0001476045-21-000064.txt : 20210504 0001476045-21-000064.hdr.sgml : 20210504 20210504145430 ACCESSION NUMBER: 0001476045-21-000064 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 74 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210504 DATE AS OF CHANGE: 20210504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Chatham Lodging Trust CENTRAL INDEX KEY: 0001476045 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 271200777 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-34693 FILM NUMBER: 21887861 BUSINESS ADDRESS: STREET 1: 222 LAKEVIEW AVENUE STREET 2: SUITE 200 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 BUSINESS PHONE: (561) 802-4477 MAIL ADDRESS: STREET 1: 222 LAKEVIEW AVENUE STREET 2: SUITE 200 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 10-Q 1 cldt-20210331.htm 10-Q cldt-20210331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-34693
CHATHAM LODGING TRUST
(Exact Name of Registrant as Specified in Its Charter)
Maryland27-1200777
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
222 Lakeview Avenue, Suite 200
West Palm BeachFlorida33401
(Address of Principal Executive Offices)(Zip Code)
(561) 802-4477
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of Each Exchange On Which Registered
Common Shares of Beneficial Interest, $0.01 par valueCLDTNew York Stock Exchange
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    x  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨  
Accelerated filerx
Non-accelerated filer
¨  
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes    x  No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOutstanding at May 4, 2021
Common Shares of Beneficial Interest ($0.01 par value per share)48,617,918

1



2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CHATHAM LODGING TRUST
Consolidated Balance Sheets
(In thousands, except share and per share data)
 
March 31,
2021
December 31,
2020
(unaudited)
Assets:
Investment in hotel properties, net$1,251,986 $1,265,174 
Investment in hotel properties under development52,540 43,651 
Cash and cash equivalents14,638 21,124 
Restricted cash8,724 10,329 
Right of use asset, net20,480 20,641 
Hotel receivables (net of allowance for doubtful accounts of $263 and $248, respectively)
2,507 1,688 
Deferred costs, net4,990 5,384 
Prepaid expenses and other assets6,882 2,266 
Total assets$1,362,747 $1,370,257 
Liabilities and Equity:
Mortgage debt, net$457,924 $460,145 
Revolving credit facility120,000 135,300 
Construction loan21,757 13,325 
Accounts payable and accrued expenses22,350 25,374 
Distributions and losses in excess of investments in unconsolidated real estate entities 19,951 
Lease liability, net 23,103 23,233 
Distributions payable147 469 
Total liabilities645,281 677,797 
Commitments and contingencies (Note 13)
Equity:
Shareholders’ Equity:
Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at March 31, 2021 and December 31, 2020
  
Common shares, $0.01 par value, 500,000,000 shares authorized; 48,518,201 and 46,973,473 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
485 470 
Additional paid-in capital929,725 906,000 
Accumulated deficit(226,062)(228,718)
Total shareholders’ equity704,148 677,752 
Noncontrolling Interests:
Noncontrolling interest in Operating Partnership13,318 14,708 
Total equity717,466 692,460 
Total liabilities and equity$1,362,747 $1,370,257 
The accompanying notes are an integral part of these consolidated financial statements.
3


CHATHAM LODGING TRUST
Consolidated Statements of Operations
(In thousands, except share and per share data)
(unaudited)
For the three months ended
March 31,
20212020
Revenue:
Room$29,390 $53,048 
Food and beverage363 2,063 
Other1,574 3,518 
Reimbursable costs from unconsolidated real estate entities787 1,580 
Total revenue32,114 60,209 
Expenses:
Hotel operating expenses:
Room7,166 13,394 
Food and beverage284 1,889 
Telephone400 378 
Other hotel operating 365 810 
General and administrative3,812 5,278 
Franchise and marketing fees2,598 4,720 
Advertising and promotions757 1,510 
Utilities2,287 2,516 
Repairs and maintenance2,461 3,462 
Management fees1,196 2,024 
Insurance648 360 
Total hotel operating expenses21,974 36,341 
Depreciation and amortization13,334 13,061 
Impairment loss on investment in unconsolidated real estate entities 15,282 
Property taxes, ground rent and insurance5,879 6,099 
General and administrative3,530 2,765 
Other charges55 2,768 
Reimbursable costs from unconsolidated real estate entities787 1,580 
Total operating expenses45,559 77,896 
Operating loss before (loss) gain on sale of hotel property(13,445)(17,687)
(Loss) gain on sale of hotel property(43)1 
Operating loss(13,488)(17,686)
Interest and other income74 81 
Interest expense, including amortization of deferred fees(6,470)(6,833)
Loss from unconsolidated real estate entities(1,231)(3,673)
Gain on sale of investment in unconsolidated real estate entities23,817  
Income (loss) before income tax expense2,702 (28,111)
Income tax expense  
Net income (loss)2,702 (28,111)
Net income (loss) attributable to noncontrolling interests(46)328 
Net income (loss) attributable to common shareholders$2,656 $(27,783)
Income (loss) per Common Share - Basic:
Net income (loss) attributable to common shareholders (Note 10)$0.06 $(0.59)
Income (loss) per Common Share - Diluted:
Net income (loss) attributable to common shareholders (Note 10)$0.06 $(0.59)
Weighted average number of common shares outstanding:
Basic47,224,972 46,948,533 
Diluted47,368,518 46,948,533 
Distributions declared per common share:$ $0.22 
The accompanying notes are an integral part of these consolidated financial statements.
4


