e8vkza
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K/A
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 5, 2010
CHATHAM LODGING TRUST
(Exact name of Registrant as specified in its charter)
 
         
Maryland   001-34693   27-1200777
(State or Other Jurisdiction   (Commission File Number)   (I.R.S. Employer Identification No.)
of Incorporation or Organization)        
     
50 Cocoanut Row, Suite 216    
Palm Beach, Florida   33480
(Address of principal executive offices)   (Zip Code)
(561) 802-4477
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


 

This Form 8-K/A amends and supplements the registrant’s Form 8-K, as filed on October 5, 2010, to include historical financial statements and unaudited pro forma financial information required by Item 9.01 (a) and (b).
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Residence Inn by Marriott® New Rochelle, NY
New Roc Hotels, LLC
Independent Auditors Report
Balance Sheets as of June 30, 2010 (Unaudited) and December 31, 2009 and 2008
Statements of Operations for the six-month period ended June 30, 2010 (Unaudited), and for the years ended December 31, 2009 and 2008
Statements of Changes in Members’ Equity for the six-month period ended June 30, 2010 (Unaudited), and for the years ended December 31, 2009 and 2008.
Statements of Cash Flows for the six-month period ended June 30, 2010 (Unaudited), and for the years ended December 31, 2009 and 2008
Notes to Financial Statements
(b) Pro Forma Financial Information.
Chatham Lodging Trust
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2010
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended June 30, 2010
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2009
(d) Exhibits.
     
Exhibit    
Number   Description
23.1
  Consent of DeLeon and Stang

 


 

SIGNATURE
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
  CHATHAM LODGING TRUST
 
 
Date: October 27, 2010  By:   /s/ Dennis M. Craven    
    Dennis M. Craven   
    Executive Vice President and Chief Financial Officer   
 

 


 

EXHIBIT INDEX
     
Exhibit    
Number   Description
23.1
  Consent of DeLeon and Stang

 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

FINANCIAL STATEMENTS
For The Six Month Periods ended June 30, 2010 and 2009
 


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Balance Sheets
June 30, 2010 and December 31, 2009
 
                 
    2010     2009  
 
ASSETS
Current assets
               
Cash and cash equivalents
  $ 321,790     $ 297,551  
Accounts and guest receivables, net of allowance for uncollectible accounts
    167,420       61,645  
Escrows:
               
Taxes and insurance
    73,936       170,926  
Replacement Reserve
    125,019       69,526  
                 
Total escrows
    198,955       240,452  
Due from affiliate
           
Inventory
    26,301       26,332  
Prepaid expenses
    159,977       54,592  
                 
Total current assets
    874,443       680,572  
Property and equipment
               
Property and equipment, at cost, net of accumulated depreciation
    16,844,301       17,264,883  
Other assets
               
Deferred costs — air rights, net of accumulated amortization
    2,586,554       2,619,927  
Deferred financing costs, net of accumulated amortization
    18,334       45,264  
                 
Total other assets
    2,604,888       2,665,191  
                 
Total Assets
  $ 20,323,632     $ 20,610,646  
                 
 
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities
               
Accounts payable, trade
  $ 56,636     $ 137,803  
Accrued expenses
    149,174       99,914  
                 
Total current liabilities
    205,810       237,717  
Long-term liabilities
               
Mortgage note payable
    16,800,000       16,800,000  
                 
Total liabilities
    17,005,810       17,037,717  
Members’ equity
    3,317,822       3,572,929  
                 
Total Liabilities and Members’ Equity
  $ 20,323,632     $ 20,610,646  
                 
 
See Notes to the Financial Statements


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statements of Operations
For the Six Month Periods Ended June 30, 2010 and 2009
 
                 
    2010     2009  
 
Revenues:
               
Room revenues
  $ 2,818,873     $ 2,778,953  
Telephone revenue
    3,945       4,302  
Other revenues
    102,551       126,635  
                 
Total revenues
    2,925,369       2,909,890  
Expenses:
               
Departmental costs:
               
Room expense
    648,268       618,513  
Telephone expense
    6,077       4,758  
                 
Total departmental costs
    654,345       623,271  
                 
Gross operating profit
    2,271,024       2,286,619  
General and administrative:
               
General and administrative
    349,360       352,590  
Energy expenses
    207,883       174,019  
Franchise expenses
    211,769       209,652  
Property taxes and insurance
    311,910       307,543  
Property operations, repairs and maintenance
    133,670       159,479  
Sales and marketing expenses
    134,487       120,185  
Management fees
    116,528       97,642  
                 
Total general and administrative expenses
    1,465,607       1,421,110  
                 
Total expenses
    2,119,952       2,044,381  
                 
Income from operations, before depreciation, amortization and interest
    805,417       865,509  
Other income and (expenses):
               
Depreciation and amortization
    (525,181 )     (567,889 )
Interest expense
    (460,343 )     (461,684 )
                 
Total other income and (expenses), net
    (985,524 )     (1,029,573 )
                 
Net Loss
  $ (180,107 )   $ (164,064 )
                 
 
See Notes to the Financial Statements


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statement of Changes in Members’ Equity
For the Six Month Periods Ended June 30, 2010
 
                                 
          Louis R.
             
    Cappelli
    Cappelli Family
    Kylie
       
    Hotels, LLC     Partnership     Cappelli     Total  
 
Percentage ownership
    25 %     25 %     50 %     100 %
Profit and loss percentage
    100 %     0 %     0 %     100 %
Balance at December 31, 2009
  $ (543,352 )   $ 1,372,093     $ 2,744,188     $ 3,572,929  
Net loss
    (180,107 )                 (180,107 )
Distributions
    (75,000 )                 (75,000 )
                                 
Balance at June 30, 2010
  $ (798,459 )   $ 1,372,093     $ 2,744,188     $ 3,317,822  
                                 
 
See Notes to the Financial Statements


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statements of Cash Flows
For the Six Month Periods Ended June 30, 2010 and 2009
 
                 
    2010     2009  
 
Cash Flows From Operating Activities
               
Net loss
  $ (180,107 )   $ (164,064 )
Adjustments to reconcile net loss to net cash provided by operating activities
               
Depreciation
    464,878       457,059  
Amortization of intangible assets
    33,373       33,373  
Amortization of debt issue costs
    26,930       77,457  
(Decrease) increase in accounts and guest receivables
    (105,775 )     12,102  
Increase in prepaid assets
    (105,385 )     (51,298 )
Deposits to escrow for insurance and real estate taxes
    (320,368 )     (342,406 )
Releases from escrow for insurance and real estate taxes
    417,809       384,038  
Decrease in inventories
    31       169  
Increase (decrease) in accounts payable
    (81,167 )     52,265  
Increase (decrease) in other accrued liabilities
    49,260       (99,951 )
                 
Total adjustments
    379,586       522,808  
                 
Net cash provided by operating activities
  $ 199,479     $ 358,744  
Cash Flows From Investing Activities
               
Deposits to escrow for repairs and replacements
  $ (140,437 )   $ (140,437 )
Releases from escrow for repairs and replacements
    84,493       52,729  
Purchases of fixed assets
    (44,296 )     (88,498 )
                 
Net cash used in investing activities
    (100,240 )     (176,206 )
Cash Flows From Financing Activities
               
Distributions to members
    (75,000 )     (675,000 )
                 
Net cash used in financing activities
    (75,000 )     (675,000 )
Net increase (decrease) in cash and cash equivalents
    24,239       (492,462 )
Cash and cash equivalents at beginning of period
    297,551       822,369  
                 
Cash and cash equivalents at end of period
  $ 321,790     $ 329,907  
                 
Supplemental Disclosure
               
Cash paid during the period for interest
  $ 460,343     $ 461,864  
                 
                 


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements
 
NOTE 1 — NATURE OF ORGANIZATION
 
The New Roc Hotels, LLC (the Company) was incorporated in the State of New York for the purpose of operating a hotel known as Residence Inn by Marriott (Property), a 124-room hotel located in New Rochelle, New York.
 
The Company operates in one geographic market: New Rochelle, New York. Accordingly, the Company’s ability to meet its obligations is dependent on the tourism and business conditions in the New York metropolitan area. Management believes that the risk arising from this concentration is mitigated by the scarcity of reasonably-priced, quality hotel rooms in the immediate area, the market being one of the largest in the world and the Property’s proximity near many important entertainment and sports venues.
 
Organization and Partnership Agreement
 
During 2008, the Company changed the structure of its ownership. Under the third amended and restated operating agreement of New Roc Hotels, LLC, Donald J. Urgo & Associates, LLC withdrew as a member of the Company leaving Cappelli Hotels, LLC with one hundred percent (100%) of the membership interest. Effective May 1, 2008 Cappelli Hotels, LLC assigned 50% of its rights, title and interest to Kylie Cappelli and 25% of its rights, title and interest to the Louis R. Cappelli Family Limited Partnership.
 
