Greetings, and welcome to the Chatham Lodging Trust Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Chris Daly, President of Daly Gray Public Relations. Thank you. You may begin.

Thank you, Melissa. Good morning everybody, and welcome to the Chatham Lodging Trust Fourth Quarter 2017 Results Conference Call. Please note that many of our comments today are considered forward-looking statements as defined by Federal Securities Laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our most recent Form 10-K and other SEC filings. All information in this call is as of February 26, 2018, unless otherwise noted. And the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our Web site at http -- www.chathamlodgingtrust.com. Now to provide you with some insight into Chatham's 2017 fourth quarter results, allow me to introduce Jeff Fisher, Chairman, President, and Chief Executive Officer; Dennis Craven, Executive Vice President and Chief Operating Officer; and Jeremy Wegner, Senior Vice President and Chief Financial Officer. Let me turn the session over to Jeff Fisher. Jeff?

Thanks, Chris. Good morning, everybody. Our results for the fourth quarter were strong by most measures and finished at the upper end of our guidance range. Let's talk about a few of those highlights from the quarter. RevPAR growth was 1.1% compared to our guidance of minus 1% to up 1%, of course, benefiting from hurricane related demand at our Houston and Florida hotels. Adjusted EBITDA finished slightly above the upper end of that guidance range due to RevPAR outperformance as well as the incremental EBITDA contributed by the two acquisitions offset by EBITDA loss at the hotel that was sold. Adjusted FFO per diluted share was $0.36 compared to guidance of $0.35 to $0.38 per share. But excluding the impact of the fourth quarter equity offering, the two hotel acquisitions and one hotel sold, pro forma adjusted FFO per share would be $0.38 above consensus and at the upper end of our guidance. Dennis will go into more detail regarding our operating performance. I’m going to take a few minutes though to reflect on our strategic performance in 2017 and also talk about our plan as we move forward into 2018. Earlier last year, we set forth publically a four pronged strategic approach to add value to our portfolio. Let me just talk about those one by one. First, opportunistically recycle capital. We are going to selectively prune assets from our portfolio that either don’t fit strategically of which there's only a few or we believe we could generate incremental new EBITDA and cash flow by selling at a lower cap rate and reinvesting those proceeds in higher quality hotels, in higher growth markets that earn a higher yield. We accomplish this in 2017 through the sale of our Carlsbad hotel at an approximate 6.5% cap and we acquired…

Thanks, Jeff. Good morning, everyone. Our RevPAR growth of 1.1% in the quarter was driven by ADR gains of 0.8% to $159 and a 0.4% increase in occupancy to 75% in the quarter. Excluding our four Houston hotels, which benefited from hurricane Harvey related demand, RevPAR declined 0.5%. Looking at our more significant markets in the quarter, RevPAR at Silicon Valley Residence Inn was up 1% in the quarter with ADR rising 0.5% $223 on occupancy of 75%. Over the last three years, we’ve absorbed 24% of upscale new supply in our market track as well as 9% of new supply in our market track. The good news is that market supply growth has declined three straight years and despite all of the new supply over the last 36 months, we’ve managed to gain occupancy levels over 80% over that same period. Cat companies continue to drive our economy and despite all the supply demand growth continues to outface supply across the Valley. It's a great location to own hotel and our four hotels are the perfect brand that being Residence Inn to accommodate the significant extended-stay demand in the Valley. San Diego represents our second-largest market and we saw RevPAR decline 12% in the quarter, one of our two hotels Residence Inn, Mission Valley was under renovation for most of the quarter. In Houston, RevPAR rose 23.5%, obviously most hotels did really well in the quarter, but I’d like to point out that our four hotels improved their market share by approximately 6% in the quarter. So we got more than our fair share of hurricane Harvey business and Island did a fantastic job maximizing performance. The hotel teams were in constant communication with Island's revenue managers, who were then managing inventory with some of our preferred customers who…

