 | — | ||||||
Weighted-average number of common shares outstanding–diluted | 59,247,219 | 54,178,494 | ||||||
Net income (loss) available per common share–basic and diluted | $ | 0.13 | $ | (0.02 | ) |
Record Date | Payment Date | Dividend Per Common Share | ||||||
Fourth Quarter 2015 | December 31, 2015 | January 15, 2016 | $ | 0.40 | ||||
First Quarter 2016 | March 31, 2016 | April 15, 2016 | $ | 0.40 |
Record Date | Payment Date | Dividend Per Series A Cumulative Redeemable Preferred Share | ||||||
Fourth Quarter 2015 | December 31, 2015 | January 15, 2016 | $ | 0.484375 | ||||
First Quarter 2016 | March 31, 2016 | April 15, 2016 | $ | 0.484375 |
Trust TSR as % of Index Total Return | Payout (% of Maximum) | |
<67% | 0% | |
67% | 25% | |
100% | 50% | |
≥133% | 100% |
Number of Shares | Weighted-Average Grant-Date Fair Value | ||||||
Restricted common shares as of December 31, 2015 | 1,057,270 | $ | 17.40 | ||||
Granted | 431,276 | $ | 15.26 | ||||
Vested | (120,711 | ) | $ | 27.12 | |||
Forfeited | — | $ | — | ||||
Restricted common shares as of March 31, 2016 | 1,367,835 | $ | 15.87 |
Fair Value at March 31, 2016 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Liabilities: | ||||||||||||||||
Interest rate swap (included within other liabilities) | $ | 447 | $ | — | $ | 447 | $ | — | ||||||||
$ | 447 | $ | — | $ | 447 | $ | — |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | U.S. economic conditions generally and the real estate market and the lodging industry specifically; |
• | management and performance of our hotels; |
• | our plans for renovation of our hotels; |
• | our financing plans and the terms on which capital is available to us; |
• | supply and demand for hotel rooms in our current and proposed market areas; |
• | our ability to acquire additional hotels and the risk that potential acquisitions may not be completed or perform in accordance with expectations; |
• | legislative/regulatory changes, including changes to laws governing taxation of real estate investment trusts; and |
• | our competition. |
Hotel | Location | Rooms | Acquisition Date | ||||||
1 | Hyatt Regency Boston | Boston, MA | 502 | March 18, 2010 | |||||
2 | Hilton Checkers Los Angeles | Los Angeles, CA | 193 | June 1, 2010 | |||||
3 | Boston Marriott Newton | Newton, MA | 430 | July 30, 2010 | |||||
4 | Le Meridien San Francisco | San Francisco, CA | 360 | December 15, 2010 | |||||
5 | Homewood Suites Seattle Convention Center | Seattle, WA | 195 | May 2, 2011 | |||||
6 | W Chicago – City Center | Chicago, IL | 403 | May 10, 2011 | |||||
7 | Hotel Indigo San Diego Gaslamp Quarter | San Diego, CA | 210 | June 17, 2011 | |||||
8 | Courtyard Washington Capitol Hill/Navy Yard | Washington, DC | 204 | June 30, 2011 | |||||
9 | Hotel Adagio San Francisco, Autograph Collection | San Francisco, CA | 171 | July 8, 2011 | |||||
10 | Denver Marriott City Center | Denver, CO | 613 | October 3, 2011 | |||||
11 | Hyatt Herald Square New York | New York, NY | 122 | December 22, 2011 | |||||
12 | W Chicago – Lakeshore | Chicago, IL | 520 | August 21, 2012 | |||||
13 | Hyatt Regency Mission Bay Spa and Marina | San Diego, CA | 429 | September 7, 2012 | |||||
14 | The Hotel Minneapolis, Autograph Collection | Minneapolis, MN | 222 | October 30, 2012 | |||||
15 | Hyatt Place New York Midtown South | New York, NY | 185 | March 14, 2013 | |||||
16 | W New Orleans – French Quarter | New Orleans, LA | 97 | March 28, 2013 | |||||
17 | Le Meridien New Orleans | New Orleans, LA | 410 | April 25, 2013 | |||||
18 | Hyatt Centric Fisherman's Wharf | San Francisco, CA | 316 | May 31, 2013 | |||||
19 | Hyatt Centric Santa Barbara | Santa Barbara, CA | 200 | June 27, 2013 | |||||
20 | JW Marriott San Francisco Union Square | San Francisco, CA | 337 | October 1, 2014 | |||||
21 | Royal Palm South Beach Miami, a Tribute Portfolio Resort | Miami Beach, FL | 393 | March 9, 2015 | |||||
22 | Ace Hotel and Theater Downtown Los Angeles | Los Angeles, CA | 182 | April 30, 2015 | |||||
6,694 |
Three Months Ended March 31, | |||||||
2016 | 2015(1) | Change | |||||
Occupancy | 78.8 | % | 72.0 | % | 680 bps | ||
ADR | $216.28 | $214.86 | 0.7% | ||||
RevPAR | $170.35 | $154.78 | 10.1% | ||||
Adjusted Hotel EBITDA | $40,051 | $31,668 | 26.5% | ||||
Adjusted Hotel EBITDA Margin | 28.5 | % | 24.9 | % | 360 bps |
(1) | Includes results of operations for certain hotels prior to our acquisition. |
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Net income | $ | 10,070 | $ | 1,552 | ||||
Add: Interest expense | 8,210 | 7,179 | ||||||
Depreciation and amortization | 18,484 | 14,927 | ||||||
Air rights contract amortization | 130 | 130 | ||||||
Corporate general and administrative | 5,266 | 4,577 | ||||||
Hotel acquisition costs | — | 369 | ||||||
Less: Income tax benefit | (1,954 | ) | (3,348 | ) | ||||
Hotel EBITDA | 40,206 | 25,386 | ||||||
Less: Non-cash amortization(1) | (155 | ) | (81 | ) | ||||
Adjusted Hotel EBITDA | 40,051 | 25,305 | ||||||
Add: Prior owner Hotel EBITDA(2) | — | 6,363 | ||||||
Pro forma Adjusted Hotel EBITDA | $ | 40,051 | $ | 31,668 | ||||
Total revenue | $ | 140,611 | $ | 109,290 | ||||
Add: Prior owner total revenue(2) | — | 18,044 | ||||||
Pro forma total revenue | $ | 140,611 | $ | 127,334 | ||||
Pro forma Adjusted Hotel EBITDA Margin | 28.5 | % | 24.9 | % |
(1) | Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, and unfavorable contract liability. |
(2) | Reflects results of operations for certain hotels prior to our acquisition. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net income | $ | 10,070 | $ | 1,552 | |||
Add: Interest expense | 8,210 | 7,179 | |||||
Depreciation and amortization | 18,484 | 14,927 | |||||
Less: Income tax benefit | (1,954 | ) | (3,348 | ) | |||
Corporate EBITDA | 34,810 | 20,310 | |||||
Add: Hotel acquisition costs | — | 369 | |||||
Less: Non-cash amortization(1) | (25 | ) | 49 | ||||
Adjusted Corporate EBITDA | $ | 34,785 | $ | 20,728 |
(1) | Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net income | $ | 10,070 | $ | 1,552 | |||
Add: Depreciation and amortization | 18,484 | 14,927 | |||||
FFO | 28,554 | 16,479 | |||||
Less: Preferred share dividends | (2,422 | ) | (2,422 | ) | |||
Dividends declared on unvested time-based awards | (144 | ) | (137 | ) | |||
Undistributed earnings allocated to unvested time-based awards | — | — | |||||
FFO available to common shareholders | 25,988 | 13,920 | |||||
Add: Hotel acquisition costs | — | 369 | |||||
Less: Non-cash amortization(1) | (25 | ) | 49 | ||||
AFFO available to common shareholders | $ | 25,963 | $ | 14,338 | |||
FFO available per common share–basic and diluted | $ | 0.44 | $ | 0.26 | |||
AFFO available per common share–basic and diluted | $ | 0.44 | $ | 0.26 |
(1) | Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract. |
Payments Due by Period | ||||||||||||||||||||
Contractual Obligations | Total | Less Than One Year | One to Three Years | Three to Five Years | More Than Five Years | |||||||||||||||
Revolving credit facility, including interest(1) | $ | 127,327 | $ | 2,433 | $ | 4,867 | $ | 120,027 | $ | — | ||||||||||
Term loan, including interest(1) | 129,337 | 129,337 | — | — | — | |||||||||||||||
Other mortgage loans, including interest | 645,228 | 151,792 | 53,834 | 170,808 | 268,794 | |||||||||||||||
Corporate office lease | 354 | 235 | 119 | — | — | |||||||||||||||
Ground leases(2) | 212,664 | 4,101 | 8,201 | 8,201 | 192,161 | |||||||||||||||
$ | 1,114,910 | $ | 287,898 | $ | 67,021 | $ | 299,036 | $ | 460,955 |
(1) | Assumes no additional borrowings and interest payments are based on the interest rate in effect at March 31, 2016. Also assumes that no extension options are exercised. See the notes to our interim consolidated financial statements for additional information relating to our revolving credit facility and term loan. |
(2) | The ground leases for the Hyatt Regency Mission Bay Spa and Marina and the JW Marriott San Francisco Union Square provide for the greater of base or percentage rent, subject to potential increases over the term of the leases. Amounts assume only base rent for all periods presented and do not assume any adjustments for potential increases. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period | Total Number of Shares Purchased(1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2) | ||||||||||
January 1, 2016–January 31, 2016 | 7,854 | $ | 24.67 | — | $ | 100,000 | ||||||||
February 1, 2016–February 29, 2016 | — | $ | — | — | $ | 100,000 | ||||||||
March 1, 2016–March 31, 2016 | — | $ | — | — | $ | 100,000 | ||||||||
7,854 | $ | 24.67 | — |
(1) | We provide employees, who have been issued restricted common shares, the option of selling shares to us to satisfy the minimum statutory tax withholding requirements on the date their shares vest. The common shares repurchased during the three months ended March 31, 2016 related to such repurchases. |
(2) | On September 29, 2015, our board of trustees authorized a share repurchase program pursuant to which we may acquire up to $100.0 million of our common shares. The repurchase program expires in September 2018, but may be suspended or discontinued at any time, and does not obligate us to acquire any particular amount of our shares. As of March 31, 2016, we have not repurchased any common shares under the share repurchase program. |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Mine Safety Disclosures |