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
A summary of the major accounting policies followed by the Company is set forth below:
 
Use of Estimates
 
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
Basis of Accounting
 
The Company prepares its financial statements on the accrual basis of accounting, in accordance with generally accepted accounting principles.
 
Cash and Cash Equivalents
 
The Company considers all highly-liquid debt instruments, purchased with a maturity of three months or less, to be cash equivalents
 
Escrows
 
Under the terms of the mortgage and management agreements, the Company is required to establish escrow reserve accounts to cover the costs of real estate taxes, insurance, replacements and renewals related to the furniture, fixtures and equipment, and certain repairs and maintenance to the hotel.


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)
 
Accounts and Guest Receivable
 
Accounts receivable are stated at the amount billed to the customer plus any accrued and unpaid interest. The Company considers guest receivables to be delinquent after thirty days, and begin collection activities on that date. The delinquent receivables at June 30, 2010 and December 31, 2009, aggregated $27,204 and $25,257, respectively.
 
Allowance for Doubtful Accounts
 
The Company provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off though a charge to the valuation allowance and a credit to accounts receivable. Changes in the valuation allowance have not been material to the financial statements.
 
Inventory
 
Inventory of food, beverages and supplies are stated at the lower of cost or market using the first-in, first-out method.
 
Fair Value
 
The Company does not value any of its assets or liabilities at fair value, under Financial Accounting Standards Board (FASB) Statement No. 157, Fair Value Measurements.
 
Deferred Costs
 
Deferred costs represent costs incurred in connection with the purchase and development of the property, and in obtaining its long-term financing. These costs are being amortized on a straight-line basis as follows:
 
     
    Years
 
Finance costs
  2-20
Air rights
  55
 
Fixed Assets and Depreciation
 
Property, hotel furniture and equipment are recorded at cost. Depreciation of real property is computed using the straight-line method over a 40-year estimated useful life. Depreciation of furniture, fixtures and equipment is provided over the estimated economic lives of the related assets, using the straight-line method over five to seven years. Maintenance and repair costs are charged to expense when incurred. At the time fixed assets are retired or otherwise disposed of, the foxed assets and related accumulated depreciation or amortization accounts are relieved of the applicable amounts, and any gain or loss is credited or charged to income.
 
Depreciation expense was $464,878 and $457,059 for six month periods ended June 30, 2010 and 2009, respectively.
 
Advertising Costs
 
The costs of advertising, promotion and marketing programs are charged to operations in the year incurred and are included as operating expenses in the accompanying statements of operations


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)
 
Income Taxes
 
The Company has elected for income tax purposes to be treated as a partnership. Accordingly, federal and state income taxes have not been provided, as the Company’s income or loss is passed through and reported by the members on their individual tax returns. The Company has determined that there are no uncertain positions required to be disclosed or recorded under Accounting Standards Codification 740, Accounting for Uncertainty in Income Taxes.
 
Subsequent Events
 
The Company has evaluated the financial statements for subsequent events that could require accrual or disclosure through the financial statement report date of October 27, 2010.
 
NOTE 3 — PROPERTY AND EQUIPMENT
 
Property and equipment consists of the following at June 30 2010 and December 31, 2009:
 
                 
    2010     2009  
 
Building
  $ 20,338,974     $ 20,338,974  
Equipment
    5,369,411       5,325,115  
                 
Subtotal
    25,708,385       25,664,089  
Less accumulated depreciation
    (8,864,084 )     (8,399,206 )
                 
Total
  $ 16,844,301     $ 17,264,883  
                 
 
NOTE 4 — DEFERRED COSTS
 
The Company has an air rights lease with the City of New Rochelle. The Company paid a one-time payment of $3,203,750 and has an annual base rent of $10. The lease initially expires on December 1, 2047. During 2007, the Company extended the lease with an additional payment of $75,000. The lease extension expires on December 1, 2062. The additional payment is amortized over the life of the lease extension.
 
Deferred costs and accumulated amortization are as follows at June 30, 2010 and December 31, 2009:
 
                         
    As of June 30, 2010  
          Accumulated
    Amortization
 
    Cost     Amortization     Period  
 
Air Rights
  $ 3,278,750     $ 692,196       55 years  
Financing Costs
    388,617       388,617       2 years  
Franchise Expense
    50,000       31,666       20 years  
                         
Total
  $ 3,717,367     $ 1,112,479          
                         
 
                         
    As of December 31, 2009  
          Accumulated
    Amortization
 
    Cost     Amortization     Period  
 
Air Rights
  $ 3,278,750     $ 658,823       55 years  
Financing Costs
    388,617       363,354       2 years  
Franchise Expense
    50,000       29,999       20 years  
                         
Total
  $ 3,717,367     $ 1,052,176          
                         


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)
 
The annual amortization of deferred costs is expected to be as follows:
 
                                 
For the Six
                       
Months Ended
        Financing
    Franchise
       
June 30,   Air Rights     Costs     Expense     Total  
 
2011
    66,746             3,333     $ 70,079  
2012
    66,746             3,333     $ 70,079  
2013
    66,746             3,333     $ 70,079  
2014
    66,746             3,333     $ 70,079  
2015
    66,746               3,336     $ 70,082  
Thereafter
    2,252,824             1,666       2,254,490  
                                 
    $ 2,586,554     $     $ 18,334     $ 2,604,888  
                                 
 
NOTE 5 — GARAGE LEASE AGREEMENT
 
The Company has an agreement with the town of New Rochelle to lease 128 parking spaces in a municipal parking garage for their guests and employees. The annual base rent for the lease is $10 plus the Company’s proportionate share of the city’s adopted budget for the operation, management and maintenance of the garage and the proportionate share of the established reserve fund for the cost of capital repairs.
 
The lease has been accounted for as an operating lease, rent and expense was $62,700 and $63,051 for six month periods ended June 30, 2010 and 2009, respectively.
 
NOTE 6 — MORTGAGE NOTE PAYABLE
 
During 2008, the Company borrowed $16,800,000 pursuant to a loan agreement with CIBC, Inc. The mortgage bears an interest rate of 5.45% and is collateralized by the Hotel and related real estate and equipment. The loan was extended on December 18, 2009 and is interest-only for the entire duration of the loan. The entire outstanding principal of the note, together with all accrued and unpaid interest, shall be due and payable on November 30, 2011. Interest expense was $460,343 and $461,864 for the six month periods ended June 30, 2010 and 2009, respectively.
 
Annual maturities of long-term debt are as follows:
 
         
2010
  $  
2011
    16,800,000  
         
Total
  $ 16,800,000  
         
 
NOTE 7 — RELATED PARTY TRANSACTIONS
 
Due from affiliate consists of net advances to an affiliate of a Member of $29,033 at June 30, 2009. The advances were non-interest bearing and fully repaid during 2009.
 
NOTE 8 — HOTEL MANAGEMENT AGREEMENT
 
The Company has entered into a management agreement with Urgo Hotels, LLC to manage the operations of the Property.


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)
 
The management fee is 3% of adjusted gross revenues and additional fees, which will vary depending on the Property’s achieving certain profit goals. The management fee was $116,528 and $97,642 for the six month periods ended June 30, 2010 and 2009, respectively.
 
NOTE 9 — RETIREMENT PLAN
 
Eligible employees of the Company participate in a defined contribution plan maintained by the Company, as described in section 401(k) of the Internal Revenue Code (IRC). Employees are eligible to participate after six months of employment. Employees may make contributions to the plan up to the maximum amount allowed by the Internal Revenue Code if they wish. Through June 1, 2009 the employer matched employee contributions dollar for dollar the first 3% of an employee’s gross salary and 50% of the next 2% of an employee’s salary, not to exceed a maximum of 4%. The matching provision was amended in 2009 whereby future employer contributions were strictly discretionary. The company made did not make any contributions for the six month periods ended June 30 2010 and 2009.
 
NOTE 10 — COMMITMENTS AND CONTINGENCIES
 
Franchise Agreement
 
On December 21, 2000, the Company entered into a franchise agreement with Marriot Corporation (Marriot) for the use of its trade name for an initial term of 20 years with an option to renew for an additional 10 years. The following fees are payable quarterly:
 
a. 5% of gross room revenue, as defined
 
b. 2.5% of gross room revenue, as defined, which is paid into a fund for the purposes of paying marketing and advertising costs in connection with the operation or promotion of the Property.
 
The franchise expense paid was $211,769 and $209,652 for the six month periods ended June 30, 2010 and 2009, respectively.
 
Contingencies
 
The Company is involved in various legal actions and claims arising in the ordinary course of its business. Management believes that current litigation and claims will be resolved without any material effect on the Company’s financial position.
 
