Greetings, and welcome to Chatham Lodging Trust Third Quarter 2017 Earnings 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 that conference over to your host, Patrick Daly. Thank you, sir. You may begin.

Thank you, Sheri. Good morning everyone, and welcome to the Chatham Lodging Trust third 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 October 31, 2017, 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 chathamlodgingtrust.com. Now to provide you with some insight into Chatham's 2017 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?

Okay, Pat, and good morning everyone. Glad to be here again as always. I'd like to just step back for a minute and briefly reflect on the past few months overall environment and particularly I have to talk about weather a little bit, but quite a few of our hotels and a number of our employees and guests have been impacted by hurricanes, flooding, and even the fires out West. The devastation was unimaginable, including for some of our employees. Despite all this, our employees showed tremendous courage and dedication tending to their hotels and their guests, and I'd like to thank the hundreds of our employees in our hotels around the country and in our corporate officer here who dealt with very trying conditions and circumstances working to protect our assets, and most importantly, serve our valued customers and guests. Thankfully our hotels escaped any major damage. Our Savannah and Fort Lauderdale hotels were evacuated for a few days, but other than that our hotels remained open through the disasters, and accordingly our results were actually better by the increased demand for lodging in our Houston and Florida locations. So with that as a backdrop, I'd like to switch to talk about the quarter a little bit. We're excited about our strong quarter results and updated guidance, which raises the midpoint of our full-year guidance as we exceeded the upper end of our range in the third quarter, and raised our fourth quarter numbers. In addition, we added another superior quality hotel to our portfolio with the acquisition of the Hilton Garden Inn in the history downtown waterfront community of Portsmouth, New Hampshire. Great hotel, we'll talk a little bit more about that. On our second quarter call, we talked about our four-pronged strategy to build value for our…

Thanks, Jeff. Good morning. We had a great quarter with FFO per share of $0.68, finishing above the upper end of our range of $0.63 to $0.67. RevPAR rose 1% for the quarter, which was right at the upper end of our guidance range. And the 1% increase in RevPAR was equally attributable to gains and occupancy of 50 basis points, to 85%, and REIT of 50 basis points to $173. Within the quarter, RevPAR was flat basically through the end of August. And September RevPAR rose 2.9% aided by the increased demand in Houston and Florida related from the impacts of Hurricane Harvey and Irma. Peeling back the onion into some of our specific markets, RevPAR in Silicon Valley was up almost 1%, to $202 entirely attributable to occupancy, which rose to 87% as we share-shifted [ph] some of our key corporate business to give us more consistency throughout the shoulder and weekend nights. Another strong tech-driven market for us is Bellevue, Washington, and our Residence Inn saw RevPAR grow almost 3%, to $201 as we benefited from a strong intern program over the summer despite a delve market that has seen a 10% increase in new supply in 2017. San Diego was in a market that was inundated with new supply over the past couple of years, however, thanks to strong city-wide events and strong laser demand, the market fits pretty resilient. So far in 2017, demand growth of 2% has doubled supply growth of 1% in the Greater San Diego area, our three San Diego hotels our RevPAR raised almost 3% in the quarter. As we all know this has been a challenging lodging market, we all know the devastation from Hurricane Harvey that occurred in the area. Thankfully all four of our wholly owned hotels that…

Thanks, Jeff. Good morning everyone. For the quarter, we reported net income of $14.5 million or $0.36 per diluted share compared to net income of $13.4 million or $0.35 per diluted share in Q3, 2016. The primary differences between net income and FFO related to non-cash cost depreciation, which was $10.9 million in the quarter, one-time gains or losses, and our share of similar items within the joint ventures, which were approximately $1.7 million in the quarter. Adjusted FFO for the quarter was $27 million, compared to $27.5 million in Q3 2016, a decrease of 1.8%. Adjusted FFO per share was $0.68 per share, which represents a decrease of 4.2% from the $0.71 per share generated in Q3 2016. Adjusted EBITDA for the company declined 0.3% to $37.2 million, compared to $37.3 million in Q3 2016. In the quarter, our two joint ventures contributed approximately $4.9 million of adjusted EBITDA, and $2.9 million of adjusted FFO. Third quarter RevPAR was up 4.1% in the Inland portfolio, and down 1.5% in Innkeepers' portfolio. The strong performance of the Inland portfolio is largely attributable to the significant amount of renovation that was completed on that portfolio in 2016, and weaker performance of the Innkeepers' portfolio was primarily due to the disruption caused by renovation occurring in that portfolio in 2017. Our balance sheet remains in excellent condition. Our net debt was $593 million at the end of the quarter, and our leverage ratio was 39.5%. In Q3, we issued 614,000 shares under our ATM and direct stock purchase plans, which generated $12.7 million of proceeds. We used the proceeds from the share issuance to help fund the $43.5 million acquisition of the Hilton Garden Inn in Portsmouth that we completed on September 20. Transitioning to our guidance for Q4 and full-year 2017,…

Thank you. At this time we'll be conducting a question-and-answer session. [Operator Instructions] Our first question is from Gaurav Mehta from Cantor Fitzgerald. Please state your question.