CHATHAM LODGING TRUST
Consolidated Statements of Equity
(In thousands, except share and per share data)
(unaudited)
Three months ended March 31, 2020 and 2021
Common SharesAdditional Paid - In CapitalRetained earnings (distributions in excess of retained earnings)Total Shareholders’ EquityNoncontrolling Interest in Operating PartnershipTotal Equity
SharesAmount
Balance, January 1, 202046,928,445 $469 $904,273 $(142,365)$762,377 $12,647 $775,024 
Issuance of shares pursuant to Equity Incentive Plan24,516 — 450 — 450 — 450 
Issuance of shares, net of offering costs of $2
7,428 — 91 — 91 — 91 
Amortization of share based compensation— — 8 — 8 1,372 1,380 
Dividends declared on common shares ($0.22 per share)
— — — (10,331)(10,331)— (10,331)
Distributions declared on LTIP units ($0.22 per unit)
— — — — — (233)(233)
Reallocation of noncontrolling interest— — 1,114 — 1,114 (1,114) 
Net loss— — — (27,783)(27,783)(328)(28,111)
Balance, March 31, 202046,960,389 $469 $905,936 $(180,479)$725,926 $12,344 $738,270 
Balance, January 1, 202146,973,473 $470 $906,000 $(228,718)$677,752 $14,708 $692,460 
Issuance of shares pursuant to Equity Incentive Plan40,224 — 450 — 450 — 450 
Issuance of shares, net of offering costs of $518
1,504,504 15 20,761 — 20,776 — 20,776 
Amortization of share based compensation— — 7 — 7 1,031 1,038 
Forfeited distributions declared on LTIP units— — — — — 40 40 
Reallocation of noncontrolling interest— — 2,507 — 2,507 (2,507) 
Net income— — — 2,656 2,656 46 2,702 
Balance, March 31, 202148,518,201 $485 $929,725 $(226,062)$704,148 $13,318 $717,466 

The accompanying notes are an integral part of these consolidated financial statements.
5


CHATHAM LODGING TRUST
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
For the three months ended
March 31,
20212020
Cash flows from operating activities:
Net income (loss)$2,702 $(28,111)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation13,274 13,000 
Amortization of deferred franchise fees60 61 
Amortization of deferred financing fees included in interest expense480 227 
Loss on sale of hotel property43  
Gain on sale of investment in unconsolidated real estate entities(23,817) 
Impairment loss on investment in unconsolidated real estate entities 15,282 
Share based compensation1,156 1,206 
Accelerated share based compensation for employee severance 287 
Loss from unconsolidated real estate entities1,231 3,673 
Changes in assets and liabilities:
Right of use asset161 155 
Hotel receivables(818)1,829 
Deferred costs (16)
Prepaid expenses and other assets(4,617)(3,407)
Accounts payable and accrued expenses(1,797)(6,932)
Lease liability(130)(114)
Net cash used in operating activities(12,072)(2,860)
Cash flows from investing activities:
Improvements and additions to hotel properties(1,115)(6,110)
Investment in hotel properties under development(8,889)(6,197)
Proceeds from sale of unconsolidated real estate entity2,800  
Net cash used in investing activities(7,204)(12,307)
Cash flows from financing activities:
Borrowings on revolving credit facility8,000 86,000 
Repayments on revolving credit facility(23,300)(3,000)
Borrowings on construction loan8,432  
Payments on mortgage debt(2,300)(2,297)
Payment of financing costs(142) 
Payment of offering costs(518)(2)
Proceeds from issuance of common shares21,294 92 
Distributions-common shares/units(281)(16,237)
Net cash provided by financing activities11,185 64,556 
Net change in cash, cash equivalents and restricted cash(8,091)49,389 
Cash, cash equivalents and restricted cash, beginning of period31,453 20,182 
Cash, cash equivalents and restricted cash, end of period$23,362 $69,571 
Supplemental disclosure of cash flow information:
Cash paid for interest$6,698 $6,835 
Capitalized interest$690 $277 
Cash paid for income taxes$2 $4 
-continued-
Supplemental disclosure of non-cash investing and financing information:
On January 15, 2021, the Company issued 40,224 shares to its independent trustees pursuant to the Company’s Equity Incentive Plan as compensation for services performed in 2020. On January 15, 2020, the Company issued 24,516 shares to its independent trustees pursuant to the Company’s Equity Incentive Plan as compensation for services performed in 2019.
As of March 31, 2021, the Company had accrued distributions payable of $147. As of March 31, 2020, the Company had accrued distributions payable of $469. These distributions related to accrued but unpaid distributions on unvested performance based shares and LTIP units.
Accrued share based compensation of $118 and $113 is included in accounts payable and accrued expenses as of March 31, 2021 and 2020, respectively.
Accrued capital improvements of $3,507 and $3,338 are included in accounts payable and accrued expenses as of March 31, 2021 and 2020, respectively.

