Good morning, ladies and gentlemen, and welcome to the Chatham Lodging Trust Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, November 5, 2025. I would now like to turn the call over to Mr. Chris Daly. Please go ahead.

Thank you, Kelsey. Happy Wednesday, everybody, and welcome to the Chatham Lodging Trust Third Quarter 2025 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 November 5, 2025, unless otherwise noted, and the company undertakes no obligation to update any forward-looking statements 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 website at chathamlodgingtrust.com. Now to provide you with some insight into Chatham's 2025 third 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, everyone. I certainly appreciate everybody being on our call today. Before I comment on our third quarter operating results, I'd like to update some of our key corporate initiatives. Earlier this year, we completed the sale of 5 hotels with an average age of 25 years at an approximate 6% capitalization rate, and each of these 5 hotels were among the 6 lowest RevPAR hotels in our portfolio. In the fourth quarter, we are under contract to close on the sale of another hotel for $17 million with similar characteristics and at similar returns to the previously sold 5 hotels. These opportunistic sales add liquidity to execute on other value-enhancing opportunities for the company. On that note, we've now repurchased approximately 500,000 or 1% of our outstanding shares of our stock at an average price of $6.85. Included in that amount is approximately 230,000 shares that we have repurchased since the end of the third quarter. We intend to remain active repurchasers of shares moving forward since we believe we are trading at a meaningful discount. Lastly, we completed an upsized and recast syndication of our credit facility and term loan, further enhancing our financial condition and lowering overall borrowing costs. We are one of the lowest leveraged lodging REITs and have great flexibility to create value by using that capacity to repurchase shares, acquire hotels and fund our upcoming Home2 Portland, Maine development. With respect to acquiring hotels, we are somewhat more bullish on our ability to grow externally than we've been in the last 18 months. Deal flow underwriting has been steady here, and it seems like seller pricing expectations in some cases, are becoming more reasonable. We have been and will continue to exercise great patience and discipline as operating fundamentals are quite…

Thanks, Jeff. Good morning, everyone. Continuing on with some color related to Silicon Valley. Excluding our 2 Sunnyvale hotels, portfolio RevPAR would have been down 1.7% in the quarter. Occupancy at the 4 Silicon Valley hotels was still a solid 75% with a range of 73% to 83% occupancy in the quarter between the 4 hotels. Importantly, October RevPAR at our 4 Silicon Valley hotels was flat to last year compared to the down -- down 4% trend for the quarter. RevPAR was down approximately 5% at the 2 Sunnyvale hotels and up 7% at the other 2 hotels. So just adding on to what Jeff talked about earlier in the call, our Silicon Valley hotels were essentially able to, over the last few months, replace approximately half of the business that we chose to pass on related to one of our larger corporate clients. So good trend developing as we move into the fourth quarter with respect to Silicon Valley and those 2 hotels. Obviously, our 3 Washington, D.C. hotels have been for quite a ride this year as evidenced by the following trends, which was First quarter RevPAR was up 6%. Second quarter RevPAR was down 2%, feeling the effects of DOGE when April RevPAR was down 9%. Our third quarter RevPAR really shows the impact of just the threat of a shutdown as we typically see just the threat of shutdown start to impact government travel into those markets. Our RevPAR for those 3 hotels was flat in July, then down approximately 9% in August and September. The government shutdown impacted the third quarter portfolio RevPAR by approximately 40 basis points. In October, the effect of those 3 hotels which were down 19% actually impacted RevPAR by 170 basis points. And when you just take out those…

Thanks, Dennis. Good morning, everyone. Our Q3 2025 hotel EBITDA was $28.8 million. Adjusted EBITDA was $26.2 million and adjusted FFO was $0.32 per share. Our GOP margin for the quarter of 43.6% was only down 90 basis points from Q3 2024 despite the challenging RevPAR environment due to continued strong expense control and moderating inflationary cost pressures. In Q3, we were able to hold year-over-year increase in labor and benefits cost per occupied room to 1.7%. In Q3, we continue to strengthen our balance sheet by refinancing our revolving credit facility and term loan, which were our only near-term debt maturities. With this transaction, we upsized our revolving credit facility from $260 million to $300 million and upsized our term loan from $140 million to $200 million. Our low leverage of 3.5x net debt to EBITDA and the liquidity provided by our $300 million undrawn revolving credit facility provide us with significant capacity to pursue investment opportunities. In Q3, we ramped up utilization of our share repurchase program and repurchased 255,000 shares for $1.8 million. And subsequent to the end of Q3 in early October, we repurchased an additional 230,000 of shares for $1.5 million. At current price levels, we believe acquiring Chatham stock is a very attractive investment, and we continue to expect to actively repurchase our shares in the future. Turning to our Q4 and full year 2025 guidance. We expect RevPAR of minus 3.5% to minus 2.5%, adjusted EBITDA of $16.7 million to $18.3 million and adjusted FFO per share of $0.14 to $0.17 in Q4 and RevPAR growth of minus 0.7% to minus 0.3%, adjusted EBITDA of $89.2 million to $90.8 million and adjusted FFO per share of $0.96 to $0.99 for the full year. This guidance assumes no further asset sales, capital markets activity or changes in floating interest rates. This concludes my portion of the call. Operator, please open the line for questions.