Item 5. | Other Information |
Item 6. | Exhibits |
Exhibit Number | Description of Exhibit | |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer | |
32.1 | Section 1350 Certification of President and Chief Executive Officer | |
32.2 | Section 1350 Certification of Executive Vice President and Chief Financial Officer | |
101.INS XBRL | Instance Document | |
101.SCH XBRL | Taxonomy Extension Schema Document | |
101.CAL XBRL | Taxonomy Extension Calculation Linkbase Document | |
101.DEF XBRL | Taxonomy Extension Definition Linkbase Document | |
101.LAB XBRL | Taxonomy Extension Label Linkbase Document | |
101.PRE XBRL | Taxonomy Extension Presentation Linkbase Document |
CHESAPEAKE LODGING TRUST | |||
Date: April 28, 2016 | By: | /S/ DOUGLAS W. VICARI | |
Douglas W. Vicari | |||
Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |||
/S/ GRAHAM J. WOOTTEN | |||
Graham J. Wootten | |||
Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) |
(1) | I have reviewed this report on Form 10-Q of Chesapeake Lodging Trust; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(1) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(2) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(3) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(4) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions): |
(1) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(2) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: April 28, 2016 | /s/ James L. Francis | |
President and Chief Executive Officer |
(1) | I have reviewed this report on Form 10-Q of Chesapeake Lodging Trust; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(1) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(2) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(3) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(4) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions): |
(1) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(2) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Douglas W. Vicari |
Executive Vice President and Chief Financial Officer |
/s/ James L. Francis |
President and Chief Executive Officer |
/s/ Douglas W. Vicari |
Executive Vice President and Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Apr. 22, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Chesapeake Lodging Trust | |
Entity Central Index Key | 0001473078 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 60,083,747 |
Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
ASSETS | ||
Allowance for doubtful accounts | $ 148 | $ 172 |
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
Preferred shares, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred shares, liquidation preference, value | $ 127,422 | $ 127,422 |
Preferred shares, authorized (in shares) | 100,000,000 | 100,000,000 |
Preferred shares, issued (in shares) | 5,000,000 | 5,000,000 |
Preferred shares, outstanding (in shares) | 5,000,000 | 5,000,000 |
Common shares, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common shares, authorized (in shares) | 400,000,000 | 400,000,000 |
Common shares, issued (in shares) | 60,083,747 | 59,659,522 |
Common shares, outstanding (in shares) | 60,083,747 | 59,659,522 |
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Revenues [Abstract] | ||
Rooms | $ 103,772 | $ 81,594 |
Food and beverage | 30,555 | 23,398 |
Other | 6,284 | 4,298 |
Total revenue | 140,611 | 109,290 |
Hotel operating expenses: | ||
Rooms | 25,501 | 21,100 |
Food and beverage | 22,766 | 18,466 |
Other direct | 1,558 | 1,333 |
Indirect | 50,580 | 43,005 |
Total hotel operating expenses | 100,405 | 83,904 |
Depreciation and amortization | 18,484 | 14,927 |
Air rights contract amortization | 130 | 130 |
Corporate general and administrative | 5,266 | 4,577 |
Hotel acquisition costs | 0 | 369 |
Total operating expenses | 124,285 | 103,907 |
Operating income | 16,326 | 5,383 |
Interest expense | (8,210) | (7,179) |
Income (loss) before income taxes | 8,116 | (1,796) |
Income tax benefit | 1,954 | 3,348 |
Net income | 10,070 | 1,552 |
Preferred share dividends | (2,422) | (2,422) |
Net income (loss) available to common shareholders | $ 7,648 | $ (870) |
Net income (loss) available per common share - basic and diluted | $ 0.13 | $ (0.02) |
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 10,070 | $ 1,552 |
Other comprehensive loss: | ||
Unrealized losses on cash flow hedge instruments | (318) | (747) |
Reclassification of unrealized losses on cash flow hedge instruments to interest expense | 163 | 61 |
Comprehensive income | $ 9,915 | $ 866 |
Organization and Description of Business |
3 Months Ended |
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Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Description of Business | 1. Organization and Description of Business Chesapeake Lodging Trust (the “Trust”) is a self-advised real estate investment trust (“REIT”) that was organized in the state of Maryland in June 2009. The Trust is focused on investments primarily in upper-upscale hotels in major business and convention markets and, on a selective basis, premium select-service hotels in urban settings or unique locations in the United States of America (“U.S.”). The Trust completed its initial public offering (“IPO”) in January 2010. The Trust owned no hotels nor had any operations prior to its IPO. As of March 31, 2016, the Trust owned 22 hotels with an aggregate of 6,699 rooms in nine states and the District of Columbia. Substantially all of the Trust’s assets are held by, and all of its operations are conducted through, Chesapeake Lodging, L.P., a Delaware limited partnership, which is wholly owned by the Trust (the “Operating Partnership”). For the Trust to qualify as a REIT, it cannot operate hotels. Therefore, the Operating Partnership leases its hotels to taxable REIT subsidiaries (each, a “TRS”), which are wholly owned subsidiaries of the Operating Partnership and are treated as TRSs for federal income tax purposes. The TRSs then engage hotel management companies to operate the hotels pursuant to management agreements. |
Summary of Significant Accounting Policies |
3 Months Ended |
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Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation—The interim consolidated financial statements presented herein include all of the accounts of Chesapeake Lodging Trust and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation as a result of adopting a new accounting pronouncement relating to debt issuance costs. See "Recent Accounting Pronouncements" for additional information. The information in these interim consolidated financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal, recurring nature unless disclosed otherwise. These interim consolidated financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission (“SEC”) and do not include all of the information and disclosures required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Trust's Form 10-K for the year ended December 31, 2015. Cash and Cash Equivalents—The Trust considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Restricted Cash—Restricted cash includes reserves held in escrow for normal replacements of furniture, fixtures and equipment (“FF&E”), property improvement plans (each, a "PIP"), real estate taxes, and insurance pursuant to certain requirements in the Trust’s hotel management, franchise, and loan agreements. Investments in Hotels—The Trust allocates the purchase prices of hotels acquired based on the fair value of the property, FF&E, and identifiable intangible assets acquired and the fair value of the liabilities assumed. In making estimates of fair value for purposes of allocating the purchase price, the Trust utilizes a number of sources of information that are obtained in connection with the acquisition of a hotel, including valuations performed by independent third parties and cost segregation studies. The Trust also considers information obtained about each hotel as a result of its pre-acquisition due diligence in estimating the fair value of the tangible and intangible assets acquired and liabilities assumed. Hotel acquisition costs, such as transfer taxes, title insurance, environmental and property condition reviews, and legal and accounting fees, are expensed in the period incurred. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, generally 15 to 40 years for buildings and building improvements and three to ten years for FF&E. Leasehold improvements are amortized over the shorter of the lease term or the useful lives of the related assets. Replacements and improvements at the hotels are capitalized, while repairs and maintenance are expensed as incurred. Upon the sale or retirement of property and equipment, the cost and related accumulated depreciation are removed from the Trust’s accounts and any resulting gain or loss is recognized in the consolidated statements of operations. Intangible assets and liabilities are recorded on non-market contracts, including air rights, lease, management, and franchise agreements, assumed as part of the acquisition of certain hotels. Above-market and below-market contract values are based on the present value of the difference between contractual amounts to be paid pursuant to the contracts assumed and the Trust’s estimate of the fair market contract rates for corresponding contracts measured over a period equal to the remaining non-cancelable term of the contracts assumed. No value is allocated to market contracts. Intangible assets and liabilities are amortized using the straight-line method over the remaining non-cancelable term of the related contracts. The Trust reviews its hotels for impairment whenever events or changes in circumstances indicate that the carrying values of the hotels may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, adverse changes in the demand for lodging at the hotels due to declining national or local economic conditions and/or new hotel construction in markets where the hotels are located. When such conditions exist, management performs an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel exceed its carrying value. If the estimated undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related hotel’s estimated fair market value is recorded and an impairment loss is recognized. No impairment losses have been recognized related to any hotels for the three months ended March 31, 2016 and 2015. The Trust classifies a hotel as held for sale in the period in which it has made the decision to dispose of the hotel, a binding agreement to purchase the hotel has been signed under which the buyer has committed a significant amount of nonrefundable cash, and no significant financing contingencies exist which could cause the transaction not to be completed in a timely manner. If these criteria are met, depreciation and amortization of the hotel will cease and an impairment loss will be recognized if the fair value of the hotel, less the costs to sell, is lower than the carrying amount of the hotel. If the sale represents a strategic shift that has (or will have) a major effect on the Trust's operations and financial results, the Trust will classify the loss, together with the related operating results, as discontinued operations in the consolidated statements of operations and will classify the related assets and liabilities as held for sale in the consolidated balance sheets. As of March 31, 2016, the Trust had no assets held for sale or liabilities related to assets held for sale. Revenue Recognition—Revenues from operations of the hotels are recognized when the services are provided. Revenues consist of room sales, food and beverage sales, and other hotel department revenues, such as parking, marina, theater, telephone, and gift shop sales. Prepaid Expenses and Other Assets—Prepaid expenses and other assets consist of prepaid real estate taxes, prepaid insurance, deposits on hotel acquisitions and loan applications, deferred franchise costs, inventories, deferred tax assets, and other assets. Deferred Financing Costs—Deferred financing costs are recorded at cost and consist of loan fees and other costs incurred in issuing debt. Amortization of deferred financing costs is computed using a method that approximates the effective interest method over the term of the related debt and is included in interest expense in the consolidated statements of operations. Unamortized deferred financing costs are included as a direct deduction from long-term debt in the consolidated balance sheets. Derivative Instruments—From time to time, the Trust is a party to interest rate swaps, which are considered derivative instruments, in order to manage its interest rate exposure. The Trust’s interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows. The Trust records derivative instruments at fair value as either assets or liabilities and designates them as cash flow hedging instruments at inception. The Trust evaluates the hedge effectiveness of the designated cash flow hedging instruments on a quarterly basis and records the effective portion of the change in the fair value of the cash flow hedging instruments as other comprehensive income (loss). Amounts reported in accumulated other comprehensive income (loss) related to cash flow hedging instruments are reclassified to interest expense as interest payments are made on the variable-rate debt being hedged. The Trust does not enter into derivative instruments for trading or speculative purposes and monitors the financial stability and credit standing of its counterparties. Fair Value Measurements—The Trust accounts for certain assets and liabilities at fair value. In evaluating the fair value of both financial and non-financial assets and liabilities, GAAP outlines a valuation framework and creates a fair value hierarchy that distinguishes between market assumptions based on market data (observable inputs) and the reporting entity’s own assumptions about market data (unobservable inputs). The three levels of the fair value hierarchy are as follows: Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. An active market is defined as a market in which transactions occur with sufficient frequency and volume to provide pricing on an ongoing basis. Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves), and inputs that are derived principally from or corroborated by observable market data correlation or other means. Level 3 – Unobservable inputs reflect the reporting entity’s own assumptions about the pricing of an asset or liability when observable inputs are not available or when there is minimal, if any, market activity for an identical or similar asset or liability at the measurement date. Income Taxes—The Trust has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code. As a REIT, the Trust generally will not be subject to federal income tax on that portion of its net income that does not relate to any of the Trust's TRSs, and that is currently distributed to its shareholders. Our TRSs, which lease the Trust’s hotels from the subsidiaries of the Operating Partnership owning them, are subject to federal and state income taxes. The Trust accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Valuation allowances are provided if based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Share-Based Compensation—From time to time, the Trust grants restricted share awards to employees and trustees. To date, the Trust has granted two types of restricted share awards: (1) awards that vest solely on continued employment or service (time-based awards) and (2) awards that vest based on the Trust achieving specified levels of relative total shareholder return and continued employment (performance-based awards). The Trust measures share-based compensation expense for the restricted share awards based on the fair value of the awards on the date of grant. The fair value of time-based awards is determined based on the closing price of the Trust’s common shares on the measurement date, which is generally the date of grant. The fair value of performance-based awards is determined using a Monte Carlo simulation performed by an independent third party. For time-based awards, share-based compensation expense is recognized on a straight-line basis over the life of the entire award. For performance-based awards, share-based compensation expense is recognized over the requisite service period for each award. No share-based compensation expense is recognized for awards for which employees or trustees do not render the requisite service. Earnings Per Share—Basic earnings per share is computed by dividing net income available to common shareholders, adjusted for dividends declared on and undistributed earnings allocated to unvested time-based awards, by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income available to common shareholders, adjusted for dividends declared on and undistributed earnings allocated to unvested time-based awards, by the weighted-average number of common shares outstanding, plus potentially dilutive securities, such as unvested performance-based awards, during the period. The Trust’s unvested time-based awards are entitled to receive non-forfeitable dividends, if declared. Therefore, unvested time-based awards qualify as participating securities, requiring the allocation of dividends and undistributed earnings under the two-class method to calculate basic earnings per share. The percentage of undistributed earnings allocated to the unvested time-based awards is based on the proportion of the weighted-average unvested time-based awards outstanding during the period to the total of the weighted-average common shares and unvested time-based awards outstanding during the period. No adjustment is made for shares that are anti-dilutive during the period. Segment Information—The Trust has determined that its business is conducted in one reportable segment, hotel ownership. Use of Estimates—The preparation of the interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recent Accounting Pronouncements—In April 2015, the Financial Accounting Standards Board ("FASB") issued updated accounting guidance for the presentation of debt issuance costs in the consolidated balance sheets. Under the new accounting guidance, debt issuance costs are shown as a direct deduction from the related debt liability rather than as an asset in the consolidated balance sheet. The amortization of the costs will continue to be included in interest expense in the consolidated statement of operations. The new accounting guidance is effective for interim and annual periods beginning on or after December 15, 2015 and is to be applied on a retrospective basis. The Trust adopted the new accounting guidance on January 1, 2016. As a result, $6.5 million of unamortized deferred financing costs, which was previously presented as an asset as of December 31, 2015, is now presented within long-term debt. This reclassification had no effect on previously reported results of operations or retained earnings. The Trust does not believe that the adoption of this guidance has a material impact on the consolidated financial statements. |