NOTE 11 — SUBSEQUENT EVENT
 
Sale of Hotel
 
On October 4, 2010 the Company sold the Property to Chatham New Rochelle RI, LLC for $21,000,000. Chatham New Rochelle RI, LLC received the building, all of its contents and a portion of the guest receivables and also assumed the mortgage payable to CBIC, Inc. in the amount of $16,800,000.


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)
 
INDEPENDENT AUDITORS’ REPORT AND
FINANCIAL STATEMENTS
For the years ended December 31, 2009 and 2008
 


 


 

DELEON & STANG LOGO
 
INDEPENDENT AUDITORS’ REPORT
 
New Roc Hotels, LLC
(A limited liability company)
New Rochelle, New York
 
We have audited the accompanying balance sheets of New Roc Hotels, LLC (a limited liability company) as of December 31, 2009 and 2008, and the related statements of operations, cash flows and changes in members’ equity for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above fairly present, in all material respects, the financial position of New Roc Hotels, LLC as of December 31, 2009 and 2008 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
-s- DeLeon Stang
 
DeLeon & Stang, CPAs
Gaithersburg, Maryland
 
100 Lakeforest Blvd., Suite 650 •  Gaithersburg, MD 20877 •  Phone 301-948-9825
 • Fax 301-948-3220 e-mail: info@deleonandstang.com • www.deleonandstang.com


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Balance Sheets
December 31, 2009 and 2008
 
                 
    2009     2008  
 
ASSETS
Current assets
               
Cash and cash equivalents
  $ 297,551     $ 822,369  
Accounts and guest receivables, net of allowance for uncollectible accounts
    61,645       105,357  
Escrows:
               
Taxes and insurance
    170,926       135,750  
Replacement Reserve
    69,526       212,106  
                 
Total escrows
    240,452       347,856  
Due from affiliate
          29,033  
Inventory
    26,332       25,775  
Prepaid expenses
    54,592       90,695  
                 
Total current assets
    680,572       1,421,085  
Property and equipment
               
Property and equipment, at cost, net of accumulated depreciation
    17,264,883       17,776,984  
Other assets
               
Deferred costs — air rights, net of accumulated amortization
    2,619,927       2,686,673  
Deferred financing costs, net of accumulated amortization
    45,264       200,178  
                 
Total other assets
    2,665,191       2,886,851  
                 
Total Assets
  $ 20,610,646     $ 22,084,920  
                 
 
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities
               
Accounts payable, trade
  $ 137,803     $ 93,628  
Accrued expenses
    99,914       160,859  
                 
Total current liabilities
    237,717       254,487  
Long-term liabilities
               
Mortgage note payable
    16,800,000       16,800,000  
                 
Total liabilities
    17,037,717       17,054,487  
Members’ equity
    3,572,929       5,030,433  
                 
Total Liabilities and Members’ Equity
  $ 20,610,646     $ 22,084,920  
                 
 
See Notes to the Financial Statements


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statements of Operations
For the Years Ended December 31, 2009 and 2008
 
                 
    2009     2008  
 
Revenues:
               
Room revenues
  $ 5,561,935     $ 6,782,868  
Telephone revenue
    8,861       20,019  
Other revenues
    193,914       395,672  
                 
Total revenues
    5,764,710       7,198,559  
Expenses:
               
Departmental costs:
               
Room expense
    1,249,665       1,534,922  
Telephone expense
    15,767       23,180  
                 
Total departmental costs
    1,265,432       1,558,102  
                 
Gross operating profit
    4,499,278       5,640,457  
General and administrative:
               
General and administrative
    715,181       732,303  
Energy expenses
    319,085       441,605  
Franchise expenses
    425,459       509,996  
Property taxes and insurance
    611,171       571,743  
Property operations, repairs and maintenance
    332,811       343,662  
Sales and marketing expenses
    250,269       233,383  
Management fees
    182,928       286,865  
                 
Total general and administrative expenses
    2,836,904       3,119,557  
                 
Total expenses
    4,102,336       4,677,659  
                 
Income from operations, before depreciation, amortization and interest
    1,662,374       2,520,900  
Other income and (expenses):
               
Depreciation and amortization
    (1,135,777 )     (1,102,395 )
Interest expense
    (930,069 )     (933,782 )
Write off of deferred financing costs
          (423,427 )
Interest income
          1,820  
                 
Total other income and (expenses), net
    (2,065,846 )     (2,457,784 )
                 
Net (loss) income
  $ (403,472 )   $ 63,116  
                 
 
See Notes to the Financial Statements


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statements of Changes in Members’ Equity
For the Years Ended December 31, 2009 and 2008
 
                                 
          Louis R.
             
          Cappelli
             
    Cappelli
    Family
    Kylie
       
    Hotels, LLC     Partnership     Cappelli     Total  
 
Percentage ownership — December 31, 2009
    25 %     25 %     50 %     100 %
Profit and loss percentage — December 31, 2009
    100 %     0 %     0 %     100 %
Balance at December 31, 2007
  $ 10,501,983     $     $     $ 10,501,983  
                                 
Share of net income January through April 2008
    21,057                   21,057  
Distributions January through April 2008
    (5,034,666 )                 (5,034,666 )
                                 
Balance at April 30, 2008
    5,488,374                   5,488,374  
Member Interest Transfer at May 1, 2008
    (4,116,281 )     1,372,093       2,744,188        
                                 
Balance at May 1, 2008
    1,372,093       1,372,093       2,744,188       5,488,374  
                                 
Share of net income May through December 2008
    42,059                   42,059  
Distributions May through December 2008
    (500,000 )                 (500,000 )
                                 
Balance at December 31, 2008
    914,152       1,372,093       2,744,188       5,030,433  
                                 
Share of 2009 net loss
    (403,472 )                 (403,472 )
2009 Distributions
    (1,054,032 )                 (1,054,032 )
                                 
Balance at December 31, 2009
  $ (543,352 )   $ 1,372,093     $ 2,744,188     $ 3,572,929  
                                 
 
See Notes to the Financial Statements


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statements of Cash Flows
For the Years Ended December 31, 2009 and 2008
 
                 
    2009     2008  
 
Cash Flows From Operating Activities
               
Net income (loss)
  $ (403,472 )   $ 63,116  
Adjustments to reconcile net income (loss) to net
               
cash provided by operating activities
               
Depreciation
    914,118       902,449  
Amortization of intangible assets
    66,746       66,746  
Amortization of debt issue costs
    154,913       133,200  
Write off of deferred financing costs
          423,427  
Decrease in accounts and guest receivables
    43,712       3,530  
Decrease (increase) in prepaid assets
    36,102       (82,508 )
Deposits to escrow for insurance and real estate taxes
    639,323       762,202  
Releases from escrow for insurance and real estate taxes
    (674,499 )     (644,148 )
Decrease (increase) in inventories
    (557 )     37,012  
Increase (decrease) in accounts payable
    44,175       (40,690 )
Increase (decrease) in other accrued liabilities
    (60,945 )     (109,169 )
                 
Total adjustments
    759,616       1,452,051  
                 
Net cash provided by operating activities
  $ 739,537     $ 1,515,167  
Cash Flows From Investing Activities
               
Deposits to escrow for repairs and replacements
  $ (280,873 )   $ (266,925 )
Releases from escrow for repairs and replacements
    423,455       62,258  
Purchases of fixed assets
    (402,017 )     (77,112 )
                 
Net cash used in investing activities
    (259,435 )     (281,779 )
Cash Flows From Financing Activities
               
Decrease (increase) in due from affiliate
    29,033       (20,079 )
Proceeds from long-term debt
          16,800,000  
Increase in financing costs
          (303,160 )
Repayment of long-term debt
          (12,511,093 )
Distributions to members
    (1,054,032 )     (5,534,666 )
                 
Net cash used in financing activities
    (1,024,999 )     (1,568,998 )
Net decrease in cash and cash equivalents
    (524,818 )     (335,610 )
Cash and cash equivalents at beginning of year
    822,369       1,157,979  
                 
Cash and cash equivalents at end of year
  $ 297,551     $ 822,369  
                 
Supplemental Disclosure
               
                 
Cash paid during the year for interest
  $ 930,069     $ 944,513  
                 
 
See Notes to the Financial Statements


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements
For the Years Ended December 31, 2009 and 2008
 
NOTE 1 — NATURE OF ORGANIZATION
 
The New Roc Hotels, LLC (the Company) was incorporated in the State of New York for the purpose of operating a hotel known as Residence Inn by Marriott (Property), a 124-room hotel located in New Rochelle, New York.
 
The Company operates in one geographic market: New Rochelle, New York. Accordingly, the Company’s ability to meet its obligations is dependent on the tourism and business conditions in the New York metropolitan area. Management believes that the risk arising from this concentration is mitigated by the scarcity of reasonably-priced, quality hotel rooms in the immediate area, the market being one of the largest in the world and the Property’s proximity near many important entertainment and sports venues.
 