Yes, hi, good morning.

Good morning.

Just couple of questions, I was wondering if you could provide some color on dispositions on the asset -- that sale that didn't go through, if you're still looking to sell that asset or any additional asset this year.

Yes, I mean I don't think we're in position at this moment, Gaurav, to name the asset that we're going to sell that was terminated yet because we're still looking at potential options there, although we're not looking -- we don't think there's anything anytime soon for that asset. I was a West Coast asset. I think we've talked about that before. And looking to think as we kind of digest determination of the sale will determine what we want to do going forward. And then Jeff alluded to another asset that we are in negotiations regarding the sale, and that kind of fits the same dynamics. Another West Coast asset that we believe is, at least for us is the right time to put it on the market.

Okay. And I think in your prepared remarks you also mentioned that you've identified the hotels to acquire. I was wondering if the acquisition of new hotels is that contingent upon your selling the hotels or you would be able to acquire without selling as well?

It's not going to be contingent on us closing on the sale of that deal. We do have agreements to acquire two hotels out in the future. So certainly we're still planning to close on those regardless of how that second, whether that closes or not.

Okay, thank you. That's all for me.

Our next question is from Anthony Powell with Barclays. Please state your question.

Hi, good morning guys. Just follow-up to that question, so I think your net-debt-to-EBITDA ticked up a bit to six times as a result of the acquisition. As you acquire more hotels how committed are you to getting that back down to maybe under six or is that not necessarily a target for you?

I'd say we like that range. The six times was a tad inflated because it doesn't reflect the full-year impact of the Portsmouth hotels. If you were to add in kind of a full-year impact of EBITDA that six times is more like 5.8. So it's kind of in the range we've been at for a while and in a range where we're generally comfortable.

Got it, thanks. And in terms of the fourth quarter guidance, how much EBITDA from Portsmouth is included in the fourth quarter? And also, what's the RevPAR impact of the renovations in the fourth quarter?

EBITDA from Portsmouth in the fourth quarter is about $800,000. Yes, on the renovation side, I wouldn't factor in more than kind of 30 to 40 basis points in terms of total RevPAR. But if -- you obviously follow us, Anthony, we pretty much in having one to two hotels per quarter under renovation for kind of the past year-and-a-half. So from a comparable basis year-over-year it should be a relatively neutral impact on overall RevPAR growth.

Got it. I guess a follow-up to that, given you guys did 1% RevPAR growth in the third quarter -- third quarter RevPAR was 1%, and you have Houston with the benefit of Harvey for the full quarter theoretically. So I would've thought that maybe there would've been a slight acceleration overall RevPAR growth in the fourth quarter given the counter shifts and the Houston benefits. Are there any kind of one-off impacts that are maybe headwinds in the fourth quarter?

No, not really. I mean, certainly -- for the fourth quarter, our Houston hotels are benefiting our overall RevPAR by about 150 basis points in the quarter. That was about 80 basis points in the third quarter, so we are getting an acceleration in the benefit that we're deriving from those. Anyhow, and quite frankly, listen I think for the balance of the portfolio we are comfortable with the range we provided. If we happen to outperform that's great.

Right, understood. And in terms of supply growth for your markets, when do you think supply growth peaks for your markets on a kind of weighted average basis?

Well, for us, I mean I think it's interesting for us for the fourth consecutive quarter if that trend has gone down slightly. However we will say that in looking at all the reports that are available, whether it's PKF or Smith Travel, at least if you look at the pipeline going out planning and under construction, it appears that that's going to tick back up in 2018. Now who knows whether all those items -- all those hotels get built, and who knows about the timing of stuff of when it's going to start. So it looks like that's going to tick back in a couple of quarters, but for now it's, for us, it's been four consecutive quarters on a slight decline.

Okay, all right. That's it for me. Thank you.

Thanks, Anthony.

Our next question is from Bryan Maher with FBR. Please state your question.

Good morning guys. I just wanted to clarify the Houston thing. I think I caught it that you said you expect RevPAR at your hotel to be up 20% in the fourth quarter there?

Correct, yes. 21% for the four Houston hotels, and that should benefit our overall portfolio by about 150 basis points.

Okay. And again clarifying, you said the Superstorm Sandy lag was about nine to 12 months, and you think that this would be similar to that? And how do think…

[Indiscernible]

Well, how do you think it phases out?