The accompanying notes are an integral part of these consolidated financial statements.
6


CHATHAM LODGING TRUST
Notes to the Consolidated Financial Statements
(in thousands, except share and per share data, unless otherwise specified)
(unaudited)
 
1.    Organization

Chatham Lodging Trust (“we,” “us” or the “Company”) was formed as a Maryland real estate investment trust (“REIT”) on October 26, 2009. The Company is internally-managed and invests primarily in upscale extended-stay and premium-branded select-service hotels. The Company has elected to be treated as a REIT for federal income tax purposes.
In December 2017, the Company established an At the Market Equity Offering ("Prior ATM Plan") whereby, from time to time, we may publicly offer and sell our common shares having an aggregate maximum offering price of up to $100 million by means of ordinary brokers’ transactions on the New York Stock Exchange (the "NYSE"), in negotiated transactions or in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. The Company filed a $100 million registration statement for a new ATM program (the "ATM Plan" and together with the Prior ATM Plan, the "ATM Plans") on March 5, 2021 to replace the prior program. At the same time, the Company entered into sales agreements with Cantor Fitzgerald & Co., Barclays Capital Inc., BMO Capital Markets Corp., BofA Securities, Inc., BTIG, LLC, Citigroup Global Markets Inc., Regions Securities LLC, Stifel, Nicolaus & Company, Incorporated and Wells Fargo Securities as sales agents. During the three months ended March 31, 2021, the Company issued 1.4 million shares under the ATM Plan at an average price of $14.18, which generated $19.3 million of proceeds. As of March 31, 2021, there was approximately $80.7 million available for issuance under the ATM Plan.
In December 2017, the Company established a $50 million dividend reinvestment and stock purchase plan (the "Prior DRSPP"). We filed a new $50 million shelf registration statement for the dividend reinvestment and stock purchase plan (the "New DRSPP" and together with the Prior DRSPP, the "DRSPPs") on December 22, 2020 to replace the prior program. Under the DRSPPs, shareholders may purchase additional common shares by reinvesting some or all of the cash dividends received on the Company's common shares. Shareholders may also make optional cash purchases of the Company's common shares subject to certain limitations detailed in the prospectus for the DRSPPs. During the three months ended March 31, 2021, the Company issued 0.1 million shares under the New DRSPP at a weighted average price of $13.80, which generated $2.0 million of proceeds. As of March 31, 2021, there was approximately $48.0 million available for issuance under the New DRSPP.
The net proceeds from any share offerings or issuances are contributed to Chatham Lodging, L.P., our operating partnership (the “Operating Partnership”), in exchange for partnership interests. Substantially all of the Company’s assets are held by, and all operations are conducted through, the Operating Partnership. Chatham Lodging Trust is the sole general partner of the Operating Partnership and owns 100.0% of the common units of limited partnership interest in the Operating Partnership. Certain of the Company’s executive officers hold vested and unvested long-term incentive plan units in the Operating Partnership ("LTIP units"), which are presented as non-controlling interests on our consolidated balance sheets.
As of March 31, 2021, the Company wholly owned 39 hotels with an aggregate of 5,900 rooms located in 15 states and the District of Columbia. As of March 31, 2021, the Company held a 10% noncontrolling interest in a joint venture (the "Inland JV") with affiliates of Colony Capital, Inc. ("CLNY"), which owns 48 hotels acquired from Inland American Real Estate Trust, Inc. ("Inland"), comprising an aggregate of 6,402 rooms. As of March 31, 2021, the Inland JV hotels are in receivership. Prior to March 18, 2021, the Company also held a 10.3% noncontrolling interest in a joint venture (the “NewINK JV”) with affiliates of CLNY, which owned 46 hotels with an aggregate of 5,948 rooms. Chatham sold its interest in the NewINK JV in March 2021 for $2.8 million. We sometimes use the term "JVs", which refers collectively to the NewINK JV and Inland JV.
To qualify as a REIT, the Company cannot operate the hotels. Therefore, the Operating Partnership and its subsidiaries lease the Company's wholly owned hotels to taxable REIT subsidiary lessees (“TRS Lessees”), which are wholly owned by the Company’s taxable REIT subsidiary (“TRS”) holding company. The Company indirectly owns its 10% interest in the 48 Inland JV hotels through the Operating Partnership. All of the Inland JV hotels are leased to TRS Lessees, in which the Company indirectly owns noncontrolling interests through its TRS holding company. Each hotel is leased to a TRS Lessee under a percentage lease that provides for rental payments equal to the greater of (i) a fixed base rent amount or (ii) a percentage rent based on hotel revenue. The initial term of each of the TRS leases is 5 years. Lease revenue from each TRS Lessee is eliminated in consolidation.
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The TRS Lessees have entered into management agreements with third-party management companies that provide day-to-day management for the hotels. As of March 31, 2021, Island Hospitality Management LLC (“IHM”), which is 97.5% owned by Jeffrey H. Fisher, the Company's Chairman, President and Chief Executive Officer, managed all 39 of the Company’s wholly owned hotels. As of March 31, 2021, all of the Inland JV hotels were managed by other management companies.

2.    Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and in conformity with the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial information. These unaudited consolidated financial statements, in the opinion of management, include all adjustments consisting of normal, recurring adjustments which are considered necessary for a fair statement of the consolidated balance sheets, consolidated statements of operations, consolidated statements of equity, and consolidated statements of cash flows for the periods presented. Interim results are not necessarily indicative of full year performance due to seasonal and other factors, including the timing of the acquisition or sale of hotels.

The consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited financial statements prepared in accordance with GAAP, and the related notes thereto as of December 31, 2020, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

3.    Disposition of Hotel Properties
On November 24, 2020, the Company sold the Residence Inn Mission Valley hotel in San Diego, CA for $67.0 million and recognized a gain on sale of the hotel property of $21.1 million. The balance of the mortgage loan of $26.7 million was repaid with proceeds from the sale. Additional proceeds were used to repay amounts outstanding on the Company's revolving credit facility. The sale did not represent a strategic shift that had or will have a major effect on the Company's operations and financial results and did not qualify to be reported as discontinued operations.
During the three months ended March 31, 2021 and 2020, the Company's consolidated statements of operations included operating income related to the disposed hotel as follows (in thousands):
For the three months ended
March 31,
20212020
Residence Inn Mission Valley, CA$ $752 
Total$ $752 

4.    Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts at a level believed to be adequate to absorb estimated probable losses. That estimate is based on past loss experience, current economic and market conditions and other relevant factors. The allowance for doubtful accounts was $0.3 million and $0.2 million as of March 31, 2021 and December 31, 2020, respectively.

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5.    Investment in Hotel Properties

Investment in hotel properties,net

Investment in hotel properties, net as of March 31, 2021 and December 31, 2020 consisted of the following (in thousands):
 
March 31, 2021December 31, 2020
Land and improvements$287,049 $287,049 
Building and improvements1,197,805 1,195,276 
Furniture, fixtures and equipment86,506 84,381 
Renovations in progress6,656 11,225 
1,578,016 1,577,931 
Less: accumulated depreciation(326,030)(312,757)
Investment in hotel properties, net$1,251,986 $1,265,174 

Investment in hotel properties under development

We are developing a hotel in the Warner Center submarket of Los Angeles, CA on a parcel of land owned by us. We have incurred $52.5 million of costs to date, which includes $6.6 million of land acquisition costs and $45.9 million of other development costs.
6.    Investment in Unconsolidated Entities

 On June 9, 2014, the Company acquired a 10.3% interest in the NewINK JV, a joint venture between affiliates of NorthStar Realty Finance Corp. ("NorthStar") and the Operating Partnership. NorthStar merged with Colony Capital, Inc. ("Colony") on January 10, 2017 to form a new company, CLNY, which owned a 89.7% interest in the NewINK JV. Chatham sold its interest in the NewINK JV in March 2021 for $2.8 million which resulted in Chatham recording a gain on sale of investment in unconsolidated real estate entities of $23.8 million during the three months ended March 31, 2021. The Company accounted for this investment under the equity method.

On November 17, 2014, the Company acquired a 10.0% interest in the Inland JV, a joint venture between affiliates of NorthStar and the Operating Partnership. NorthStar merged with Colony on January 10, 2017 to form a new company, CLNY, which owns a 90% interest in the Inland JV.  The value of Inland JV assets and liabilities were adjusted to reflect estimated fair market value at the time Colony merged with NorthStar. The Company serves as managing member of the Inland JV. The Company accounts for this investment under the equity method. During the three months ended March 31, 2021 and 2020, the Company received no cash distributions from the Inland JV.

The Company’s ownership interest in the Inland JV is subject to change in the event that either the Company or CLNY calls for additional capital contributions to the JV necessary for the conduct of business, including contributions to fund costs and expenses related to capital expenditures. In connection with the non-recourse mortgage loan secured by the Inland JV properties, the Operating Partnership provided the lender with customary environmental indemnities, as well as a guarantee of certain customary non-recourse carve-out provisions such as fraud, material and intentional misrepresentations and misapplication of funds.  In some circumstances, such as the bankruptcy, the guarantee is for the full amount of the outstanding debt, but in most circumstances, the guarantee is capped at 20% of the debt outstanding at the time in question. In connection with the Inland JV loan, the Operating Partnership has entered into a contribution agreement with its JV partner whereby the JV partner is, in most cases, responsible to cover such JV partner’s pro rata share of any amounts due by the Operating Partnership under the guarantee and environmental indemnities. CLNY may also approve certain actions by the JV without the Company’s consent, including certain property dispositions conducted at arm’s length, certain actions related to the restructuring of the applicable JV and removal of the Company as managing member in the event the Company fails to fulfill its material obligations under the applicable joint venture agreement.

9


During the three months ended March 31, 2020, the Company determined that an other than temporary decline in the value of its equity investment in the Inland JV had occurred. The Inland JV’s operating performance has been significantly impacted by the COVID-19 pandemic. The Inland JV has high leverage, limited liquidity and limited ability to fund the level of operating losses caused by the COVID-19 pandemic for a sustained period of time. Based on these factors, we assessed that the fair market value of our equity investment in the Inland JV is zero and the Company did not consider the investment recoverable and therefore recorded an impairment of $15.3 million on the investment. Since the Company’s basis in the Inland JV is now zero and we expect that ongoing losses are not sustainable, we stopped recording any equity income or losses from the Inland JV as of March 31, 2020.

On April 9, 2020 the Inland JV failed to make a debt service payment related to its $780.0 million loan and has not made any of its subsequent monthly debt service payments. The failure to make the required debt service payments is an event of default under the Inland loan agreement. The Inland JV has not been successful in negotiating a forbearance agreement with its lenders. At the direction of the special servicer for the Inland JV loan, control of Inland JV properties has transitioned to a court appointed receiver. The receiver, LW Hospitality Advisors, has been appointed for Inland JV hotels, and has replaced IHM with new hotel management companies. The Inland JV debt is non-recourse to Chatham with the exception of customary non-recourse carve-out provisions such as fraud, material and intentional misrepresentations and misapplication of funds. A default under the Inland JV loan agreement does not trigger a cross-default under any of Chatham’s debt agreements.