Thanks, Dennis. Good morning, everyone. For the quarter, we reported net income of $5.5 million or $0.12 per diluted share compared to net income of $2.7 million or $0.07 per diluted share in Q4 2016. Our Q4 2017 net income included a $3.3 million gain from the sale of the Homewood Suites Carlsbad. The primary differences between net income and FFO relate to non-cash costs such as depreciation, which was $11.6 million in the quarter, one-time gains and losses which were $2.8 million and our share of similar items within the joint ventures which were approximately $1.8 million in the quarter. Adjusted FFO for the quarter were $16 million compared to $17 million in Q4 2016, a decrease of 5.7%. Adjusted FFO per share was $0.36, which represents a decrease of 18.2% from the $0.44 per share generated in Q4 2016. Our $0.36 of FFO per share for the quarter was within our guidance range of $0.35 to $0.38,which was provided before the equity rate acquisition and disposition that we completed in Q4. Excluding the impact of the equity acquisition and disposition, our FFO per share would've been $0.38 in Q4. Adjusted EBITDA for the company was $26.3 million in Q4, which was flat to 2016. In the quarter, our two joint ventures contributed approximately $3.4 million of adjusted EBITDA and $1.3 million of adjusted FFO. Fourth quarter RevPAR was up 3.7% in the Inland portfolio, which is coming off a significant amount of renovation in 2016 and RevPAR was at 0.3% in the Innkeepers portfolio which have significant amount of renovation disruption in 2017 that will continue into 2018. After 2018, the renovation activity should be very limited both of the joint venture portfolios for the next several years. We took a number of steps in Q4 that both…

Thank you. [Operator Instructions] Our first question comes from the line of Anthony Powell with Barclays. Please proceed with your question.

Hi. Good morning, everyone.

Hey, Anthony.

Hey. Could you talk about how much investment capacity you currently have before any new equity offerings? And also could you talk about how you rank your opportunities in terms of acquisitions, building the hotels, and adding rooms?

I guess with respect to your first question, if we look at it really simply and say, hey, if we were to lever up then the proceeds from the asset sale and the equity offerings to 40%, that would allow us to buy sort of an additional $135-ish million of hotel on top of the $150 million we’ve already acquired or have under contract.

Got it.

So if we were to do or fund that with all debt under our line, that would get us sort of $0.11 to $0.13 of FFO per share sort of depending on the cap rate we acquired hotels at.

And just to comment -- I’m sorry, I was going to answer the ranking part of the question, but go ahead Anthony.

No, I was going to say, are you comfortable going at the 40% leverage at this part of the cycle?

Yes.

Yes.

Okay. And then on to the ranking?

Yes, I think that first and foremost and the first piece of the strategy is successful in 2017 is really pruning a few assets and really recycling capital with a positive spread. So that’s priority number one around here, is to find hotels that are new, are in markets that are growing faster than the overall portfolio and making that kind of trade. Additionally, I think then you come down to the second part of the story which is just looking for any opportunity to add within the existing portfolio and also we didn’t talk too much about it in the script, but really look at opportunities in some of these limited service hotels to add a few more bars, because we have done that in a couple of hotels that produced anywhere from $90,000 to about $180,000 of new bottom line cash flow in the right location where there really isn't easy access within walking to another facility, that can work well, so we’re going to ramp that effort up a little bit in some hotels that we think we have a captive audience. And really the development of a new hotel is probably last on the list, but still as I said, maybe here or there an opportunity we're considering.

Got it and thanks. Going to the dividend, I think you highlight in the release that your payout ratio goes to 71% based on the midpoint of your FFO per share guidance. Can you remind us what your dividend policy is? Do you pay dividends based on the payout ratio or paying on taxable income and how do you expect the dividend to trend this year?

Yes, I mean, listen we typically have targeted it to some range of an adjusted FFO per share -- 70% is a little bit higher than that. I would tell you that if you even look at our earnings for 2017, we generally paid out pretty darn close to 100% of taxable income that will decline a little bit in 2018. So from a return of capital perspective, we're not paying a stupid number. So I think we’re pretty comparable still at above $0.32 a share which is 70% of adjusted FFO. We do have a pretty significant CapEx number this year, but as Jeremy mentioned in his prepared remarks about $6 million of the $33 million has already been funded into reserves, so it kind of lessened our cash flow out the door in 2018.