Acquisitions |
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Acquisitions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition of hotels | 3. Acquisitions The Trust has acquired the following hotels since January 1, 2015 (in thousands, except rooms data):
The allocation of the purchase prices to the assets acquired and liabilities assumed based on their fair values was as follows (in thousands):
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Property and Equipment |
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Property and Equipment | 4. Property and Equipment Property and equipment as of March 31, 2016 and December 31, 2015 consisted of the following (in thousands):
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Intangible Assets and Liability |
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Intangible Assets and Liability | 5. Intangible Assets and Liability Intangible assets and liability as of March 31, 2016 and December 31, 2015 consisted of the following (in thousands):
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Long-Term Debt |
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Long-term Debt, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | 6. Long-Term Debt Long-term debt as of March 31, 2016 and December 31, 2015 consisted of the following (in thousands):
Revolving credit facility On March 4, 2015, the Trust entered into an amended credit agreement to (1) convert its revolving credit facility from a secured to an unsecured revolving credit facility, (2) increase the maximum borrowing availability under the revolving credit facility from $250.0 million to $300.0 million, (3) lower the interest rate to LIBOR plus 1.55% - 2.30% (the spread over LIBOR continues to be based on the Trust's consolidated leverage ratio), and (4) extend the maturity date to March 2019. The amended credit agreement provides for the possibility of further future increases, up to a maximum of $450.0 million, in accordance with the terms of the amended credit agreement. The amended credit agreement also provides for an extension of the maturity date by one year, subject to satisfaction of certain customary conditions. The amount that the Trust can borrow under the revolving credit facility is based on the value of the Trust's hotels included in the borrowing base, as defined in the amended credit agreement. As of March 31, 2016, the borrowing base included 11 of the Trust's hotels providing borrowing availability of $300.0 million under the revolving credit facility, of which $180.0 million remained available. The amended credit agreement contains more favorable financial covenants, including the leverage ratio and minimum tangible net worth requirement, as compared to those in effect prior to the amendment, and has additional financial covenants typically found in similar unsecured revolving credit facilities, including a consolidated secured debt ratio, an unsecured leverage ratio and an unsecured debt service coverage ratio. Other Certain of the Trust's mortgage loan agreements contain standard financial covenants relating to coverage ratios and standard provisions that require loan servicers to maintain escrow accounts for certain items, including real estate taxes, insurance premiums, and normal replacements of FF&E. As of March 31, 2016, the Trust was in compliance with all financial covenants under its borrowing arrangements. As of March 31, 2016, the Trust’s weighted-average interest rate on its long-term debt was 3.85%. Future scheduled principal payments of debt obligations (assuming no exercise of extension options) as of March 31, 2016 are as follows (in thousands):
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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | 7. Earnings Per Share The following is a reconciliation of the amounts used in calculating basic and diluted earnings per share (in thousands, except share and per share data):
For the three months ended March 31, 2016 and 2015, 278,271 unvested performance-based awards and 722,305 unvested performance-based awards, respectively, were excluded from diluted weighted-average common shares outstanding as the awards either had not achieved the specific levels of relative total shareholder return required for vesting at each period end or their effect would have been anti-dilutive. |
Shareholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | 8. Shareholders’ Equity Common Shares—The Trust is authorized to issue up to 400,000,000 common shares, $.01 par value per share. Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Holders of the Trust’s common shares are entitled to receive distributions when authorized by the Trust’s board of trustees out of assets legally available for the payment of distributions. On September 6, 2013, the Trust entered into sales agreements with two sales agents, pursuant to which the Trust may issue and sell up to $100.0 million in the aggregate of its common shares through a continuous at-the-market offering or other methods (the “ATM program”). The Trust did not sell any common shares under the ATM program during the three months ended March 31, 2016. As of March 31, 2016, $76.0 million of common shares remained available for issuance under the ATM program. On March 27, 2015, the Trust completed an underwritten public offering of 4,600,000 common shares at a price of $33.47 per share, including 600,000 shares sold pursuant to the underwriter's exercise of its option to purchase additional shares. After deducting underwriting fees and offering costs, the Trust generated net proceeds of $153.7 million. On September 29, 2015, the Trust's board of trustees authorized a share repurchase program pursuant to which the Trust may acquire up to $100.0 million of its common shares. The repurchase program authorizes the Trust to repurchase its common shares from time to time through open market purchases, negotiated transactions or other means, in accordance with applicable securities laws and other restrictions. The repurchase program expires in September 2018, but may be suspended or discontinued at any time, and does not obligate the Trust to acquire any particular amount of its shares. As of March 31, 2016, $100.0 million remained available for the repurchase of common shares. For the three months ended March 31, 2016, the Trust issued 803 unrestricted common shares and 431,276 restricted common shares to its trustees and employees. For the three months ended March 31, 2016, the Trust repurchased 7,854 common shares from employees to satisfy the minimum statutory tax withholding requirements related to the vesting of their previously granted restricted common shares. As of March 31, 2016, the Trust had 60,083,747 common shares outstanding. For the three months ended March 31, 2016, the Trust paid or its board of trustees declared the following dividends per common share:
Preferred Shares—The Trust is authorized to issue up to 100,000,000 preferred shares, $.01 par value per share. The Trust’s board of trustees is required to set for each class or series of preferred shares the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, and terms or conditions of redemption. As of March 31, 2016, the Trust had 5,000,000 shares of its 7.75% Series A Cumulative Redeemable Preferred Shares outstanding. Holders of Series A Cumulative Redeemable Preferred Shares are entitled to receive, when and as authorized by the Trust's board of trustees, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 7.75% per annum of the $25.00 per share liquidation preference, equivalent to $1.9375 per annum per share. Dividends on the Series A Cumulative Redeemable Preferred Shares are cumulative from the date of original issuance and are payable quarterly in arrears on or about the 15th day of each of January, April, July and October. The Series A Cumulative Redeemable Preferred Shares rank senior to the Trust's common shares with respect to the payment of dividends; the Trust will not declare or pay any dividends, or set aside any funds for the payment of dividends, on its common shares unless the Trust also has declared and either paid or set aside for payment the full cumulative dividends on the Series A Cumulative Redeemable Preferred Shares. For the three months ended March 31, 2016, the Trust paid or its board of trustees declared the following dividends per preferred share:
