Chatham Lodging Trust's Q2 2025: Key Contradictions in Development Timelines, Acquisition Yields, and Asset Sales Strategies

Portland hotel development timeline, acquisition market yields, asset sales strategy, and acquisition market conditions are the key contradictions discussed in Chatham Lodging Trust's latest 2025Q2 earnings call.



Asset Sales and Capital Deployment:
- Chatham Lodging Trust completed the sale of 5 hotels with an average age of 25 years, at an approximate 6% capitalization rate on 2024 NOI levels for proceeds of $83 million.
- The proceeds will be used for Home2 Portland development, hotel acquisitions, and share repurchases to add shareholder value.

Operational Performance and Revenue Growth:
- The company achieved RevPAR and FFO per share at the top of their guidance range, with an occupancy rate of 82% in Q2, matching last year's post-pandemic high.
- Growth was driven by strong business traveler demand, particularly during weekdays, and a recovery in Silicon Valley, which is poised for further demand growth due to tech investments.

Financial Health and Shareholder Returns:
- Chatham Lodging Trust reduced leverage to 21% and is projected to generate almost $20 million of free cash flow in 2025 after dividends.
- The Board approved a $25 million share buyback plan, with approximately 20,000 shares repurchased in Q2, indicating confidence in the company's financial strength.

Regional Market Performance and Recovery:
- The company's Silicon Valley hotels, which account for a significant portion of their portfolio, saw RevPAR growth of 3%, driven by strong performance in June and investments by tech companies.
- The Sun Belt markets performed well, with the 2 Charleston hotels showing strong growth, while Texas hotels faced challenges due to convention center closures.

Portfolio Enhancement and CapEx Investments:
- The company added 8 rooms to their existing portfolio by converting meeting and other spaces, potentially adding $3 million to $4 million in value.
- The investment and conversion strategy is part of a plan to enhance the portfolio's profitability, reflecting the company's focus on internal growth and value creation.