Okay, right. I will get back in the queue. Thanks.

Thank you. [Operator Instructions] Thank you. We'd like to take a follow-up from Anthony Powell with Barclays. Please proceed with your question.

Well, I guess, I’m the queue today. So going to

You just stay [technical difficulty].

All right. Just going to Houston, we’ve heard some people say that there is a bit of kind of the return of energy-related business. Have you seen that and when do you think RevPAR comps will start getting positive in Houston?

Yes, we have seen that, Anthony in the Chatham portfolio. But we’ve also seen it sprinkle through both our -- well primarily our Inland portfolio and there's a portfolio that is owned by -- partly by Jeff and with Colony, that has a little more exposure to oil and gas and we have seen some more business in our oil and gas markets. If you look at our SpringHill Suites in Washington, Pennsylvania, even over the past kind of three to six months that hotel has done really well in terms of -- I mean, obviously it’s pretty small, but in terms of just RevPAR growth, we’re talking kind of 15% to 30% RevPAR growth. A lot of that is crews that are coming back whether it's for maintenance, but it certainly has spiked up a little bit. We can say that we have seen that.

All right. And Jeff I think you mentioned that the brands could help hotel owners a bit more in terms of regaining loss of margin. What ideas do you have that kind of -- that the brands could kind of implement to help you in that front?

We are looking at a variety of different things. Of course, we first start by just simply looking at existing brand standards and seeing where we think it is -- there's opportunity within those standards, and it's just trimming around the edges. It could be little things like cutting out newspapers that cost plenty of money every day to put out there, but obviously as we know most folks are reading news online these days anyway. It’s -- on the staffing front, I would say that we’re pretty very, very lean, not pretty lean. So there's not much room there, but efficiencies in housekeeping and cleaning rooms and the number of minutes that we budget to clean those rooms is what we're looking at right now. And we’re looking at sort of a tiered bonus formula to further encourage kind of the reduction in those housekeeping minutes. So it's things like that, brand standards, mandate, what we put out for breakfast, what we might put out during the evening social hour, they call it in a Residence Inn or our Homewood Suites, but we're actually experimenting in advance and for the brand a little bit as to beta testing in some hotels by pairing down that offering. And we’re going to monitor our guest service scores, look at our cost per occupied room, which we're already seeing some savings in those tests hotels and continuing to work with the brands and encouraging them to take another look at what those offerings are. So, we’re fairly optimistic that everyone's eye is on the same ball here in a flat RevPAR environment as we know we just can't maintain margins.

Got it. And, I guess, my last one on the RevPAR guidance. Negative 1.5% to plus 0.5%, excluding Houston and DC, what do you think the kind of the unaffected guidance is and is that higher or lower than it was in '17 and when do you think that number can maybe start improving a bit?

Yes, I mean, that brings overall portfolio RevPAR down by about 60 basis points for the year, so if you look at kind of the midpoint of our guidance, it's around basically flat 2018 versus 2017.

And that's a bit below I think some of the forecasters for upscale and upper midscale, is that just due to more supply growth in some markets like Denver for example?

Yes, I think that’s still due to new supplies. We talked about it still kind of in that 3% range for us in 2017. We do have two more hotels that are being renovated in 2018 versus '17. We finished the -- we completed renovations on five hotels last year, we’re going to do seven in 2018. So, there's a little bit extra there, but that's we are, like I said, five versus 7, so a little more displacement.

Got it. Okay. All right. That’s it for me. Thanks.

Thanks, Anthony. See you soon.

Thank you. [Operator Instructions] Mr. Fisher, there are no further questions at this time. I will turn the floor back to you for any final comments.

Well, I appreciate that. Hopefully the lack of questions is because we did a thorough job in laying this out. We certainly try to -- we think there's upside here as well. We tried to be conservative in our approach. We are bullish on opportunities to work with the brands and other folks to, as I said, minimize margin erosion and of course having the affiliated operator here allows us to work very closely with them on all initiatives and on all those fronts. So with that we will move forward and look forward to speaking with you next time. Thank you.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.