The Company's recorded investments in the NewINK JV and the Inland JV were $0.0 million and $0.0 million, respectively, at March 31, 2021. The following table sets forth the combined components of net income (loss), including the Company’s share, related to all JVs for the three months ended March 31, 2021 and 2020 (in thousands):
For the three months ended
March 31,
20212020
Revenue$24,690 $90,870 
Total hotel operating expenses24,106 71,965 
Hotel operating income$584 $18,905 
Impairment loss$ $13,881 
Loss from continuing operations$(13,109)$(40,285)
Loss on sale of hotels (82)
Net loss$(13,109)$(40,367)
Loss allocable to the Company$(1,347)$(4,072)
Basis difference adjustment116 399 
Total loss from unconsolidated real estate entities attributable to the Company$(1,231)$(3,673)

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7.    Debt

The Company’s mortgage loans are collateralized by first-mortgage liens on certain of the Company’s properties. The mortgage loans are non-recourse except for instances of fraud or misapplication of funds. Mortgage and revolving credit facility debt consisted of the following (dollars in thousands):
 
CollateralInterest RateMaturity Date3/31/21 Property Carrying ValueBalance Outstanding on Loan as of
March 31, 2021December 31,
2020
Revolving Credit Facility (1)3.11 %March 8, 2022$624,787 $120,000 $135,300 
Construction loan (2)7.75 %August 3, 202452,540 21,757 13,325 
Residence Inn by Marriott New Rochelle, NY5.75 %September 1, 202121,829 12,483 12,602 
Homewood Suites by Hilton San Antonio, TX 4.59 %February 6, 202328,384 15,097 15,195 
Residence Inn by Marriott Vienna, VA4.49 %February 6, 202330,748 20,645 20,780 
Courtyard by Marriott Houston, TX4.19 %May 6, 202329,891 17,012 17,126 
Hyatt Place Pittsburgh, PA4.65 %July 6, 202333,464 20,901 21,031 
Residence Inn by Marriott Bellevue, WA4.97 %December 6, 202362,033 42,768 42,998 
Residence Inn by Marriott Garden Grove, CA4.79 %April 6, 202441,126 31,305 31,463 
Residence Inn by Marriott Silicon Valley I, CA 4.64 %July 1, 202474,670 63,152 63,418 
Residence Inn by Marriott Silicon Valley II, CA4.64 %July 1, 202482,846 68,902 69,192 
Residence Inn by Marriott San Mateo, CA 4.64 %July 1, 202461,935 47,364 47,564 
Residence Inn by Marriott Mountain View, CA4.64 %July 6, 202447,754 36,936 37,092 
SpringHill Suites by Marriott Savannah, GA4.62 %July 6, 202433,106 29,234 29,358 
Hilton Garden Inn Marina del Rey, CA4.68 %July 6, 202437,775 20,372 20,490 
Homewood Suites by Hilton Billerica, MA 4.32 %December 6, 202412,796 15,336 15,411 
Hampton Inn & Suites Houston Medical Center, TX 4.25 %January 6, 202515,619 17,310 17,396 
Total debt before unamortized debt issue costs$1,291,303 $600,574 $609,741 
Unamortized mortgage debt issue costs(893)(971)
Total debt outstanding$599,681 $608,770 
 
1.The interest rate for the revolving credit facility is variable and based on LIBOR (subject to a 0.5% floor) plus a spread of 2.5% if borrowings remain at or below $200 million and a spread of 3.0% if borrowings exceed $200 million. At March 31, 2021 and December 31, 2020, the Company had $120.0 million and $135.3 million, respectively, of outstanding borrowings under its $250.0 million revolving credit facility. The credit facility provides two six-month extension options that would extend the final maturity to March 8, 2023 if exercised.
2.On August 4, 2020, a subsidiary of Chatham entered into an agreement with affiliates of Mack Real Estate Credit Strategies to obtain a $40 million loan to fund the remaining construction costs of the Warner Center hotel development. The loan has an initial term of 4 years and there are two six-month extension options. The rate on the loan is LIBOR, subject to a 0.25% floor, plus a spread of 7.5%.
The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates. All of the Company's mortgage loans are fixed-rate. Rates take into consideration general market conditions, quality and estimated value of collateral and maturity of debt with similar credit terms and are classified within level 3 of the fair value hierarchy. The estimated fair value of the Company’s fixed rate debt as of March 31, 2021 and December 31, 2020 was $464.2 million and $462.6 million, respectively.
The Company estimates the fair value of its variable rate debt by taking into account general market conditions and the estimated credit terms it could obtain for debt with similar maturity and is classified within level 3 of the fair value hierarchy. As of March 31, 2021, the Company’s variable rate debt consisted of its revolving credit facility and construction loan. The estimated fair value of the Company’s variable rate debt as of March 31, 2021 and December 31, 2020 was $141.8 million and $148.6 million, respectively.
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On December 16, 2020, the Company, entered into a Third Amendment to the Company’s Amended and Restated Credit Agreement, dated as of March 8, 2018 (as amended by the Credit Agreement Amendment, and as previously amended by that certain First Amendment to the Amended and Restated Credit Agreement, dated as of May 6, 2020, and as further amended by that certain Second Amendment to Amended and Restated Credit Agreement, dated as of July 23, 2020), with certain lenders for whom Barclays Bank PLC is acting as the administrative agent. The amendment provides for the waiver of certain financial covenants through December 31, 2021 and allows the Company to borrow up to the entire $250.0 million facility size during this period. During this covenant waiver period, the Company will be required to maintain a minimum liquidity of $25.0 million which will include both unrestricted cash and credit facility availability. In connection with the amendment, the Company added 6 hotels to the credit facility’s borrowing base which now has a total of 24 properties. The amendment provided the Company’s credit facility lenders with pledges of the equity in the 24 borrowing base hotels. The amendment places additional limits on the Company’s ability to incur debt, pay dividends, and make capital expenditures during the covenant waiver period. During the covenant waiver period interest will be calculated as LIBOR (subject to a 0.5% floor) plus a spread of 2.50% if borrowings remain at or below $200.0 million and a spread of 3.0% if borrowings exceed $200.0 million. As of March 31, 2021, the Company was in compliance with all of its modified financial covenants.