The Trust cannot redeem the Series A Cumulative Redeemable Preferred Shares prior to July 17, 2017, except as described below and in certain limited circumstances related to the ownership limitation necessary to preserve the Trust's qualification as a REIT. On and after July 17, 2017, the Trust, at its option, can redeem the Series A Cumulative Redeemable Preferred Shares, in whole or from time to time in part, at a redemption price of $25.00 per share, plus any accrued and unpaid dividends. The holders of Series A Cumulative Redeemable Preferred Shares have no voting rights, except in certain limited circumstances. Upon the occurrence of a change of control, as defined in the articles supplementary designating the Series A Cumulative Redeemable Preferred Shares, as a result of which the Trust's common shares and the common securities of the acquiring or surviving entity are not listed or quoted on the New York Stock Exchange, the NYSE MKT or the NASDAQ Stock Market, or any successor exchanges, the Trust may, at its option, redeem the Series A Cumulative Redeemable Preferred Shares in whole or in part within 120 days following the change of control by paying $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. If the Trust does not exercise its right to redeem the Series A Cumulative Redeemable Preferred Shares upon a change of control, the holders of the Series A Cumulative Redeemable Preferred Shares have the right to convert some or all of their shares into a number of the Trust's common shares based on a defined formula subject to a share cap. The share cap on each Series A Cumulative Redeemable Preferred Share is 2.9189 common shares. |
Equity Plan |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Plan | 9. Equity Plan In January 2010, the Trust established the Chesapeake Lodging Trust Equity Plan (the “Plan”), which provides for the issuance of equity-based awards, including restricted shares, unrestricted shares, share options, share appreciation rights, and other awards based on the Trust’s common shares. Employees and trustees of the Trust and other persons that provide services to the Trust are eligible to participate in the Plan. The compensation committee of the board of trustees administers the Plan and determines the number of awards to be granted, the vesting period, and the exercise price, if any. The Trust initially reserved 454,657 common shares for issuance under the Plan at its establishment. In May 2012, the Trust’s common shareholders approved an amendment to the Plan such that the number of shares available for issuance under the Plan was increased by 2,750,000. Shares that are issued under the Plan to any person pursuant to an award are counted against this limit as one share for every one share granted. If any shares covered by an award are not purchased or are forfeited, if an award is settled in cash, or if an award otherwise terminates without delivery of any shares, then the number of common shares counted against the aggregate number of shares available under the Plan with respect to the award will, to the extent of any such forfeiture or termination, again be available for making awards under the Plan. As of March 31, 2016, subject to increases that may result in the case of any future forfeiture or termination of currently outstanding awards, 836,882 common shares were reserved and available for future issuances under the Plan. The Trust will make appropriate adjustments to outstanding awards and the number of shares available for issuance under the Plan, including the individual limitations on awards, to reflect share dividends, share splits, spin-offs and other similar events. While the compensation committee can terminate or amend the Plan at any time, no amendment can adversely impair the rights of grantees with respect to outstanding awards. In addition, an amendment will be contingent on approval of the Trust’s common shareholders to the extent required by law or if the amendment would materially increase the benefits accruing to participants under the Plan, materially increase the aggregate number of shares that can be issued under the Plan, or materially modify the requirements as to eligibility for participation in the Plan. Unless terminated earlier, the Plan will terminate in January 2020, but will continue to govern unexpired awards. For the three months ended March 31, 2016, the Trust granted 431,276 restricted common shares to certain employees, of which 145,359 shares were time-based awards and 285,917 shares were performance-based awards (the “2016 Performance-Based Awards”). The time-based awards are eligible to vest at the annual rate of one-third of the number of restricted shares granted commencing on the first anniversary of their issuance. The 2016 Performance-Based Awards are eligible to vest at December 31, 2018. Dividends on the 2016 Performance-Based Awards accrue, but are not paid unless the related shares vest. The fair value of the 2016 Performance-Based Awards was $10.54 per share and was determined using a Monte Carlo simulation with the following assumptions: volatility of 21.04%; an expected term equal to the requisite service period for the awards; and a risk-free interest rate of 1.38%. The actual number of shares under the 2016 Performance-Based Awards that vest will be based on the Trust’s total shareholder return (“TSR”), as defined in the restricted share agreements, measured over a three-year performance period ending December 31, 2018, relative to the total return generated by the SNL US Hotel REIT Index prepared by SNL Financial LC (the “Index”). The payout schedule for the 2016 Performance-Based Awards is as follows, with linear interpolation for performance between 67% and 100%, and between 100% and 133% of the Index:
If the Trust’s TSR is negative for the performance period, no shares under the 2016 Performance-Based Awards will vest. If the Trust’s TSR is positive for the performance period and the total return of the Index is negative, 100% of the shares subject to vesting under the 2016 Performance-Based Awards will vest. As of March 31, 2016, there was approximately $13.8 million of unrecognized share-based compensation expense related to restricted common shares. The unrecognized share-based compensation expense is expected to be recognized over a weighted-average period of 2.0 years. The following is a summary of the Trust’s restricted common share activity for the three months ended March 31, 2016:
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Fair Value Measurements and Derivative Instrument |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 10. Fair Value Measurements and Derivative Instrument The following table sets forth the Trust’s financial assets and liabilities measured at fair value by level within the fair value hierarchy (in thousands). Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Derivative instruments are classified within Level 2 of the fair value hierarchy as they are valued using third-party pricing models which contain inputs that are derived from observable market data. Where possible, the values produced by the pricing models are verified to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility, and correlations of such inputs. The Trust’s financial instruments in addition to those disclosed in the table above include cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses, and long-term debt. The carrying values reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued expenses approximate fair value. The Trust estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument using estimated market rates of debt instruments with similar maturities and credit profiles. These inputs are classified as Level 3 within the fair value hierarchy. As of March 31, 2016, the carrying value reported in the consolidated balance sheet for the Trust's long-term debt approximated its fair value. |
Commitments and Contingencies |
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Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies Disclosure [Text Block] | 11. Commitments and Contingencies Management Agreements—The Trust’s hotels operate pursuant to management agreements with various third-party management companies. Each management company receives a base management fee generally between 2% and 4% of hotel revenues. The management companies are also eligible to receive an incentive management fee if hotel operating income, as defined in the management agreements, exceeds certain performance thresholds. The incentive management fee is generally calculated as a percentage of hotel operating income after the Trust has received a priority return on its investment in the hotel. Franchise Agreements—As of March 31, 2016, 12 of the Trust’s hotels operated pursuant to franchise agreements with hotel brand companies and 10 hotels operated pursuant to management agreements with hotel brand companies that allowed them to operate under their respective brands. Under the 12 franchise agreements, the Trust generally pays a royalty fee ranging from 3% to 6% of room revenues and up to 3% of food and beverage revenues, plus additional fees for marketing, central reservation systems, and other franchisor costs that amount to between 1% and 5% of room revenues. Ground Lease Agreements—The Trust leases the land underlying the Hyatt Regency Mission Bay Spa and Marina pursuant to a lease agreement, which has an initial term ending January 2056. Rent due under the lease agreement is the greater of base rent or percentage rent. Base rent is currently $2.3 million per year. Base rent resets every three years over the remaining term of the lease equal to 75% of the average of the actual rent paid over the two years preceding the base rent reset year. The next base rent reset year is 2019. Annual percentage rent is calculated based on various percentages of the hotel's various sources of revenue, including room, food and beverage, and marina rentals, earned during the period. The Trust also leases the land underlying the JW Marriott San Francisco Union Square pursuant to a lease agreement, which has a term ending January 2083. Rent due under the lease agreement is the greater of base rent or percentage rent. Base rent is currently $1.7 million per year. Base rent resets every five years over the remaining term of the lease based on the level of inflation, as defined in the agreement, over the preceding five years, but in no event resulting in an increase of more than 125% of the base rent in effect immediately prior to the reset year (nor subject to any decrease). The next base rent reset year is 2019. In January 2034, base rent will reset to 10% of the fair market value of the underlying land as determined by a valuation performed by an independent third party, if such reset results in an increase over the base rent in effect immediately prior to the reset year. Annual percentage rent is calculated based on various percentages of the hotel's various sources of revenue, including room and food and beverage, earned during the period. FF&E Reserves—Pursuant to its management, franchise and loan agreements, the Trust is required to establish a FF&E reserve for each hotel to cover the cost of replacing FF&E. Contributions to the FF&E reserve are based on a percentage of gross revenues at each hotel. The Trust is generally required to contribute between 3% and 5% of gross revenues over the term of the agreements. Litigation—The Trust is not involved in any material litigation nor, to its knowledge, is any material litigation threatened against the Trust. |
Subsequent Events |
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Subsequent Events [Line Items] | |
Subsequent Events [Text Block] | 12. Subsequent Events On April 6, 2016, the Trust prepaid without penalty its mortgage loan secured by the Hyatt Regency Boston, which had an outstanding principal balance at the time of $88.2 million, with a borrowing under its revolving credit facility. The Trust is currently in discussions with a lender on obtaining a commitment for a new mortgage loan to be secured by the Hyatt Regency Boston. On April 14, 2016, the Trust sold the separate, five-room villa building and related land parcel at the Hyatt Centric Santa Barbara for $2.1 million. The Trust expects to recognize an approximate $0.6 million gain on sale of hotel in the second quarter of 2016. |
Summary of Significant Accounting Policies (Policies) |
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Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation—The interim consolidated financial statements presented herein include all of the accounts of Chesapeake Lodging Trust and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation as a result of adopting a new accounting pronouncement relating to debt issuance costs. See "Recent Accounting Pronouncements" for additional information. The information in these interim consolidated financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal, recurring nature unless disclosed otherwise. These interim consolidated financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission (“SEC”) and do not include all of the information and disclosures required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Trust's Form 10-K for the year ended December 31, 2015. |
Cash and Cash Equivalents | Cash and Cash Equivalents—The Trust considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. |
Restricted Cash | Restricted Cash—Restricted cash includes reserves held in escrow for normal replacements of furniture, fixtures and equipment (“FF&E”), property improvement plans (each, a "PIP"), real estate taxes, and insurance pursuant to certain requirements in the Trust’s hotel management, franchise, and loan agreements. |
Investments in Hotels | Investments in Hotels—The Trust allocates the purchase prices of hotels acquired based on the fair value of the property, FF&E, and identifiable intangible assets acquired and the fair value of the liabilities assumed. In making estimates of fair value for purposes of allocating the purchase price, the Trust utilizes a number of sources of information that are obtained in connection with the acquisition of a hotel, including valuations performed by independent third parties and cost segregation studies. The Trust also considers information obtained about each hotel as a result of its pre-acquisition due diligence in estimating the fair value of the tangible and intangible assets acquired and liabilities assumed. Hotel acquisition costs, such as transfer taxes, title insurance, environmental and property condition reviews, and legal and accounting fees, are expensed in the period incurred. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, generally 15 to 40 years for buildings and building improvements and three to ten years for FF&E. Leasehold improvements are amortized over the shorter of the lease term or the useful lives of the related assets. Replacements and improvements at the hotels are capitalized, while repairs and maintenance are expensed as incurred. Upon the sale or retirement of property and equipment, the cost and related accumulated depreciation are removed from the Trust’s accounts and any resulting gain or loss is recognized in the consolidated statements of operations. Intangible assets and liabilities are recorded on non-market contracts, including air rights, lease, management, and franchise agreements, assumed as part of the acquisition of certain hotels. Above-market and below-market contract values are based on the present value of the difference between contractual amounts to be paid pursuant to the contracts assumed and the Trust’s estimate of the fair market contract rates for corresponding contracts measured over a period equal to the remaining non-cancelable term of the contracts assumed. No value is allocated to market contracts. Intangible assets and liabilities are amortized using the straight-line method over the remaining non-cancelable term of the related contracts. The Trust reviews its hotels for impairment whenever events or changes in circumstances indicate that the carrying values of the hotels may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, adverse changes in the demand for lodging at the hotels due to declining national or local economic conditions and/or new hotel construction in markets where the hotels are located. When such conditions exist, management performs an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel exceed its carrying value. If the estimated undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related hotel’s estimated fair market value is recorded and an impairment loss is recognized. No impairment losses have been recognized related to any hotels for the three months ended March 31, 2016 and 2015. The Trust classifies a hotel as held for sale in the period in which it has made the decision to dispose of the hotel, a binding agreement to purchase the hotel has been signed under which the buyer has committed a significant amount of nonrefundable cash, and no significant financing contingencies exist which could cause the transaction not to be completed in a timely manner. If these criteria are met, depreciation and amortization of the hotel will cease and an impairment loss will be recognized if the fair value of the hotel, less the costs to sell, is lower than the carrying amount of the hotel. If the sale represents a strategic shift that has (or will have) a major effect on the Trust's operations and financial results, the Trust will classify the loss, together with the related operating results, as discontinued operations in the consolidated statements of operations and will classify the related assets and liabilities as held for sale in the consolidated balance sheets. As of March 31, 2016, the Trust had no assets held for sale or liabilities related to assets held for sale. |
Revenue Recognition | Revenue Recognition—Revenues from operations of the hotels are recognized when the services are provided. Revenues consist of room sales, food and beverage sales, and other hotel department revenues, such as parking, marina, theater, telephone, and gift shop sales. |
Prepaid Expenses and Other Assets | Prepaid Expenses and Other Assets—Prepaid expenses and other assets consist of prepaid real estate taxes, prepaid insurance, deposits on hotel acquisitions and loan applications, deferred franchise costs, inventories, deferred tax assets, and other assets. |
Deferred Financing Costs | Deferred Financing Costs—Deferred financing costs are recorded at cost and consist of loan fees and other costs incurred in issuing debt. Amortization of deferred financing costs is computed using a method that approximates the effective interest method over the term of the related debt and is included in interest expense in the consolidated statements of operations. Unamortized deferred financing costs are included as a direct deduction from long-term debt in the consolidated balance sheets. |