Organization and Partnership Agreement
 
During 2008, the Company changed the structure of its ownership. Under the third amended and restated operating agreement of New Roc Hotels, LLC, Donald J. Urgo & Associates, LLC withdrew as a member of the Company leaving Cappelli Hotels, LLC with one hundred percent (100%) of the membership interest. Effective May 1, 2008 Cappelli Hotels, LLC assigned 50% of its rights, title and interest to Kylie Cappelli and 25% of its rights, title and interest to the Louis R. Cappelli Family Limited Partnership.
 
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
A summary of the major accounting policies followed by the Company is set forth below:
 
Use of Estimates
 
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
Basis of Accounting
 
The Company prepares its financial statements on the accrual basis of accounting, in accordance with generally accepted accounting principles.
 
Cash and Cash Equivalents
 
The Company considers all highly-liquid debt instruments, purchased with a maturity of three months or less, to be cash equivalents
 
Escrows
 
Under the terms of the mortgage and management agreements, the Company is required to establish escrow reserve accounts to cover the costs of real estate taxes, insurance, replacements and renewals related to the furniture, fixtures and equipment, and certain repairs and maintenance to the hotel.


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)
 
Accounts and Guest Receivable
 
Accounts receivable are stated at the amount billed to the customer plus any accrued and unpaid interest. The Company considers guest receivables to be delinquent after thirty days, and begin collection activities on that date. The delinquent receivables at December 31, 2009 and 2008 aggregated $25,257 and $25,353, respectively.
 
Allowance for Doubtful Accounts
 
The Company provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off though a charge to the valuation allowance and a credit to accounts receivable. Changes in the valuation allowance have not been material to the financial statements.
 
Inventory
 
Inventory of food, beverages and supplies are stated at the lower of cost or market using the first-in, first-out method.
 
Fair Value
 
The Company does not value any of its assets or liabilities at fair value, under Financial Accounting Standards Board (FASB) Statement No. 157, Fair Value Measurements.
 
Deferred Costs
 
Deferred costs represent costs incurred in connection with the purchase and development of the property, and in obtaining its long-term financing. These costs are being amortized on a straight-line basis as follows:
 
     
    Years
 
Finance costs
  2-20
Air rights
  55
 
Fixed Assets and Depreciation
 
Property, hotel furniture and equipment are recorded at cost. Depreciation of real property is computed using the straight-line method over a 40-year estimated useful life. Depreciation of furniture, fixtures and equipment is provided over the estimated economic lives of the related assets, using the straight-line method over five to seven years. Maintenance and repair costs are charged to expense when incurred. At the time fixed assets are retired or otherwise disposed of, the foxed assets and related accumulated depreciation or amortization accounts are relieved of the applicable amounts, and any gain or loss is credited or charged to income.
 
Depreciation expense was $914,118 and $902,449 for 2009 and 2008, respectively.
 
Advertising Costs
 
The costs of advertising, promotion and marketing programs are charged to operations in the year incurred and are included as operating expenses in the accompanying statements of operations


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)
 
Income Taxes
 
The Company has elected for income tax purposes to be treated as a partnership. Accordingly, federal and state income taxes have not been provided, as the Company’s income or loss is passed through and reported by the members on their individual tax returns. The Company has determined that there are no uncertain positions required to be disclosed or recorded under Accounting Standards Codification 740, Accounting for Uncertainty in Income Taxes.
 
Subsequent Events
 
The Company has evaluated the financial statements for subsequent events that could require accrual or disclosure through the financial statement report date of October 27, 2010.
 
NOTE 3 — PROPERTY AND EQUIPMENT
 
Property and equipment consists of the following at December 31, 2009 and 2008:
 
                 
    2009     2008  
 
Building
  $ 20,338,974     $ 20,242,943  
Equipment
    5,325,115       5,019,129  
                 
Subtotal
    25,664,089       25,262,072  
Less accumulated depreciation
    (8,399,206 )     (7,485,088 )
                 
Total
  $ 17,264,883     $ 17,776,984  
                 
 
NOTE 4 — DEFERRED COSTS
 
The Company has an air rights lease with the City of New Rochelle. The Company paid a one-time payment of $3,203,750 and has an annual base rent of $10. The lease initially expires on December 1, 2047. During 2007, the Company extended the lease with an additional payment of $75,000. The lease extension expires on December 1, 2062. The additional payment is amortized over the life of the lease extension.
 
In connection with the 2008 refinancing of the Company’s mortgage debt (Note 6), previously deferred fees of $423,427 were written off to amortization expense during the year ended December 31, 2008.
 
Deferred costs and accumulated amortization are as follows at December 31, 2009 and 2008:
 
                         
    As of December 31, 2009  
          Accumulated
    Amortization
 
    Cost     Amortization     Period  
 
Air Rights
  $ 3,278,750     $ 658,823       55 years  
Financing Costs
    388,617       363,354       2 years  
Franchise Expense
    50,000       29,999       20 years  
                         
Total
  $ 3,717,367     $ 1,052,176          
                         
 


 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)
 
                         
    As of December 31, 2008  
          Accumulated
    Amortization
 
    Cost     Amortization     Period  
 
Air Rights
  $ 3,278,750     $ 592,077       55 years  
Financing Costs
    388,617       211,773       2 years  
Franchise Expense
    50,000       26,666       20 years  
                         
Total
  $ 3,717,367     $ 830,516          
                         
 
The annual amortization of deferred costs is expected to be as follows:
 
                                 
          Financing
    Franchise
       
    Air Rights     Costs     Expense     Total  
 
2010
  $ 66,746     $ 25,263     $ 3,333     $ 95,342  
2011
    66,746             3,333     $ 70,079  
2012
    66,746             3,333     $ 70,079  
2013
    66,746             3,333     $ 70,079  
2014
    66,746             3,333     $ 70,079  
Thereafter
    2,286,197             3,336       2,289,533  
                                 
    $ 2,619,927     $ 25,263     $ 20,001     $ 2,665,191  
                                 
 
NOTE 5 — GARAGE LEASE AGREEMENT
 
The Company has an agreement with the town of New Rochelle to lease 128 parking spaces in a municipal parking garage for their guests and employees. The annual base rent for the lease is $10 plus the Company’s proportionate share of the city’s adopted budget for the operation, management and maintenance of the garage and the proportionate share of the established reserve fund for the cost of capital repairs.
 
The lease has been accounted for as an operating lease, rent and expense for the years ended December 31, 2009 and 2008 was $126,092 and $109,779, respectively.
 
NOTE 6 — MORTGAGE NOTE PAYABLE
 
During 2008, the Company borrowed $16,800,000 pursuant to a loan agreement with CIBC, Inc. The mortgage bears an interest rate of 5.45% and is collateralized by the Hotel and related real estate and equipment. The loan was extended on December 18, 2009 and is interest-only for the entire duration of the loan. The entire outstanding principal of the note, together with all accrued and unpaid interest, shall be due and payable on November 30, 2011. Interest expense was $930,069 for 2009 and $933,782 for 2008.
 
Annual maturities of long-term debt are as follows:
 
         
2010
  $  
2011
    16,800,000  
         
Total
  $ 16,800,000  
         

 


 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)
 
NOTE 7 — RELATED PARTY TRANSACTIONS
 
Due from affiliate consists of net advances to an affiliate of a Member of $29,033 at December 31, 2008. The advances were non-interest bearing and fully repaid during 2009.
 
NOTE 8 — HOTEL MANAGEMENT AGREEMENT
 
The Company has entered into a management agreement with Urgo Hotels, LLC to manage the operations of the Property.
 
The management fee is 3% of adjusted gross revenues and additional fees, which will vary depending on the Property’s achieving certain profit goals. The management fee was $182,928 and $286,865 for the years ended December 31, 2009 and 2008, respectively.
 
NOTE 9 — RETIREMENT PLAN
 
Eligible employees of the Company participate in a defined contribution plan maintained by the Company, as described in section 401(k) of the Internal Revenue Code (IRC). Employees are eligible to participate after six months of employment. Employees may make contributions to the plan up to the maximum amount allowed by the Internal Revenue Code if they wish. Through June 1, 2009 the employer matched employee contributions dollar for dollar the first 3% of an employee’s gross salary and 50% of the next 2% of an employee’s salary, not to exceed a maximum of 4%. The matching provision was amended in 2009 whereby future employer contributions were strictly discretionary. The company made contributions of $0 and $21,423 for 2009 and 2008, respectively.
 
NOTE 10 — COMMITMENTS AND CONTINGENCIES
 
Franchise Agreement
 
On December 21, 2000, the Company entered into a franchise agreement with Marriot Corporation (Marriot) for the use of its trade name for an initial term of 20 years with an option to renew for an additional 10 years. The following fees are payable quarterly:
 
a. 5% of gross room revenue, as defined
 
b. 2.5% of gross room revenue, as defined, which is paid into a fund for the purposes of paying marketing and advertising costs in connection with the operation or promotion of the Property.
 