[Operator Instructions] And your first question comes from Gaurav Mehta from Alliance Global Partners.

I wanted to ask you on investment opportunities. Can you maybe provide some more color on what you guys are seeing in the acquisition market as you're selling hotels? Are there any opportunities to redeploy that capital into acquisitions in the future?

Yes, I think I'll take that. Gaurav, it feels certainly, and we've been consistently like a lot of companies, looking at deals, talking to owners. But with RevPAR turning in a negative direction, I think that there does present and usually has in the past some opportunities. I feel like the overall ask is certainly now north even on the asking side, north of 8% on a cap rate basis, whereas everybody was hanging on to a lower number, notwithstanding what the hotel REITs trade at as an implied cap rate or otherwise. And I think what we're seeing in a few cases is perhaps the opportunity, as I said, and the goal is to try to create long-term shareholder value here with great hotels that will grow at least as good, if not better than the existing portfolio that are newer that are in the brands that we all know we specialize in. And I think we might be able to do that with some yields that will approximate what we can do by buying our own stock, as Jeremy was talking about.

And Gaurav, I think I'll just add one thing to add on to Jeff's is when you combine all that with some of these newer assets are coming up on their next wave or really in a lot of cases, first waves of renovations. And as an owner who might have been relatively new to the industry now has to look at an environment that's a bit choppy and has to come up with $2 million to $3 million to renovate a hotel, that decision might spur a little bit more activity as well. So we're in a great financial position to be able to take on some of these opportunities in a market that might make others a little bit nervous.

Great. Second question on the development. Can you remind us on the timing of the Portland, Maine development?

Yes. I mean, Gaurav, I think we'll -- we're kind of proceeding as we'll start site work on that in 2026, probably be a 21- to 24-month construction time line. So kind of an early 2028 opening.

I think the seasonality and the results that Dennis was talking about in the existing asset really dictate we have to be very careful about when we start digging up the parking lot because it's the same land parcel. And as Portland has continued, it seems beyond, obviously, summer months well into the month of October to achieve ADRs, particularly on weekends that are over $300 a night. So we're going to look at that carefully and skirt those time frames as well.

Yes. I mean I think October RevPAR at our Hampton Inn Portland was, I believe, around $380. So just to add on to Jeff's comment, that hotel does really well in almost every month, except for the late December and January and early February when just weather is a little tricky.

And your next question comes from Tyler Batory from Oppenheimer.

So I wanted to really dive into the RevPAR performance for a little bit, if I could. You missed the midpoint of the guide. Just isolate for us what really drove the variance? Just trying to understand what surprised you in the quarter and what caused that shortfall?

Yes, Tyler, it really comes down to 2 things. It's our decision on the 2 hotels in Sunnyvale and basically the government shutdown impact on August and September. So you had -- the 2 Sunnyvale hotels are basically 10% of our room count. And for those 2 hotels to be down 9% in the quarter following a first and second quarter with growth in the mid-single digits was a very significant impact that I think, as Jeff talked about, is really, for us, we decided yes, it ultimately was a short-term hit to us, but maintaining that rate integrity. And I think as I spoke about, we were able to, in essence, replace half of that business in October already, I think, ultimately is going to prove to be a pretty good decision long term. And then obviously, in Washington, D.C., it was flat RevPAR growth in July. And then what we historically see, and by the way, we saw this back in -- late in the first and early in the second quarter with the DOGE cuts and the threat of a government shutdown is that as soon as the threat of a government shutdown starts or is kind of out there, generally speaking, that government travel pulls back. And we saw that leading into the actual shutdown with RevPAR at our 3 D.C. hotels down 9% in August and September. That's it.

Okay. Awesome. So thinking about the outlook and the guide for Q4, RevPAR down 2.5% in Q3. You're guiding down 2.5% to down 3.5% in Q4. So the declines is getting worse. Last time that we spoke and last time you reported and just looking at kind of some of the industry forecast, there was an expectation that Q4 is going to be a little bit better compared with Q3, just from a year-over-year perspective. So just kind of unpack what's implied in that Q4 and kind of why things on a sequential basis are getting -- are deteriorating and getting a little bit worse.

Yes, absolutely. That really has all to do with essentially the same answer. But just to really put a nail in it is the 3 D.C. hotels reduced our October RevPAR by approximately almost 200 basis points, 170 basis points. So just those 3 alone, in essence, if you excluded those, our RevPAR was off 1% for the month of October. So we obviously have -- we improved Silicon Valley in fourth quarter to flat RevPAR -- I mean, in October to flat RevPAR, but the moderating and lessening range of RevPAR is strictly due to the shutdown in D.C.

Okay. And then taking a step back and also trying to think about 2026, the convention calendar and some of the disruption in Austin and Dallas and San Diego coming off of a record year in 2024. How are -- or how is the convention business shaping up for next year in some of those markets? And then the supply picture, I think, has been pretty favorable for lodging. So not sure if you can comment on just supply growth in your markets, whether it's next year or the next couple of years.