Our mortgage debt agreements contain “cash trap” provisions that are triggered when the hotel’s operating results
fall below a certain debt service coverage ratio or debt yield. When these provisions are triggered, all of the excess cash flow generated by the hotel is deposited directly into cash management accounts for the benefit of our lenders until a specified debt service coverage ratio or debt yield is reached. Such provisions do not allow the lender the right to accelerate repayment of the underlying debt. As of March 31, 2021, the debt service coverage ratios or debt yields for all of our mortgage loans were below the minimum thresholds such that the cash trap provision of each respective loan could be enforced. As of March 31, 2021, none of our mortgage debt lenders has enforced cash trap provisions. We do not expect that such cash traps will affect our ability to satisfy our short-term liquidity requirements.
Future scheduled principal payments of debt obligations as of March 31, 2021, for the current year and each of the next five calendar years and thereafter are as follows (in thousands):
Amount
2021 (remaining nine months)$19,141 
2022129,249 
2023117,876 
2024318,373 
202515,935 
Thereafter 
Total debt before unamortized debt issue costs$600,574 
Unamortized mortgage debt issue costs(893)
Total debt outstanding$599,681 

Accounting for Derivative Instruments
The Company has entered into interest rate cap agreements to hedge against interest rate fluctuations related to the construction loans for the Warner Center hotel. The Company records its derivative instruments on the balance sheet at their estimated fair values. Changes in the fair value of the derivatives are recorded each period in current earnings or in other comprehensive income, depending on whether a derivative is designated as part of a hedging relationship and, if it is, depending on the type of hedging relationship. The Company's interest rate caps are not designated as a hedge but to eliminate the incremental cost to the Company if the one-month LIBOR were to exceed 3.5%. Accordingly, the interest rate caps are recorded on the balance sheet under prepaid expenses and other assets at the estimated fair value and realized and unrealized changes in the fair value are reported in the combined statement of operations. As of March 31, 2021, the fair value of the interest rate caps were $49 thousand.
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8.    Income Taxes

The Company’s TRS is subject to federal and state income taxes. Income tax expense was zero for the three months ended March 31, 2021 and 2020.
As of each reporting date, the Company's management considers new evidence, both positive and negative, that could impact management's view with regard to future realization of deferred tax assets. The Company's TRS is expecting continued taxable losses in 2021. As of March 31, 2021, the TRS continues to recognize a full valuation allowance equal to 100% of the net deferred tax assets due to the uncertainty of the TRS's ability to utilize these net deferred tax assets. Management will continue to monitor the need for a valuation allowance.

9.    Dividends Declared and Paid

The Company suspended dividends beginning after the payment of the March 27, 2020 dividend due to a decline in operating performance caused by the COVID-19 pandemic. During the three months ended March 31, 2020, the Company declared total common share dividends of $0.22 per share and distributions on LTIP units of $0.22 per unit. There were no dividends declared during the three months ended March 31, 2021. The dividends and distributions paid during the three months ended March 31, 2020 were as follows:
Record DatePayment DateCommon share distribution amountLTIP unit distribution amount
January1/31/20202/28/2020$0.11 $0.11 
February2/28/20203/27/20200.11 0.11 
1st Quarter 2020$0.22 $0.22 
Total 2020$0.22 $0.22 

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10.    Earnings Per Share

The two-class method is used to determine earnings per share because unvested restricted shares and unvested LTIP units are considered to be participating shares. The LTIP units held by the non-controlling interest holders, which may be converted to common shares of beneficial interest, have been excluded from the denominator of the diluted earnings per share calculation as there would be no effect on the amounts since limited partners' share of income or loss would also be added back to net income or loss. Unvested restricted shares, unvested long-term incentive plan units and unvested Class A Performance LTIP units that could potentially dilute basic earnings per share in the future would not be included in the computation of diluted loss per share, for the periods where a loss has been recorded, because they would have been anti-dilutive for the periods presented. The following is a reconciliation of the amounts used in calculating basic and diluted net income per share (in thousands, except share and per share data):