The franchise expense paid was $425,459 and $509,996 for the years ended December 31, 2009 and 2008, respectively.
 
Contingencies
 
The Company is involved in various legal actions and claims arising in the ordinary course of its business. Management believes that current litigation and claims will be resolved without any material effect on the Company’s financial position.
 
NOTE 11 — SUBSEQUENT EVENT
 
Sale of Hotel
 
On October 4, 2010 the Company sold the Property to Chatham New Rochelle RI, LLC for $21,000,000. Chatham New Rochelle RI, LLC received the building, all of its contents and a portion of the guest receivables and also assumed the mortgage payable to CBIC, Inc. in the amount of $16,800,000.


 


 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION OF CHATHAM LODGING TRUST
     Chatham Lodging Trust (the “Company”) was formed as a Maryland real estate investment trust (“REIT”) on October 26, 2009. The Company completed its initial public offering (“IPO”) and concurrent private placement of common shares of beneficial interest on April 21, 2010. The Company raised approximately $158.9 million, net of underwriting discounts and commissions and other offering costs paid or payable to third parties as of June 30, 2010.
     On April 23, 2010, the Company acquired six Homewood Suites by Hilton® hotels (the “Initial Hotels”) for an aggregate purchase price of $73.5 million, plus customary pro-rated amounts and closing costs from wholly owned subsidiaries of RLJ Development, LLC (“RLJ”). The Initial Hotels which contain an aggregate of 813 rooms are as follows:
    Homewood Suites by Hilton® Boston – Billerica/Bedford/Burlington; Billerica, Mass.; 147 rooms.
 
    Homewood Suites by Hilton® Hartford – Farmington; Farmington, Conn.; 121 rooms.
 
    Homewood Suites by Hilton® Minneapolis – Mall of America; Bloomington, Minn., 144 rooms.
 
    Homewood Suites by Hilton® Dallas – Market Center; Dallas, Texas; 137 rooms.
 
    Homewood Suites by Hilton® Orlando – Maitland; Maitland, Fla.; 143 rooms.
 
    Homewood Suites by Hilton® Nashville – Brentwood; Brentwood, Tenn.; 121 rooms.
     On July 2, 2010, the Company acquired the 120-room Hampton Inn & Suites® Houston-Medical Center in Houston, Texas (the “Houston Hotel”) for a cash purchase price of $16.2 million, plus customary pro-rated amounts and closing costs, from Moody National 1715 OST Houston S, LLC and Moody National 1715 OST Houston MT, LLC (collectively “Moody”). The Houston Hotel will be managed by Island Hospitality Management (“IHM”), a hotel management company 90 percent-owned by Jeffrey H. Fisher, the Company’s chief executive officer, pursuant to a management agreement between one of the Company’s taxable REIT subsidiaries (“TRS”) and IHM. The Company funded the purchase price for the Houston Hotel from the proceeds of its IPO.
     On August 3, 2010, the Company acquired the 124-room Residence Inn by Marriott® Holtsville in Holtsville, New York (the “Holtsville Hotel”) for a cash purchase price of $21.3 million, plus customary pro-rated amounts and closing costs, from Holtsville Hotel Group, LLC (collectively “Holtsville Group”). The Holtsville Hotel will be managed by IHM pursuant to a management agreement between a TRS and IHM. The Company funded the purchase price for the Holtsville Hotel from the proceeds of its IPO.
     On August 24, 2010, the Company acquired the 105-room Courtyard by Marriott® Altoona in Altoona, Pennsylvania (the “Altoona Hotel”) for a cash purchase price of $11.0 million, plus customary pro-rated amounts and closing costs, from Moody National CY Altoona PA, LLC (collectively “Moody Altoona”) and the 86-room SpringHill Suites by Marriott® Washington in Washington, Pennsylvania (the “Washington Hotel”) for a cash purchase price of $11.7 million, plus customary pro-rated amounts and closing costs, from Moody National SHS Washington PA, LLC (collectively “Moody Washington”). The Hotels will be managed by Concord Hospitality Enterprises (“Concord”) pursuant to a management agreement between the TRS and Concord. The Company funded the purchase price for the Hotels from the proceeds of its IPO.
     On September 23, 2010, the Company acquired the 133-room Residence Inn by Marriott® White Plains in White Plains, New York (the “White Plains Hotel”) for a cash purchase price of $20.9 million, plus customary pro-rated amounts and closing costs, from Moody National White Plains S, LLC and Moody National White Plains MT, LLC (collectively “Moody White Plains”). The Hotel will be managed by IHM pursuant to a management agreement between the TRS and IHM. The Company funded the purchase price for the White Plains Hotel from the proceeds of its IPO.
     The acquisitions of the Altoona, Washington and White Plains Hotels are hereafter referred to as the “Moody Acquisition”.

 


 

     On October 5, 2010, the Company acquired the 124-room Residence Inn by Marriott® New Rochelle in New Rochelle, New York (the “New Rochelle Hotel”) for a cash purchase price of $20.7 million, plus customary pro-rated amounts and closing costs, from New Roc Hotels, LLC (collectively “New Roc”). The Hotel will be managed by IHM pursuant to a management agreement between the TRS and IHM. The Company funded the purchase price for the New Rochelle Hotel from the proceeds of its IPO.
     The unaudited pro forma condensed consolidated balance sheet as of June 30, 2010 is based on the unaudited consolidated balance sheet of the Company as of June 30, 2010 and is presented as if the acquisition of the Houston, Holtsville, Moody Acquisition and New Rochelle Hotels occurred on June 30, 2010. The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2010 and for the year ended December 31, 2009 are presented as if the completion of the IPO and the acquisitions of the Initial Hotels, the Houston, Holtsville, Moody Acquisition and New Rochelle Hotels had occurred on January 1, 2009.
     The unaudited pro forma financial information is not necessarily indicative of what the Company’s results of operations or financial condition would have been assuming such transactions had been completed at the beginning of the periods presented, nor is it indicative of the Company’s results of operations or financial condition for future periods. In management’s opinion, all material adjustments necessary to reflect the effects of the significant acquisitions described above have been made. In addition, the unaudited pro forma financial information is based upon available information and upon assumptions and estimates, some of which are set forth in the notes to the unaudited pro forma financial information, which we believe are reasonable under the circumstances. The unaudited pro forma financial information and accompanying notes should be read in conjunction with the historical financial statements and notes thereto of the Company and the Initial Hotels included in the Company’s Form S-11 and the Quarterly Reports on Form 10-Q for the three months ended March 31, 2010 and six months ended June 30, 2010.

 


 

CHATHAM LODGING TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2010

(In thousands, except share data)
                                                         
    Chatham                                             Pro Forma  
    Lodging     Houston     Holtsville     Moody           Pro Forma     Chatham  
    Trust (1)     Acquisition (2)     Acquisition (3)     Acquisition (4)     New Rochelle (5)     Adjustments (6)     Lodging Trust  
Assets:
                                                       
Investment in hotel properties, net
  $ 73,132     $ 16,233     $ 21,300     $ 43,242     $ 20,715     $     $ 174,622  
Cash and cash equivalents
    98,700       (15,610 )     (20,262 )     (32,377 )     (20,957 )     (1,687 )     7,807  
Restricted cash
    2,500       (500 )     (1,065 )     1,142                   2,077  
Hotel receivables (net of allowance for doubtful accounts of approximately $4)
    699       24             106       46             875  
Deferred costs, net
    567                   191       62             820  
Prepaid expenses and other assets
    157             83       311       170             721  
 
                                         
Total assets
  $ 175,755     $ 147     $ 56     $ 12,615     $ 36     $ (1,687 )   $ 186,922  
 
                                         
 
                                                       
Liabilities and Equity:
                                                       
Mortgage payable
  $     $     $     $ 12,435     $     $     $ 12,435  
Accounts payable and accrued expenses
    2,086       140       45       150       28             2,449  
Accrued underwriter fees
    5,175                                     5,175  
Advance deposits
    59       7       11       30       8             115  
 
                                         
Total liabilities
    7,320       147       56       12,615       36             20,174  
 
                                         
 
                                                       
Commitments and contingencies
                                                       
 
                                                       
Equity:
                                                       
Shareholders’ Equity:
                                                       
Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at June 30, 2010
                                         
Common shares, $0.01 par value, 500,000,000 shares authorized; 9,201,550 shares issued and outstanding at June 30, 2010
    92                                     92  
Additional paid-in capital
    170,240                                     170,240  
Unearned compensation
    (1,404 )                                   (1,404 )
Retained earnings (deficit)
    (642 )                             (1,687 )     (2,329 )
 