Yes, listen, I think we would tell you that based on conversations we have every day with our operators, they're pretty comfortable with looking out through the end of the fourth quarter. After that I think whether you -- what you've got is you've got a lot of, whether it's consultants, you have what I would almost term kind of white-collar related business from the interns and adjusters and everything like that that are in the market now. That will shift at some point to, whether that's construction crews, people there for -- subcontractors, still displaced homeowners that'll be there for a while. So our operator is not willing to go out there too far yet on '18 and say, yes, we see a benefit through the first three or six months yet. That's purely for reference from what our experience was on Superstorm Sandy.

And what do you think the split is between residents and contractors?

Well, for us I mean I think right now we haven't had a whole lot of displaced homeowners or contractors. For us it's been mostly adjustors and other types of people in the area and professionals. I think that does shift a little bit as we move forward for our hotels. But as far as what the mix is now, we don't have that information.

But the contractor business is probably lower rated business that for the most part will go elsewhere.

Got it. And then can you just give me the quick update on your Western PA hotels?

Yes, actually there's two -- well, we actually have three. But if you look at our Springhill Suites in Washington, PA, was actually one of our top performers in the quarter from a RevPAR perspective, with RevPAR up 12%. There was actually a little bit of incremental business that came into the market over the summer. Now the Courtyard in Altoona, Pennsylvania was our worst performer, with RevPAR down 22%. And in that market I think that we've talked about for the last couple of quarters, they just opened a two-pack -- a Marriott-branded two-pack in that market earlier this year. So that Courtyard is just getting severely impacted by that new Marriott two-pack.

Okay, thank you.

Thanks.

Our next question is from Tyler Batory with Janney Montgomery Scott. Please state your question.

Thanks. Good morning. So just follow-up on the revenue management, can you just give an update on customer acquisition costs? And then curious any trends you're seeing with the OTA business in your portfolio?

Yes, for us, Tyler, it's been I think now four consecutive quarters where those costs have essentially been flat. It's right at 4% of revenue. It's a trend that at least for us has been good for us, because before we were experiencing kind of a 20 to 30 basis point increase for a good year-and-a-half. So for us it's still maintained relatively flat, and that's a combination of obviously the lower commission structures within those agreements, but hopefully also traffic that is going to brand.com as well.

Okay, great. And then just on Silicon Valley, can you talk about how RevPAR there came in versus your expectations for the quarter. And I'm not sure if you have any update on the development project out there as well?

Sure, yes, RevPAR for us for the four Silicon Valley hotels was up almost 1%. And quite frankly, that was pretty much right on with our expectations for the quarter. Fourth quarter RevPAR is projected to be around flat for the four hotels in Silicon Valley. So again, we're not expecting anything significant one way or another on the good side or the down side. The developments we're still proceeding with, with those redevelopments in Silicon Valley, we have for the first of the two locations, we're in the process of finalizing bid documents to go out and get updated pricing. So hopefully by the time we talk again in our fourth quarter call and provide guidance for 2018, we should have a pretty good understanding of where the first of those two stand.

Okay, great. And then last from me on the Portsmouth acquisition here, could you talk a little bit more about if there is any low-hanging fruit on the operations side, just already an asset that's operating at high level, and then also not sure if you can discuss more about just potential synergies between this property and some of the others in that market there?

Yes, I mean, I think we believe it was being run fairly well when we acquired it. I think certainly we're going to -- and Island is going to do their magic and I'm sure to get a few things that are going to improve the performance there. And we would accept that to occur. There are potential synergies in the area related to you know, are also having an interest in the Homewood Suites that they are unfortunate as well as [indiscernible] there. In fact, our GM that was out at Homewood Suites is now the GM at the Hilton Garden Portsmouth and that knowledge and the ability to run those two hotels almost as one should be pretty beneficial. And that's not just at the GM level, but certainly from a sales and engineering perspective.

Okay, great. Very helpful, thank you.

[Operator Instructions] Our next question is from Anthony Powell with Barclays. Please take your question.

Hi, just a follow-up from me. Jeremy, do you have the first half '17 pro forma RevPAR numbers including Portsmouth?

The first half of '17, I would need to look those up and give those to you. We'll take that probably offline.

Got it. Great, all right. Thank you.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back over to management for closing remarks.

Well, thanks everybody again. We appreciate the questions. We're looking forward to a good fourth quarter here and the execution of our forefront strategy that I talked a little bit and we're excited honestly about the ability to source the deal like Portsmouth, New Hampshire, and end up with kind of results that we got good going in yield, great growth, some enhancement on the operating side as Dennis was talking about, and we will continue to move down that kind of road, hopefully will get that one asset sold here and closed in the fourth quarter that we have been talking about. And will continue to move on in a positive way. Have a nice day. Thank you very much.

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