For the three months ended
March 31,
20212020
Numerator:
Net income (loss) attributable to common shareholders$2,656 $(27,783)
Dividends paid on unvested shares and units (50)
Net income (loss) attributable to common shareholders$2,656 $(27,833)
Denominator:
Weighted average number of common shares - basic47,224,972 46,948,533 
Unvested shares143,546 — 
Weighted average number of common shares - diluted47,368,518 46,948,533 
Basic income (loss) per Common Share:
Net income (loss) attributable to common shareholders per weighted average basic common share$0.06 $(0.59)
Diluted income (loss) per Common Share:
Net income (loss) attributable to common shareholders per weighted average diluted common share$0.06 $(0.59)

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11.    Equity Incentive Plan

The Company maintains its Equity Incentive Plan to attract and retain independent trustees, executive officers and other key employees and service providers. The plan provides for the grant of options to purchase common shares, share awards, share appreciation rights, performance units and other equity-based awards. The plan was amended and restated as of May 17, 2013 to increase the maximum number of shares available under the plan to 3,000,000 shares. Share awards under this plan generally vest over three to five years, though compensation for the Company’s independent trustees includes share grants that vest immediately. The Company pays dividends on unvested shares and units, except for performance-based shares and outperformance based units, for which dividends on unvested performance-based shares and units are accrued and not paid until those shares or units vest. Certain awards may provide for accelerated vesting if there is a change in control. In January 2021 and 2020, the Company issued 40,224 and 24,516 common shares, respectively, to its independent trustees as compensation for services performed in 2020 and 2019, respectively. As of March 31, 2021, there were 589,804 common shares available for issuance under the Equity Incentive Plan.
Restricted Share Awards
From time to time, the Company may award restricted shares under the Equity Incentive Plan as compensation to officers, employees and non-employee trustees. The Company recognizes compensation expense for the restricted shares on a straight-line basis over the vesting period based on the fair market value of the shares on the date of issuance.
A summary of the Company’s restricted share awards for the three months ended March 31, 2021 and the year ended December 31, 2020 is as follows:
Three Months EndedYear Ended
March 31, 2021December 31, 2020
Number of SharesWeighted-Average Grant Date Fair ValueNumber of SharesWeighted-Average Grant Date Fair Value
Non-vested at beginning of the period1,667 $17.40 5,001 $18.33 
Granted    
Vested  (3,334)18.80 
Forfeited    
Non-vested at end of the period1,667 $17.40 1,667 $17.40 

As of March 31, 2021 and December 31, 2020, there were $21.3 thousand and $28.5 thousand, respectively, of unrecognized compensation costs related to restricted share awards. As of March 31, 2021, these costs were expected to be recognized over a weighted–average period of approximately 0.7 years. For the three months ended March 31, 2021 and 2020, the Company recognized approximately $7.2 thousand and $8.3 thousand, respectively, of expense related to the restricted share awards.

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Long-Term Incentive Plan Awards

LTIP units are a special class of partnership interests in the Operating Partnership which may be issued to eligible participants for the performance of services to or for the benefit of the Company. Under the Equity Incentive Plan, each LTIP unit issued is deemed equivalent to an award of one common share thereby reducing the number of shares available for other equity awards on a one-for-one basis.

A summary of the Company's LTIP Unit awards for the three months ended March 31, 2021 and the year ended December 31, 2020 is as follows:
Three Months EndedYear Ended
March 31, 2021December 31, 2020
Number of UnitsWeighted-Average Grant Date Fair ValueNumber of UnitsWeighted-Average Grant Date Fair Value
Non-vested at beginning of the period669,609 $15.73 598,320 $18.30 
Granted330,945 14.55 325,507 13.42 
Vested(219,451)16.39 (254,218)18.82 
Forfeited(16,925)$17.02  $ 
Non-vested at end of the period764,178 $15.00 669,609 $15.73 

Time-Based LTIP Awards

On March 1, 2021, the Company’s Operating Partnership, upon the recommendation of the Compensation Committee, granted 132,381 time-based awards (the “2021 Time-Based LTIP Unit Award”). The grants were made pursuant to award agreements that provide for time-based vesting (the "LTIP Unit Time-Based Vesting Agreement").

Time-based LTIP Unit Awards will vest ratably provided that the recipient remains employed by the Company through the applicable vesting date, subject to acceleration of vesting in the event of the recipient’s death, disability, termination without cause or resignation with good reason, or in the event of a change of control of the Company. Prior to vesting, a holder is entitled to receive distributions on the LTIP Units that comprise the 2021 Time-Based LTIP Unit Awards and the prior year LTIP unit Awards set forth in the table above.

Performance-Based LTIP Awards

On March 1, 2021, the Company's Operating Partnership, upon the recommendation of the Compensation Committee, also granted 198,564 performance-based awards (the "2021 Performance-Based LTIP Unit Awards"). The grants were made pursuant to award agreements that have market based vesting conditions. The Performance-Based LTIP Unit Awards are comprised of Class A Performance LTIP Units that will vest only if and to the extent that (i) the Company achieves certain long-term market based TSR criteria established by the Compensation Committee and (ii) the recipient remains employed by the Company through the applicable vesting date, subject to acceleration of vesting in the event of the recipient’s death, disability, termination without cause or resignation with good reason, or in the event of a change of control of the Company. Compensation expense is based on an estimated value of $15.91 per 2021 Performance-Based LTIP Unit Award, which takes into account that some or all of the awards may not vest if long-term market based TSR criteria are not met during the vesting period.