                                         
Total shareholders’ equity
    168,286                               (1,687 )     166,599  
 
                                         
 
                                                       
Noncontrolling Interests:
                                                       
Noncontrolling interest in Operating Partnership
    149                                     149  
 
                                                       
 
                                         
Total equity
    168,435                               (1,687 )     166,748  
 
                                         
Total liabilities and equity
  $ 175,755     $ 147     $ 56     $ 12,615     $ 36     $ (1,687 )   $ 186,922  
 
                                         
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet

 


 

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
     The accompanying Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2010 is based on the unaudited historical consolidated balance sheet of the Company as of June 30, 2010, adjusted to reflect the purchase of the Houston, Holtsville, Moody Acquisition and New Rochelle Hotels.
     The Unaudited Pro Forma Condensed Consolidated Balance Sheet assumes the following occurred on June 30, 2010:
    Completion of the purchase of the Houston Hotel
 
    Completion of the purchase of the Holtsville Hotel
 
    Completion of the purchase of the Moody Acquisition
 
    Completion of the purchase of the New Rochelle Hotel
 
    Payment of costs and expenses of approximately $1,687 after June 30, 2010 related to the Houston, Holtsville, Moody Acquisitions and New Rochelle Hotels
Notes and Management Assumptions:
1) Represents the Company’s unaudited historical consolidated balance sheet as of June 30, 2010. Included in deferred costs are franchise fees of $59 for the Houston Hotel, $62 for the Holtsville Hotel, $60 for the Altoona Hotel, $50 for the Washington Hotel that were paid prior to June 30, 2010 and will be amortized over 10 years for the Houston Hotel, 15 years for the Holtsville Hotel and 20-years for the Altoona and Washington Hotels term of the new franchise agreement. Included in retained earnings (deficit) at June 30, 2010 are expenses of $29 related to the purchase of the Houston Hotel, $61 for the Holtsville Hotel and $83 for the Moody Acquisition Hotels that were expensed prior to June 30, 2010.
2) Pursuant to the purchase and sale agreement for the Houston Hotel, there was a proration of operating results on the date of closing between the Company and Moody and this proration is reflected in pro forma adjustment 2b below. Other than the liabilities described in note 2c, which are based upon the amounts in the audited combined statement of financial position of the Houston Hotel at December 31, 2009, no other assets and liabilities will be acquired pursuant to the purchase and sale agreement between the Company and Moody.
a. Investment in hotels of $16,233 is recorded at acquisition cost and depreciated using the straight line method over the estimated useful lives of the assets (5 years for furniture and equipment, 15 years for land improvements and 40 years for buildings and improvements). No intangible assets are expected to be recognized in connection with the purchase of the Houston Hotel based on the estimated values of the identifiable assets acquired. The allocation of the purchase price for the Houston Hotel is as follows:
                                 
    Purchase                    
    Price                   Furniture &
Property   Allocation   Land   Building   Equipment
Hampton Inn & Suites® Houston-Medical Center
  $ 16,233     $ 3,200     $ 12,708     $ 325  
b. Accounts receivable of $24 related to the Company’s 50% share of the July 1, 2010 hotel revenue.
c. Accounts payable and accrued expenses of $140, comprised of accrued real estate and personal property taxes of $116, sales taxes of $5, accounts payable of $19 and advance deposits of $7.
3) Pursuant to the purchase and sale agreement for the Holtsville Hotel, there was a proration of operating results on the date of closing between the Company and Holtsville Group and this proration is reflected in pro forma adjustment 3b below. Other than the liabilities described in note 3c, which are based upon the amounts in the audited combined statement of financial position of the Holtsville Hotel at December 31, 2009, no other assets and liabilities will be acquired pursuant to the purchase and sale agreement between the Company and Holtsville Group.
a. Investment in hotels of $21,300 is recorded at acquisition cost and depreciated using the straight line method over the estimated useful lives of the assets (5 years for furniture and equipment, 15 years for land improvements and 40 years for buildings and improvements). No intangible assets are expected to be

 


 

recognized in connection with the purchase of the Holtsville Hotel based on the estimated values of the identifiable assets acquired. The allocation of the purchase price for the Holtsville Hotel is as follows:
                                 
    Purchase                    
    Price                   Furniture &
Property   Allocation   Land   Building   Equipment
Residence Inn by Marriott® Holtsville
  $ 21,300     $ 2,200     $ 18,765     $ 335  
b. Prepaid expenses and other assets of $83 related to prepaid expenses of $7 and real estate taxes of $76.
c. Accounts payable and accrued expenses of $45, comprised of accrued sales taxes of $8 and accounts payable of $37 and advance deposits of $11.
4) Pursuant to the purchase and sale agreement for the Moody Hotels, there was a proration of operating results on the date of closing between the Company and Moody Altoona and this proration is reflected in pro forma adjustment 4c below. Other than the liabilities described in note 4e, which are based upon the amounts in the audited combined statement of financial position of the Altoona Hotel at December 31, 2009, no other assets and liabilities will be acquired pursuant to the purchase and sale agreement between the Company and Moody Altoona.
a. Investment in hotels of $43,242 is recorded at acquisition cost and depreciated using the straight line method over the estimated useful lives of the assets (5 years for furniture and equipment, 15 years for land improvements and 40 years for buildings and improvements). No intangible assets are expected to be recognized in connection with the purchase of the Altoona Hotel based on the estimated values of the identifiable assets acquired. The allocation of the purchase price for the Moody Acquisition is as follows:
                                 
    Purchase                    
    Price                   Furniture &
Property   Allocation   Land   Building   Equipment
Courtyard by Marriott® Altoona
  $ 11,013     $ 1,100     $ 9,630     $ 283  
SpringHill Suites by Marriott® Washington
  $ 11,754     $ 1,000     $ 10,692     $ 62  
Residence Inn by Marriott® White Plains
  $ 20,475     $ 2,200     $ 17,677     $ 598  
b. Restricted cash of $1,142 comprised of escrow accounts with the mortgage lender of $2,642 and ($1,500) of earnest money deposits.
c. Accounts receivable of $106 related to the Company’s 50% share of the closing night hotel revenue. Prepaid expenses and other assets of $311 comprised of prepaid expenses of $7 and real estate taxes of $304.
d. Deferred expenses of $191 comprised of $125 for loan costs that will be amortized over the term of the mortgages and franchise fees of $66 for the White Plains Hotel that will be amortized over the 20 year term of the franchise agreement. The Altoona hotel’s loan matures April 1, 2016 and the Washington hotel matures April 1, 2015.
e. Mortgage Loan of $12,435, accounts payable and accrued expenses of $150, comprised of accrued sales taxes of $26, accounts payable of $26, accrued payroll of $52, accrued interest of $46 and advance deposits of $30.
5) Pursuant to the purchase and sale agreement for the New Rochelle Hotel, there was a proration of operating results on the date of closing between the Company and New Roc and this proration is reflected in pro forma adjustment 5b below. Other than the assets and liabilities described in note 5c and 5d, which are based upon the amounts in the audited combined statement of financial position of the New Rochelle Hotel at December 31, 2009, no other assets and liabilities will be acquired pursuant to the purchase and sale agreement between the Company and New Roc.
a. Investment in hotels of $20,715 is recorded at acquisition cost and depreciated using the straight line method over the estimated useful lives of the assets (5 years for furniture and equipment, 15 years for land improvements and 40 years for buildings and improvements). No intangible assets are expected to be

 


 

recognized in connection with the purchase of the Altoona Hotel based on the estimated values of the identifiable assets acquired. The allocation of the purchase price for the Moody Acquisition is as follows:
                                 
    Purchase                    
    Price                   Furniture &
Property   Allocation   Land   Building   Equipment
Residence Inn by Marriott® New Rochelle
  $ 20,715     $ 0     $ 20,281     $ 434  
b. Accounts receivable of $46 related to the Company’s 50% share of the closing night hotel revenue.
c. Deferred expenses of $62 for franchise fees for the New Rochelle Hotel that will be amortized over the 20 year term of the franchise agreement.
d. Prepaid expenses and other assets of $170 comprised of prepaid expenses of $11 and real estate taxes of $159.
e. Accounts payable and accrued expenses of $36, comprised of accrued sales taxes of $9, accounts payable of $19 and advance deposits of $8.
6) Represents the costs incurred by the Company after June 30, 2010 to complete the purchase of the Houston, Holtsville, Moody Acquisition and New Rochelle Hotels:
a. Closing costs of $968.
b. Costs associated with due diligence of $86.
c. Accounting fees of $398 for services related to the audit and reviews.
d. Legal fees of $235.