Yes. I mean, with respect to the convention calendars, I mean, listen, I think Austin and Dallas are essentially going to maintain kind of where they are until '27. And with respect to San Diego, you had an all-time year last year. It came down this year. It will be something similar next year. So I think what you also have in San Diego is one thing that did happen that had a little bit more of an impact as well this year is you had the new Ryman property that opened up just outside of San Diego, and that obviously had an impact on smaller conventions that might have chosen to go there instead of the primary San Diego convention center. So I think as you move forward on that respect for '26, you probably have no incremental adverse impact from those 3 hotels. And then I think if you look at the supply outlook for our market, supply is less than 1% and is projected to remain that way for next year as well. So I think as just adding on to Jeff's concluding comment, which was when you look out into '26 and '27 and the overall macro looks really good, not only to the industry, but specifically to us with respect to some of these key markets. And I think just adding to what Jeff said, 2025 has just been a nut job of a year in terms of just all these things that have impacted the industry and us. And I think when we can get past a lot of these short-term things, which I think are primarily focused here in 2025, I think the outlook for not only the industry, but for us, and I think just with our upside to some of these markets should be pretty rosy at this point. So it's a little choppy.

Yes. So switching gears to the margin side of things. I think the performance in the quarter was really quite strong, all things considered. Just talk a little bit more about how you're able to do that. Anything you want to call out that was just kind of driving the performance there?

Yes. I mean it's -- listen, we're putting a lot of focus and energy on day-to-day and week-to-week management of headcount and productivity, specifically with respect to anything related to housekeeping. And obviously, that's very -- that fluctuates based on occupancy levels. So the key is to really keep a laser eye on those items and really just managing incoming and current wage levels. As you look at where we project moving forward, generally speaking, our hospitality staff, their annual wages are generally up for review every July 1. As you look at the wages we put in place across the portfolio, the average wage increase for us post July 1 year-over-year is about 2% as well. So I think kind of as wages have kind of stabilized, we've been able to maximize efficiencies in our housekeeping department. And I think the availability to hire labor for our hotels has really been fairly stable for the past 12 to 18 months. So we're able to, I think, have a 2% wage increase across the board is, again, pretty favorable when you look forward for us.

So last question for me, just capital allocation. Balance sheet is in great shape, plenty of liquidity. Just given the backdrop, given where the stock trades, just rank order for us your priorities for your capital here.

Yes. I mean, listen, I think the first is -- I think it's what Jeff had in his comment in order, which was we're active repurchasing shares and we will be and will continue to be active purchasing shares. We have a $25 million plan in place, which is about -- it's just a little bit less than 10% of our current equity market cap. So we'll continue to be really active there. And then I think the next priority is obviously acquiring hotels if we can do it. And we obviously have our Home2 Portland development. So I'd say #2 and #3 are kind of about the same. But in the meantime, we're going to be active purchasing shares.

[Operator Instructions] And your next question comes from [ John San Gandi from Britney Holdings. ]

My question is primarily related to capital deployment as well. From my kind of calculations here, it looks like the stock is trading around $140,000 a key. Any kind of development right now, what we've been seeing is $300,000 a key. Can you walk me through the decision-making process on why to pursue the Portland development when the stock is trading probably around half of what that cost per key would be?

Sure. This is Dennis. Nice to talk to you. I mean, listen, where our equity price is trading at, whether it's $140,000 or $150,000 or $160,000 a key, that's made up of -- that's comprised of a valuation based on the entirety of our 34 hotels. This specific hotel, you have to look at that deal individually and look and see what the returns project out to be for that specific asset and whether that's going to add value to the overall portfolio. And if you look at -- we're only going to do the deal if we believe it's going to make long-term sense and based on a lot of factors, which is the market is very restrictive on new hotel development. The market is very popular. The RevPARs and margins we're able to obtain and able to achieve on our existing Hampton, but also what we project for this particular hotel will -- based on where we are at the moment and where we believe we'll be after developing that asset, will derive and earn returns well above where the portfolio is returning. So would certainly add value to not only the company, but obviously then ultimately to our shares and be accretive to that value. So you have to look at each opportunity individually, whether it's buying a hotel, developing a hotel or selling a hotel. And if those add value ultimately to what you want to do with that -- with your capital dollars, that's how we assess it.

Got it. And then I think just on the acquisition side, you mentioned potentially looking for acquisitions. How would you allocate that -- discuss that and then review that against the share price because that's more of an immediate hit one way or the other with respect to buying shares or acquiring an existing property?

Yes. I mean I think for us, it's -- you look at what we're trading at on an equity share price. You look at the acquisition, are the yields similar? Does the acquisition provide growth either consistent with or higher than your portfolio? And does it ultimately drive incremental distributable cash flow that ultimately you'd bring back and deliver to your shareholders via dividend. So yes.

And there are no further questions at this time. You can proceed with the conference.

Well, thank you all for the questions. Thank you all for being here today with us, and we will talk to you as time goes by for better times, I think, as we move into next year.

Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation and ask that you please disconnect. Have a great day.