Derivative Instruments | Derivative Instruments—From time to time, the Trust is a party to interest rate swaps, which are considered derivative instruments, in order to manage its interest rate exposure. The Trust’s interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows. The Trust records derivative instruments at fair value as either assets or liabilities and designates them as cash flow hedging instruments at inception. The Trust evaluates the hedge effectiveness of the designated cash flow hedging instruments on a quarterly basis and records the effective portion of the change in the fair value of the cash flow hedging instruments as other comprehensive income (loss). Amounts reported in accumulated other comprehensive income (loss) related to cash flow hedging instruments are reclassified to interest expense as interest payments are made on the variable-rate debt being hedged. The Trust does not enter into derivative instruments for trading or speculative purposes and monitors the financial stability and credit standing of its counterparties |
Fair Value Measurements | Fair Value Measurements—The Trust accounts for certain assets and liabilities at fair value. In evaluating the fair value of both financial and non-financial assets and liabilities, GAAP outlines a valuation framework and creates a fair value hierarchy that distinguishes between market assumptions based on market data (observable inputs) and the reporting entity’s own assumptions about market data (unobservable inputs). The three levels of the fair value hierarchy are as follows: Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. An active market is defined as a market in which transactions occur with sufficient frequency and volume to provide pricing on an ongoing basis. Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves), and inputs that are derived principally from or corroborated by observable market data correlation or other means. Level 3 – Unobservable inputs reflect the reporting entity’s own assumptions about the pricing of an asset or liability when observable inputs are not available or when there is minimal, if any, market activity for an identical or similar asset or liability at the measurement date. |
Income Taxes | Income Taxes—The Trust has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code. As a REIT, the Trust generally will not be subject to federal income tax on that portion of its net income that does not relate to any of the Trust's TRSs, and that is currently distributed to its shareholders. Our TRSs, which lease the Trust’s hotels from the subsidiaries of the Operating Partnership owning them, are subject to federal and state income taxes. The Trust accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Valuation allowances are provided if based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. |
Share-Based Compensation | Share-Based Compensation—From time to time, the Trust grants restricted share awards to employees and trustees. To date, the Trust has granted two types of restricted share awards: (1) awards that vest solely on continued employment or service (time-based awards) and (2) awards that vest based on the Trust achieving specified levels of relative total shareholder return and continued employment (performance-based awards). The Trust measures share-based compensation expense for the restricted share awards based on the fair value of the awards on the date of grant. The fair value of time-based awards is determined based on the closing price of the Trust’s common shares on the measurement date, which is generally the date of grant. The fair value of performance-based awards is determined using a Monte Carlo simulation performed by an independent third party. For time-based awards, share-based compensation expense is recognized on a straight-line basis over the life of the entire award. For performance-based awards, share-based compensation expense is recognized over the requisite service period for each award. No share-based compensation expense is recognized for awards for which employees or trustees do not render the requisite service. |
Earnings Per Share | Earnings Per Share—Basic earnings per share is computed by dividing net income available to common shareholders, adjusted for dividends declared on and undistributed earnings allocated to unvested time-based awards, by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income available to common shareholders, adjusted for dividends declared on and undistributed earnings allocated to unvested time-based awards, by the weighted-average number of common shares outstanding, plus potentially dilutive securities, such as unvested performance-based awards, during the period. The Trust’s unvested time-based awards are entitled to receive non-forfeitable dividends, if declared. Therefore, unvested time-based awards qualify as participating securities, requiring the allocation of dividends and undistributed earnings under the two-class method to calculate basic earnings per share. The percentage of undistributed earnings allocated to the unvested time-based awards is based on the proportion of the weighted-average unvested time-based awards outstanding during the period to the total of the weighted-average common shares and unvested time-based awards outstanding during the period. No adjustment is made for shares that are anti-dilutive during the period. |
Segment Information | Segment Information—The Trust has determined that its business is conducted in one reportable segment, hotel ownership. |
Use of Estimates | Use of Estimates—The preparation of the interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements—In April 2015, the Financial Accounting Standards Board ("FASB") issued updated accounting guidance for the presentation of debt issuance costs in the consolidated balance sheets. Under the new accounting guidance, debt issuance costs are shown as a direct deduction from the related debt liability rather than as an asset in the consolidated balance sheet. The amortization of the costs will continue to be included in interest expense in the consolidated statement of operations. The new accounting guidance is effective for interim and annual periods beginning on or after December 15, 2015 and is to be applied on a retrospective basis. The Trust adopted the new accounting guidance on January 1, 2016. As a result, $6.5 million of unamortized deferred financing costs, which was previously presented as an asset as of December 31, 2015, is now presented within long-term debt. This reclassification had no effect on previously reported results of operations or retained earnings. The Trust does not believe that the adoption of this guidance has a material impact on the consolidated financial statements. |
Acquisitions (Tables) |
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Acquisitions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hotels acquired by the Trust | The Trust has acquired the following hotels since January 1, 2015 (in thousands, except rooms data):
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The allocation of the purchase prices to the assets acquired and liabilities assumed based on their fair values was as follows (in thousands):
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Property and Equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment |
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Intangible Assets and Liability (Tables) |
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Intangible Assets and Liability |
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Long-Term Debt (Tables) |
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Long-term Debt, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt |
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Future Scheduled Principal Payments of Debt Obligations |
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Earnings Per Share (Tables) |
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Calculation of Basic and Diluted Earnings Per Share |
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Shareholders' Equity (Tables) |
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Common Stock [Member] | ||||||||||||||||||||||||||||||||||||||||||||||
Dividends payable | ||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared or paid |
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Dividends payable | ||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared or paid |
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Equity Plan (Tables) |
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation Arrangement By Share-Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Common Shares |
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2016 Performance-based Awards [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation Arrangement By Share-Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payout as a percentage of maximum award |
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Fair Value Measurements and Derivative Instrument (Tables) |
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Financial Liabilities Measures at Fair Value |