 


 

CHATHAM LODGING TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2010

(In thousands, except share and per share data)
                                                                 
    Chatham                                                     Pro Forma  
    Lodging     Initial     Houston     Holtsville     Moody             Pro Forma     Chatham  
    Trust (1)     Hotels (2)     Hotel (3)     Hotel (4)     Acquisition (5)     New Rochelle (6)     Adjustments     Lodging Trust  
Revenue:
                                                               
Hotel operating:
                                                               
Rooms
  $ 4,544     $ 6,634     $ 1,931     $ 2,197     $ 5,317     $ 2,819     $     $ 23,442  
Other operating
    114       170       46       55       232       106             723  
 
                                               
Total revenue
    4,658       6,804       1,977       2,252       5,549       2,925             24,165  
 
                                               
Expenses:
                                                               
Operating expenses:
                                                               
Rooms
    1,070       1,352       368       479       1,183       648             5,100  
Other
    79       577       24       35       162       6             883  
General and administrative
    917       1,279       495       491       1,017       691             4,890  
Sales and marketing fees
    147       632       20       74       211       134             1,218  
Franchise fees
    343       266       207       165       399       212       24 (7)     1,616  
Management fees
    109       139       130       67       268       117       (143) (8)     687  
Condominium fees
                            264                   264  
Depreciation and amortization
    402             218       193       875       525       1,197 (9)     3,410  
Ground rent
                            60                   60  
Property taxes
    247       525       144       124       439       312             1,791  
Corporate general and administrative
    972                                     1,021 (10)     1,993  
Acquisition transaction costs
    1,005                                     (1,005) (11)      
 
                                               
Total expenses
    5,291       4,770       1,606       1,628       4,878       2,645       1,094       21,912  
Operating income (loss)
    (633 )     2,034       371       624       671       280       (1,094 )     2,253  
Gain on insurance proceeds
                            236             (236) (12)      
Interest expense
          (1,084 )     (402 )     (361 )     (1,254 )     (460 )     2,724 (13)     (837 )
Interest income
    38                                           38  
 
                                               
Income (loss) from continuing operations before income tax expense
    (595 )     950       (31 )     263       (347 )     (180 )     1,394       1,454  
Income taxes
    (47 )                                   (59) (14)     (106 )
 
                                               
Income(loss) from continuing operations
  $ (642 )   $ 950     $ (31 )   $ 263     $ (347 )   $ (180 )   $ 1,335     $ 1,348  
 
                                               
 
                                                               
Earnings per share data:
                                                               
Basic and diluted — continuing operations
  $ (0.18 )                                                   $ 0.15  
 
                                                           
 
Basic and diluted — weighted average shares
    3,580,028                                               (15 )     8,993,015  
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations

 


 

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
(in thousands, except share data)
1)   The Company was formed on October 26, 2009. There were no results of operations for the Company for the period from inception through April 21, 2010.
 
2)   Represents the combined unaudited historical results of operations of the Initial Hotels from January 1, 2010 to the acquisition date of April 23, 2010.
 
3)   Represents the unaudited historical results of operations of the Houston Hotel for the six months ended June 30, 2010.
 
4)   Represents the unaudited historical results of operations of the Holtsville Hotel for the six months ended June 30, 2010.
 
5)   Represents the unaudited historical results of operations of the Moody Acquisition for the six months ended June 30, 2010.
 
6)   Represents the unaudited historical results of operations of the New Rochelle Acquisition for the six months ended June 30, 2010. The historical audited financial statements of the New Rochelle Hotel are included herein.
 
7)   Reflects the adjustment to amortization of franchise fees based on the franchise application fees paid of $749 and the remaining terms of the new franchise applications, which are 15 years from the closing of the purchase of the Initial Hotels and Holtsville Hotel, 10 years from the closing of the Houston Hotel and 20 years from the closing of the Moody Acquisition Hotels and the New Rochelle Hotel.
 
8)   Reflects the adjustment to management fees for contractual differences on the Houston, Altoona, Washington and White Plains Hotels. The previous management company was paid a 4% management fee at the Houston Hotel and there was an additional asset management fee payment of 1%. The new management contract reflects a 3% management fee for the Houston Hotel. The Altoona, Washington and White Plains Hotels had an asset management fee of .5%, 1% and 2%, respectively that will not be paid going forward. Also reflects the adjustment for the contractual difference in the cost of accounting fees.
 
9)   Reflects net increase to depreciation expense based on the Company’s cost basis in the Initial, Houston, Holtsville, and Moody Acquisition Hotels and their accounting policy for depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, 5 years for furniture and equipment, 15 years for land improvements and 40 years for buildings and improvements.
 
10)   The Company was formed on October 26, 2009 and completed its IPO on April 21, 2010 and thus there was no corresponding corporate general and administrative expense until April 21, 2010. Reflects the adjustment to include corporate general and administrative expenses for the period from January 1, 2010 to June 30, 2010, including:
  a.   Salaries and benefits of $337, of which $298 is to be paid to the Company’s executive officers, who are currently Jeffrey H. Fisher, the Chairman, President and Chief Executive Officer of the Company, Peter Willis, Executive Vice President and Chief Investment Officer of the Company, Dennis Craven, Executive Vice President and Chief Financial Officer of the Company.
 
  b.   Amortization of restricted shares of $67 to Messrs. Fisher, Willis and Craven based on a three-year vesting period. The aggregate estimated value of the restricted share awards are $295 to Mr. Fisher, $197 to Mr. Willis and $176 to Mr. Craven.
 
  c.   Amortization of LTIP unit awards of $236 to Messrs. Fisher, Willis and Craven based on a five-year vesting period. The aggregate undiscounted estimated value of the LTIP unit awards are $3,979 for Mr. Fisher, $652 for Mr. Willis and $525 for Mr. Craven. After applying the share-based payment accounting guidance, the estimated discounted values of the LTIP awards are

 


 

      $3,020 for Mr. Fisher, $495 for Mr. Willis and $398 for Mr. Craven. The discounted value is used for the purposes of determining the amortization.
 
  d.   Cash compensation of $100 and restricted share compensation of $170 to the Trustees.
 
  e.   Directors and officers insurance of $86.
 
  f.   General office expenses including rent of $25
11)   Reflects the adjustment for one-time hotel acquisition costs which are not recurring and thus excluded from the pro forma results of operations.
 
12)   Reflects the adjustment for one-time gain on an insurance claim at the White Plains Hotel which is not recurring and thus excluded from the pro forma results of operations.
 
13)   Reflects the decrease to interest expense associated with defeasing the existing loans upon the purchase of the Initial, Houston, Holtsville and Moody Acquisition Hotels except for loans on the Altoona and Washington hotels, which were assumed by the Company. Except for the two assumed loans, the seller was required under the terms of the purchase and sale agreements to cause the defeasance of the loans to occur on or before the closing of the purchase of the hotels. Except for the two assumed loans, the purchase price for the Initial, Houston, Holtsville, Moody Acquisition and New Rochelle Hotels was fully funded from equity proceeds of the IPO.
 
    The Company assumed the $6,979 loan on the Altoona hotel. The loan matures on April 1, 2016 and bears an interest at a rate of 5.96%. The Company also assumed the $5,455 loan on the Washington hotel. The loan matures on April 1, 2015 and bears an interest rate of 5.84%.
 
14)   Reflects the adjustment to recognize income tax expense at an effective rate of 40% on the taxable income of the Company’s TRS.
 
15)    
                 
            Pro Forma
    Chatham   Chatham
Numerator
               
Income (loss) from continuing operations
  $ (642 )   $ 1,348  
 
               
Denominator
               
Shares issued in the offering, net of unvested restricted shares and units (1)
          9,201,550  
Impact from offering proceeds not used for acquisitions (2)
          (208,535 )
Denominator for basic earnings per share
    3,580,028       8,993,015  
Denominator for diluted earnings per share
    3,580,028       8,993,015  
 
               
Income (loss) per share data:
               
Basic — continuing operations
  $ (0.18 )   $ 0.15  
Diluted — continuing operations
  $ (0.18 )   $ 0.15  
  1)   Consideration was given to the impact of the unvested awards. The impact was determined to be immaterial.
 
  2)   The denominator in computing pro forma earnings per share should include only those common shares whose proceeds are being reflected in pro forma adjustments in the income statement, such as proceeds used for acquisitions and offering costs. In the Pro Forma Condensed Consolidated Balance Sheet, uses of proceeds from the IPO are as follows:

 


 

         
Initial Hotels
  $ 73,514  
Houston Hotel
    16,233  
Holtsville Hotel
    21,300  
Moody Acquisition Hotels
    30,808  
New Rochelle Hotel
    20,715  
Costs to complete the purchase of the Hotels
    2,148  
Costs for the IPO
    13,646  
 
     
Total use of proceeds from the IPO
  $ 178,364  
 
Total use of proceeds as a percentage of the IPO
    97.73 %
Offering proceeds not used
    2.27 %
Accordingly, in calculating the denominator for earnings per share, we only include 97.73% of the shares sold in the IPO.

