Chesapeake Reports Strong Fourth Quarter Results

Chesapeake Lodging Trust (NYSE: CHSP), a lodging real estate investment trust (REIT), reported today its financial results for the quarter ended December 31, 2011.

“We more than doubled the size of our high-quality hotel portfolio by capitalizing on attractive acquisition opportunities, added further flexibility to our revolving credit facility and took advantage of the attractive interest rate environment, and delivered strong operating results.”

HIGHLIGHTS

• Acquisitions – Acquired the 613-room Denver Marriott City Center for a purchase price of $119.0 million and the Holiday Inn New York City Midtown – 31^st Street for a purchase price of $52.2 million; On January 31, 2012, announced definitive agreement to acquire the 185-room Hyatt Place New York Midtown South for a purchase price of $76.5 million.
• Pro Forma RevPAR – 8.3% increase for comparable 11-hotel portfolio over the same period in 2010.
• Pro Forma Adjusted Hotel EBITDA Margin – 280 basis point increase for comparable 11-hotel portfolio over the same period in 2010.
• Financings – Closed on new three-year revolving credit facility, increasing facility size and reducing cost of borrowing.
• Dividends – Increased first quarter 2012 dividend by 10% to $0.22 per common share (5% annualized yield).

CONSOLIDATED FINANCIAL RESULTS

The following is a summary of the consolidated financial results (in millions, except per share amounts):

“2011 was an exceptional year for Chesapeake on various fronts,” said James L. Francis, Chesapeake Lodging Trust’s President and Chief Executive Officer. “We more than doubled the size of our high-quality hotel portfolio by capitalizing on attractive acquisition opportunities, added further flexibility to our revolving credit facility and took advantage of the attractive interest rate environment, and delivered strong operating results.”

Mr. Francis continued, “Our high-quality hotel portfolio generated industry exceeding RevPAR growth and, coupled with our aggressive asset management, produced strong improvements in margin both during the quarter and for the year.”

HOTEL OPERATING RESULTS

Management assesses the operating performance of its hotels irrespective of the hotel owner during the periods compared. Included in the following table are comparisons of, on a pro forma basis, occupancy, ADR, RevPAR, Adjusted Hotel EBITDA, and Adjusted Hotel EBITDA Margin, the key operating metrics that management uses to assess the performance of its hotels. The key operating metrics include the hotel operating results of 11 of the Trust’s 12 hotels owned as of December 31, 2011 (in thousands, except pro forma ADR and pro forma RevPAR). The key operating metrics do not include operating results for the Holiday Inn New York City Midtown – 31^st Street, as the hotel opened for business on January 19, 2012.

Funds from operations (FFO), Adjusted FFO (AFFO), net income before interest, income taxes, and depreciation and amortization (Corporate EBITDA), Adjusted Corporate EBITDA, Hotel EBITDA, Adjusted Hotel EBITDA and Adjusted Hotel EBITDA Margin are non-GAAP financial measures within the meaning of the rules of the Securities and Exchange Commission. See the discussion included in this press release for information regarding these non-GAAP financial measures.

ACQUISITION ACTIVITY

On October 3, 2011, the Trust acquired the 613-room Denver Marriott City Center located in Denver, Colorado for approximately $120.1 million, including acquired working capital. The Trust funded the acquisition with available cash on hand and by borrowing under its revolving credit facility. The Trust has assumed the existing management agreement with Marriott International, Inc. to continue operating the hotel.

On December 22, 2011, the Trust acquired the 122-room Holiday Inn New York City Midtown – 31^st Street located in New York, New York for $52.6 million, including acquired working capital. The Trust funded the acquisition with a borrowing under its revolving credit facility. The Trust entered into a management agreement with Real Hospitality Group to operate the hotel. The newly developed hotel opened for business on January 19, 2012.

FINANCING ACTIVITY

On October 14, 2011, the Trust amended its credit agreement providing for a new three-year secured revolving credit facility. The maximum amount that the Trust may borrow under the facility increased from $150.0 million to $200.0 million and provides for the possibility of further future increases, up to a maximum of $300.0 million, in accordance with certain terms. The amount that the Trust can borrow under the revolving credit facility is based on the value of the Trust's hotels included in the borrowing base, as defined in the credit agreement. The interest rate for borrowings under the new facility was reduced to LIBOR, plus 2.75% - 3.75% (the spread over LIBOR based on the Trust’s consolidated leverage ratio), as compared to LIBOR plus 3.75%, subject to a LIBOR floor of 2.00%, under the previous facility. The amended credit agreement contains standard financial covenants, including certain leverage ratios, coverage ratios, and a minimum tangible net worth requirement. Subject to certain conditions, the facility allows for a one-year extension.

DIVIDENDS

On October 14, 2011, the Trust paid a dividend of $0.20 per share to its common shareholders of record as of September 30, 2011. On December 15, 2011, the Trust declared a dividend in the amount of $0.20 per share payable to its common shareholders of record as of December 31, 2011. The dividend was paid on January 13, 2012.

On February 8, 2012, the Trust declared a dividend in the amount of $0.22 per share payable to its common shareholders of record as of March 31, 2012. The dividend will be paid on April 13, 2012.

POST-QUARTER ACTIVITY

On January 31, 2012, the Trust announced it had entered into a definitive agreement to acquire the 185-room Hyatt Place New York Midtown South located in New York, New York for a purchase price of $76.5 million, or approximately $414,000 per key. The hotel is currently under development at 52-54 West 36^th Street, between 5^th Avenue and 6^th Avenue. Closing on the proposed acquisition is expected to occur following completion of the hotel by the seller, anticipated in the third quarter 2012, and satisfaction of customary closing conditions.

2012 OUTLOOK

Based on the operating trends and fundamentals of the Trust’s current 12-hotel portfolio and the Hyatt Place New York Midtown South that is expected to close in the third quarter 2012, the Trust estimates these assets will produce the following results for 2012:

• Pro forma RevPAR to increase in the range of 6.5% to 8.5% over 2011;
• Net income available to common shareholders will range from $19.2 million to $22.1 million;
• Adjusted Hotel EBITDA will range from $82.3 million to $85.6 million; and
• AFFO per diluted share will range from $1.55 to $1.64.

“Our well-positioned hotel portfolio concentrated in major markets will benefit from strong convention calendars and growing corporate and international tourism demand in 2012. Coupled with little-to-no supply growth in our current markets, we expect the portfolio to generate strong returns on investment and to produce meaningful free cash flow for our shareholders,” said James L. Francis.

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