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Organization and Description of Business (Details) - Chesapeake Lodging Trust [Member] |
Mar. 31, 2016
room
state
hotel
|
---|---|
Organization and Description of Business (Textual) [Abstract] | |
Number of hotels owned | hotel | 22 |
Number of hotel rooms | room | 6,699 |
Number of states in which hotels located | state | 9 |
Summary of Significant Accounting Policies (Details) |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Buildings and Building Improvements [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of assets | 40 years |
Buildings and Building Improvements [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of assets | 15 years |
FF&E [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of assets | 10 years |
FF&E [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of assets | 3 years |
Summary of Significant Accounting Policies (Details 2) |
3 Months Ended |
---|---|
Mar. 31, 2016
segment
| |
Summary of Significant Accounting Policies [Line Items] | |
Number of reportable segments | 1 |
Summary of SIgnificant Accounting Policies (Details 3) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Accounting Policies [Abstract] | ||
Unamortized deferred financing costs | $ 6,027 | $ 6,493 |
Acquisitions Table (Details 1) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2015
USD ($)
room
| |
2015 Acquisitions [Member] | |
Acquisitions | |
Number of hotel rooms | room | 575 |
Net assets acquired | $ 255,349 |
Assumed mortgage loan | $ 125,000 |
Royal Palm South Beach Miami, a Tribute Portfolio Resort [Member] | |
Acquisitions | |
Location | Miami Beach, FL |
Number of hotel rooms | room | 393 |
Net assets acquired | $ 153,662 |
Acquisition date | Mar. 09, 2015 |
Assumed mortgage loan | $ 125,000 |
Ace Hotel and Theater Downtown Los Angeles [Member] | |
Acquisitions | |
Location | Los Angeles, CA |
Number of hotel rooms | room | 182 |
Net assets acquired | $ 101,687 |
Acquisition date | Apr. 30, 2015 |
Acquisitions Table (Details 2) - 2015 Acquisitions [Member] $ in Thousands |
Dec. 31, 2015
USD ($)
|
---|---|
Acquisitions | |
Land and land improvements | $ 64,462 |
Buildings | 294,498 |
Furniture, fixtures and equipment | 20,518 |
Cash | 100 |
Accounts receivable, net | 1,823 |
Prepaid expenses and other assets | 3,162 |
Accounts payable and accrued expenses | (4,089) |
Other liabilities | (125) |
Mortgage loan | (125,000) |
Net assets acquired | $ 255,349 |
Property and Equipment (Details) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Property and Equipment | ||
Land and land improvements | $ 319,755 | $ 319,702 |
Buildings and leasehold improvements | 1,629,003 | 1,628,124 |
Furniture, fixtures and equipment | 192,528 | 191,092 |
Construction-in-progress | 4,758 | 3,276 |
Property and equipment, gross | 2,146,044 | 2,142,194 |
Less: accumulated depreciation and amortization | (233,734) | (215,250) |
Property and equipment, net | $ 1,912,310 | $ 1,926,944 |
Long-Term Debt Details Textual (Details) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 04, 2015
USD ($)
|
Mar. 31, 2016
USD ($)
hotel
|
Oct. 25, 2012
USD ($)
|
|
Debt Instrument [Line Items] | |||
Maximum borrowing capacity under revolving credit facility | $ 300.0 | $ 250.0 | |
Line of credit facility, expiration date month year | March 2019 | ||
Potential maximum borrowing capacity under revolving credit facility | $ 450.0 | ||
Debt instrument maturity extension period | 1 year | ||
Number of borrowing base hotels supporting revolving credit facility | hotel | 11 | ||
Current borrowing capacity under revolving credit facility | $ 300.0 | ||
Line of credit facility, remaining borrowing capacity | $ 180.0 | ||
Weighted-average interest rate on long-term debt | 3.85% | ||
Minimum [Member] | |||
Debt Instrument [Line Items] | |||
Rate spread over LIBOR | 1.55% | ||
Maximum [Member] | |||
Debt Instrument [Line Items] | |||
Rate spread over LIBOR | 2.30% |
Long-Term Debt (Details 1) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Future Principal Payments of Debt Obligations | ||
2016 | $ 129,260 | |
2017 | 135,074 | |
2018 | 10,493 | |
2019 | 130,930 | |
2020 | 132,393 | |
Thereafter | 245,266 | |
Long-term debt, carrying amount | $ 783,416 | $ 776,065 |
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Numerator: | ||
Net income (loss) available to common shareholders | $ 7,648 | $ (870) |
Less: Dividends declared on unvested time-based awards | (144) | (137) |
Less: Undistributed earnings allocated to unvested time-based awards | 0 | 0 |
Net income (loss) available to common shareholders, excluding amounts attributable to unvested time-based awards | $ 7,504 | $ (1,007) |
Denominator: | ||
Weighted-average number of common shares outstanding - basic | 58,681,525 | 54,178,494 |
Effect of dilutive unvested performance-based awards | 565,694 | 0 |
Weighted-average number of shares outstanding - diluted | 59,247,219 | 54,178,494 |
Net income (loss) available per common share - basic and diluted | $ 0.13 | $ (0.02) |
Anti-dilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities excluded from computation of earnings per share, amount | 278,271 | 722,305 |
Shareholders' Equity (Details) |
3 Months Ended |
---|---|
Mar. 31, 2016
$ / shares
| |
Common Stock [Member] | Fourth Quarter 2015 [Member] | |
Dividends Declared or Paid | |
Record date | Dec. 31, 2015 |
Payment date | Jan. 15, 2016 |
Common share, dividend per share, cash paid | $ 0.40 |
Common Stock [Member] | First Quarter 2016 [Member] | |
Dividends Declared or Paid | |
Record date | Mar. 31, 2016 |
Payment date | Apr. 15, 2016 |
Common share, dividend per share, declared | $ 0.40 |
Series A Preferred Stock [Member] | Fourth Quarter 2015 [Member] | |
Dividends Declared or Paid | |
Record date | Dec. 31, 2015 |
Payment date | Jan. 15, 2016 |
Preferred share, dividend per share, cash paid | $ 0.484375 |
Series A Preferred Stock [Member] | First Quarter 2016 [Member] | |
Dividends Declared or Paid | |
Record date | Mar. 31, 2016 |
Payment date | Apr. 15, 2016 |
Preferred share, dividend per share, declared | $ 0.484375 |
Equity Plan (Details Textual) - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended |
---|---|---|
May. 31, 2012 |
Mar. 31, 2016 |
|
Equity Plan (Textual) [Abstract] | ||
Equity plan, common shares initially reserved for issuance (in shares) | 454,657 | |
Equity plan increase in common shares reserved for issuance (in shares) | 2,750,000 | |
Common shares reserved and available for future issuance (in shares) | 836,882 | |
Share-based compensation arrangement by share-based payment award, equity instruments other than options, grants in period | 431,276 | |
Share-based compensation arrangement by share-based payment award, time-based, grants in period | 145,359 | |
Share-based compensation arrangement by share-based payment award, performance-based, grants in period | 285,917 | |
Unrecognized share-based compensation expense | $ 13.8 | |
Unrecognized share-based compensation expense, weighted-average period (in years) | 2 years |
Equity Plan (Details Textual 2) |
3 Months Ended |
---|---|
Mar. 31, 2016
$ / shares
| |
Share-based compensation arrangement by share-based payment award [Line Items] | |
Grant date fair value per share | $ 15.26 |
2016 Performance-based Awards [Member] | |
Share-based compensation arrangement by share-based payment award [Line Items] | |
Grant date fair value per share | $ 10.54 |
Expected volatility rate | 21.04% |
Risk free interest rate | 1.38% |
Performance period | 3 years |
No payout as a percentage maximum | 0.00% |
Threshold payout as a percentage of maximum | 25.00% |
Target payout as a percentage of maximum | 50.00% |
Maximum payout | 100.00% |
No payout if relative TSR less than | 67.00% |
Threshold payout if relative TSR equal to | 67.00% |
Target payout if relative TSR equal to | 100.00% |
Maximum payout if relative TRS greater than or equal to | 133.00% |
Fair Value Measurements and Derivative Instrument (Details) $ in Thousands |
Mar. 31, 2016
USD ($)
|
---|---|
Liabilities | |
Derivative liability | $ 447 |
Interest Rate Swap [Member] | |
Liabilities | |
Derivative liability | 447 |
Fair Value, Inputs, Level 1 [Member] | |
Liabilities | |
Derivative liability | 0 |
Fair Value, Inputs, Level 1 [Member] | Interest Rate Swap [Member] | |
Liabilities | |
Derivative liability | 0 |
Fair Value, Inputs, Level 2 [Member] | |
Liabilities | |
Derivative liability | 447 |
Fair Value, Inputs, Level 2 [Member] | Interest Rate Swap [Member] | |
Liabilities | |
Derivative liability | 447 |
Fair Value, Inputs, Level 3 [Member] | |
Liabilities | |
Derivative liability | 0 |
Fair Value, Inputs, Level 3 [Member] | Interest Rate Swap [Member] | |
Liabilities | |
Derivative liability | $ 0 |
Subsequent Events (Details) $ in Millions |
Apr. 14, 2016
USD ($)
room
|
Apr. 06, 2016
USD ($)
|
---|---|---|
Hyatt Regency Boston Mortgage Loan [Member] | ||
Subsequent Events [Line Items] | ||
Principal prepayment on mortgage debt | $ 88.2 | |
Hyatt Centric Santa Barbara [Member] | ||
Subsequent Events [Line Items] | ||
Number of hotel rooms | room | 5 | |
Hotel sale price including working capital | $ 2.1 | |
Gain on sale of hotel expected | $ 0.6 |
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