 


 

CHATHAM LODGING TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009

(In thousands, except share and per share data)
                                                                 
    Chatham                                                     Pro Forma  
    Lodging     Initial     Houston     Holtsville     Moody             Pro Forma     Chatham  
    Trust (1)     Hotels (2)     Hotel (3)     Hotel (4)     Acquisition (5)     New Rochelle (6)     Adjustments     Lodging Trust  
Revenue:
                                                               
Hotel operating:
                                                               
Rooms
  $     $ 21,193     $ 3,557     $ 4,398     $ 11,108     $ 5,562     $     $ 45,818  
Other operating
          545       77       111       482       203             1,418  
 
                                               
Total revenue
          21,738       3,634       4,509       11,590       5,765             47,236  
 
                                               
Expenses:
                                                               
Operating expenses:
                                                               
Rooms
          4,239       724       901       2,437       1,250             9,551  
Other
          1,687       47       69       311       16             2,130  
General and administrative
          4,581       838       1,006       1,946       1,367       (74) (7)     9,664  
Sales and marketing fees
          2,021       134       155       434       250             2,994  
Franchise fees
          848       285       330       841       425       48 (8)     2,777  
Management fees
          458       216       135       579       183       (252) (9)     1,319  
Condominium fees
                            524                   524  
Depreciation and amortization
          2,619       435       506       1,642       1,136       483 (10)     6,821  
Ground rent
                            103                     103  
Property taxes
          1,255       391       239       849       611             3,345  
Corporate general and administrative
                                        3,387 (11)     3,387  
 
                                               
Total expenses
          17,708       3,070       3,341       9,666       5,238       3,592       42,615  
Operating income (loss)
          4,030       564       1,168       1,924       527       (3,592 )     4,621  
Write down of development costs
                      95                   (95) (12)      
Interest expense
          (3,573 )     (854 )     (739 )     (2,564 )     (930 )     6,918 (13)     (1,742 )
 
                                               
Income (loss) from continuing operations before income tax expense
          457       (290 )     334       (640 )     (403 )     3,231       2,879  
Income taxes
                                        (276 )(14)     (276 )
 
                                               
Income(loss) from continuing operations
  $     $ 457     $ (290 )   $ 334     $ (640 )   $ (403 )   $ 2,955     $ 2,603  
 
                                               
 
                                                               
Earnings per share data:
                                                               
Basic and diluted — continuing operations
  $                                                     $ 0.29  
 
                                                           
 
                                                               
Basic and diluted — weighted average shares
    1,000                                                 (15)     8,993,015  
 
                                                           
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations

 


 

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009
(in thousands, except share data)
1)   The Company was formed on October 26, 2009. There were no results of operations for the Company for the period from inception to December 31, 2009.
 
2)   Represents the combined audited historical results of operations of the Initial Hotels for the year ended December 31, 2009.
 
3)   Represents the audited historical results of operations of the Houston Hotel for the year ended December 31, 2009.
 
4)   Represents the audited historical results of operations of the Holtsville Hotel for the year ended December 31, 2009.
 
5)   Represents the audited historical results of operations of the Moody Acquisition for the year ended December 31, 2009.
 
6)   Represents the audited historical results of operations of the New Rochelle Acquisition for the year ended December 31, 2009. The historical audited financial statements of the New Rochelle Hotel are included herein.
 
7)   Reflects the adjustment to general and administrative expense for corporate allocated costs from the Initial Hotels that were included in the historical results of operations of $74.
 
8)   Reflects the adjustment to amortization of franchise fees based on the franchise application fees paid of $749 and the remaining terms of the new franchise applications, which are 15 years from the closing of the purchase of the Initial Hotels and Holtsville Hotel, 10 years from the closing of the Houston Hotel and 20 years from the closing of the Moody Acquisition Hotels and the New Rochelle Hotel.
 
9)   Reflects the adjustment to management fees for contractual differences on the Houston, Altoona, Washington and White Plains Hotels. The previous management company was paid a 4% management fee at the Houston Hotel and there was an additional asset management fee payment of 1%. The new management contract reflects a 3% management fee for the Houston Hotel. The Altoona, Washington and White Plains Hotels had an asset management fee of .5%, 1% and 2%, respectively that will not be paid going forward. Also reflects the adjustment for the contractual difference in the cost of accounting fees.
 
10)   Reflects net increase to depreciation expense based on the Company’s cost basis in the Initial, Houston, Holtsville and the Moody Acquisition Hotels and their accounting policy for depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, 5 years for furniture and equipment, 15 years for land improvements and 40 years for buildings and improvements.
 
11)   The Company was formed on October 26, 2009 and thus there was no corresponding corporate general and administrative expense for the year ended December 31, 2009. Reflects the adjustment to include corporate general and administrative expenses that the Company expects to pay, including:
  a.   Salaries and benefits of $1,119, of which $989 is to be paid to the Company’s executive officers, who are currently Jeffrey H. Fisher, the Chairman, President and Chief Executive Officer of the Company, Peter Willis, Executive Vice President and Chief Investment Officer of the Company, Dennis Craven, Executive Vice President and Chief Financial Officer of the Company.
 
  b.   Amortization of restricted shares of $223 to Messrs. Fisher, Willis and Craven based on a three-year vesting period. The aggregate estimated value of the restricted share awards are $295 to Mr. Fisher, $197 to Mr. Willis and $176 to Mr. Craven.
 
  c.   Amortization of LTIP unit awards of $783 to Messrs. Fisher, Willis and Craven based on a five-year vesting period. The aggregate undiscounted estimated value of the LTIP unit awards are $3,979 for Mr. Fisher, $652 for Mr. Willis and $525 for Mr. Craven. After applying the share-

 


 

      based payment accounting guidance, the estimated discounted values of the LTIP awards are $3,020 for Mr. Fisher, $495 for Mr. Willis and $398 for Mr. Craven. The discounted value is used for the purposes of determining the amortization.
 
  d.   Cash compensation of $333 and restricted share compensation of $563 to the Trustees.
 
  e.   Directors and officers insurance of $287.
 
  f.   General office expenses including rent of $79.
12)   Reflects the write off of $95 of development costs that were expensed in the Holtsville Hotel.
 
13)   Reflects the decrease to interest expense associated with defeasing the existing loans upon the purchase of the Initial, Houston, Holtsville and Moody Acquisition Hotels except for loans on the Altoona and Washington hotels, which were assumed by the Company. Except for the two assumed loans, the seller was required under the terms of the purchase and sale agreements to cause the defeasance of the loans to occur on or before the closing of the purchase of the hotels. Except for the two assumed loans, the purchase price for the Initial, Houston, Holtsville, Moody Acquisition and New Rochelle Hotels was fully funded from equity proceeds of the IPO.
 
    The Company assumed the $6,979 loan on the Altoona hotel. The loan matures on April 1, 2016 and bears an interest at a rate of 5.96%. The Company also assumed the $5,455 loan on the Washington hotel. The loan matures on April 1, 2015 and bears an interest rate of 5.84%.
 
14)   Reflects the adjustment to recognize income tax expense at an effective rate of 40% on the taxable income of the Company’s TRS.
 
15)    
                 
            Pro Forma
    Chatham   Chatham
Numerator
               
Income (loss) from continuing operations
  $     $ 2,603  
 
               
Denominator
               
Shares issued in the offering, net of unvested restricted shares and units (1)
    1,000       9,201,550  
Impact from offering proceeds not used for acquisitions (2)
          (208,535 )
Denominator for basic earnings per share
    1,000       8,993,015  
Denomiator for diluted earnings per share
    1,000       8,993,015  
 
               
Income (loss) per share data:
               
Basic — continuing operations
  $     $ 0.29  
Diluted — continuing operations
  $     $ 0.29  
  1)   Consideration was given to the impact of the unvested awards. It was determined that the effect would be anti-dilutive in the calculation of diluted earnings per share.
 
  2)   The denominator in computing pro forma per share should include only those common shares whose proceeds are being reflected in pro forma adjustments in the income statement, such as proceeds used for acquisitions and offering costs. In the Pro Forma Condensed Consolidated Balance Sheet, uses of proceeds from the IPO are as follows:

 


 

         
Initial Hotels
  $ 73,514  
Houston Hotel
    16,233  
Holtsville Hotel
    21,300  
Moody Acquisition Hotels
    30,808  
New Rochelle Hotel
    20,715  
Costs to complete the purchase of the Hotels
    2,148  
Costs for the IPO
    13,646  
 
     
Total use of proceeds from the IPO
  $ 178,364  
 
Total use of proceeds as a percentage of the IPO
    97.73 %
Offering proceeds not used
    2.27 %
Accordingly, in calculating the denominator for earnings per share, we only include 97.73% of the shares sold in the IPO.