The 2021 Performance-Based LTIP Unit Awards may be earned based on the Company’s relative TSR performance for the three-year period beginning on March 1, 2021 and ending on February 28, 2024. The 2021 Performance-Based LTIP Unit Awards, if earned, will be paid out between 50% and 150% of target value as follows:
Relative TSR Hurdles (Percentile)Payout Percentage
Threshold25th50%
Target50th100%
Maximum75th150%
Payouts at performance levels in between the hurdles will be calculated by straight-line interpolation.
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The Company estimated the aggregate compensation cost to be recognized over the service period determined as of the grant date under ASC 718, excluding the effect of estimated forfeitures, using a Monte Carlo approach. In determining the discounted value of the LTIP units, the Company considered the inherent uncertainty that the LTIP units would never reach parity with the other common units of the Operating Partnership and thus have an economic value of zero to the grantee. Additional factors considered in estimating the value of LTIP units included discounts for illiquidity; expectations for future dividends; risk free interest rates; stock price volatility; and economic environment and market conditions.

The grant date fair values of the LTIPs and the assumptions used to estimate the values are as follows:
Grant DateNumber of Units GrantedEstimated Value Per UnitVolatilityDividend YieldRisk Free Interest Rate
Outperformance Plan LTIP Unit Awards6/1/2015183,300$14.1326%4.5%0.95%
2016 Time-Based LTIP Unit Awards1/28/201672,966$16.6928%%0.79%
2016 Performance-Based LTIP Unit Awards1/28/201639,285$11.0930%5.8%1.13%
2017 Time-Based LTIP Unit Awards3/1/201789,574$18.5324%%0.92%
2017 Performance-Based LTIP Unit Awards3/1/2017134,348$19.6525%5.8%1.47%
2018 Time-Based LTIP Unit Awards3/1/201897,968$16.8326%%2.07%
2018 Performance-Based LTIP Unit Awards3/1/2018146,949$17.0226%6.2%2.37%
2019 Time-Based LTIP Unit Awards3/1/201988,746$18.4521%%2.57%
2019 Performance-Based LTIP Unit Awards3/1/2019133,107$18.9121%6.2%2.55%
2020 Time-Based LTIP Unit Awards3/1/2020130,206$13.0520%%1.06%
2020 Performance-Based LTIP Unit Awards3/1/2020195,301$13.6620%8.1%0.90%
2021 Time-Based LTIP Unit Awards3/1/2021132,381$12.5278%%0.08%
2021 Performance-Based LTIP Unit Awards3/1/2021198,564$15.9164%3.4%0.30%

The Company recorded $1.0 million and $1.4 million in compensation expense related to the LTIP units for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and December 31, 2020, there was $8.6 million and $4.9 million, respectively, of total unrecognized compensation cost related to LTIP units. This cost is expected to be recognized over approximately 2.3 years, which represents the weighted average remaining vesting period of the LTIP units.

12.     Leases

The Residence Inn Gaslamp hotel is subject to a ground lease with an expiration date of January 31, 2065 with an extension option by the Company of up to three additional terms of ten years each. Monthly payments are currently approximately $44,400 per month and increase 10% every five years. The hotel is subject to annual supplemental rent payments calculated as 5% of gross revenues during the applicable lease year, minus 12 times the monthly base rent scheduled for the lease year.
The Residence Inn New Rochelle is subject to an air rights lease and garage lease that each expire on December 1, 2104. The lease agreements with the City of New Rochelle cover the space above the parking garage that is occupied by the hotel as well as 128 parking spaces in a parking garage that is attached to the hotel. The annual base rent for the garage lease is the hotel’s proportionate share of the city’s adopted budget for the operations, management and maintenance of the garage and established reserves to fund for the cost of capital repairs. Aggregate rent for 2021 is approximately $30,000 per quarter.
The Hilton Garden Inn Marina del Rey hotel is subject to a ground lease with an expiration date of December 31, 2067. Minimum monthly payments are currently approximately $47,500 per month and a percentage rent payment less the minimum rent is due in arrears equal to 5% to 25% of gross income based on the type of income.
The Company entered into a corporate office lease in September 2015. The lease is for a term of 11 years and includes a 12-month rent abatement period and certain tenant improvement allowances. The Company has a renewal option of up to two successive terms of 5 years each. The Company shares the space with related parties and is reimbursed for the pro-rata share of rentable space occupied by the related parties.
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The Company is the lessee under ground, air rights, garage and office lease agreements for certain of its properties, all of which qualify as operating leases as of March 31, 2021. These leases typically provide multi-year renewal options to extend term as lessee at the Company's option. Option periods are included in the calculation of the lease obligation liability only when options are reasonably certain to be exercised.

In calculating the Company's lease obligations under the various leases, the Company uses discount rates estimated to be equal to what the Company would have to pay to borrow on a collateralized basis over a similar term, for an amount equal to the lease payments, in a similar economic environment.

The following is a schedule of the minimum future payments required under the ground, air rights, garage leases and office lease as of March 31, 2021, for each of the next five calendar years and thereafter:

Total Future Lease Payments
Amount
2021 (remaining nine months)$1,540 
20222,071 
20232,093 
20242,115 
20252,186 
Thereafter66,720 
Total lease payments$76,725 
Less: Imputed interest(53,622)
Present value of lease liabilities$23,103 

The following is a schedule of the minimum future payments required under the ground, air rights, garage leases and office lease as of December 31, 2020, for each of the next five calendar years and thereafter:

Total Future Lease Payments
Amount
2021$2,051 
20222,071