Greetings, and welcome to Chatham Lodging Trust Fourth Quarter 2018 Financial Results 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 Chris Daly, President of Daly Gray. Thank you. You may begin.

Thank you, Shelly. Good morning everyone and welcome to the Chatham Lodging Trust fourth quarter 2018 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 25, 2019, 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 in our 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 2018 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. Earlier today, we reported very strong fourth quarter results as our overall portfolio RevPAR growth of 4% easily exceeded our original guidance range of negative one to up one. As laid out in our release about 250 basis points of this increase was attributable to demand from the residential gas explosions in North Boston. Having said that, the balance of the portfolio still generated RevPAR growth of 1.5%, which was better than expected as well. This strong performance allowed us to significantly beat our AFFO guidance to close out 2018. 2018 was a good year operationally. RevPAR growth of almost 1% finished above the upper end of our range of minus 1.5% to plus 0.5% for the year, which ironically is the same range that we're putting out for 2019. Adjusted EBITDA finished towards the upper end of our range and adjusted FFO beat the upper end of our range by a penny. Driven by acquisitions in 2017 and 2018, we grew EBITDA and FFO approximately 5% year-over-year. I'm particularly pleased with the results from certain programs and innovative tools that were implemented in 2017 and 2018 to drive incremental revenue or profits. These programs and tools were the result and product of collaboration between Chatham and Island Hospitality, and drives home the huge benefit we derive from working closely together. For example, we analyzed parking rates across the portfolio and successfully raised parking rates, generating a $1.5 million incremental parking revenue increase at our 40 comparable hotels. We introduced room amenity packages in 2018 that generated an additional $200,000 in revenue in 2018. We created tools to help our revenue management and operations teams identify occupancy opportunities and we will continue to look at ways to improve our top line and minimize margin erosion.…

Thanks, Jeff good morning everyone. Our RevPAR growth of 4.1% in the quarter was driven by ADR gains of 1.5% to $161 and occupancy also rose 2.4% to 77%. Our six largest markets contribute approximately 60% of our hotel EBITDA and I want to spend a few minutes talking about each of those. Silicon Valley contributed 23% of our hotel EBITDA on a trailing 12 month basis and RevPAR in our four Silicon Valley Residence Inn was up 0.8% to $165, even though our 231 room Sunnyvale Residence Inn was under renovation in November and December. The RevPAR gain was driven by an increase in ADR of 1.6% to a strong $226 and a decline in occupancy of 0.8% to 73%. RevPAR at other three hotels at Montgomery [ph] was up approximately 3% when you take out the first Sunnyvale location. We remain encouraged by the depth and quality of the economic growth in the valley. In 2019 given the amount of renovations, and Jeff alluded to the 35 basis points impact on our overall portfolio RevPAR growth, but our RevPAR growth in the valley even with two of our hotels commencing renovations in ’19 is projected to only be down slightly to up slightly for the year. San Diego represents our second largest market, generating about 9% of our EBITDA and RevPAR was up 34% at our two hotels in San Diego. Mission Valley did benefit from an easy renovation comp last year but the real story is that our downtown Gaslamp Residence Inn had a huge quarter with RevPAR 35% to $171. A strong convention calendar as well as petrol-related demand which was about $300,000 of revenue to the hotel in the quarter drove this as the best fourth quarter performance in our history of ownership of the…

Thanks, Dennis. Good morning, everyone. For the quarter we reported a net loss of $0.2 million or $0.01 per share, compared to net income of %5.5 million or $0.12 per share in Q4, 2017. Our Q4, 2018 results included a $3.5 million write off of costs related to our previously appointed Silicon Valley expansions that we have decided to no longer pursue at this time. The primary differences between net income and FFO related non-cash costs such as depreciation which was $12..2 million in the quarter, one-time gains or losses over $3.6 million and our share of similar items within the joint ventures which were approximately $2.9 million in the quarter. Adjusted FFO for the quarter was $18.4 million compared to $16 million in Q4, 2017, an increase of 15%. Adjusted FFO per share was $0.39, which represents an increase of 8.3% from the $0.36 per share generated in Q4, 2017. Our $0.39 of FFO per share for the quarter was $0.03 above the high end of our guidance of $0.32 to $0.36. Our Q4 FFO per share benefitted by approximately $0.03 from demand related to gas leaks in the Boston area. Even excluding this unexpected one-time business, our FFO per share would have been at the high end of our guidance range due to better than expected performance of the rest of our portfolio. Adjusted EBITDA for the company was $28.9 million in Q4, which was up 9.9% for Q4, 2017. In the quarter our two joint ventures contributed approximately $3.6 million of adjusted EBITDA and $1 million of adjusted FFO. For fourth quarter RevPAR was up 3.5% in the Inland portfolio and 1.0% in the Innkeepers portfolio. Chatham received $0.8 million of cash distributions from the JVs in Q4. In December 2018, we acquired the newly constructed Courtyard…

Thank you. [Operator Instructions] Our first question is from Anthony Powell with Barclays. Please proceed with your question.

Hi. Good morning, everyone.

Hey, Anthony, good morning.

Good morning. Just a question on supply growth, you mentioned that supply growth for your markets is down to 2% as of '18. How should number trend over the next couple years. So to stay at too early go to keep going down?

Anthony. It's just -- look, and I think, if you look at the Smith Travel [ph] reports in our market, it shows it trending upwards a little bit in 2019 and 2020. Now we have that data and we know there are projects that aren't going to hit that timeline, that are identified by Smith Travels. So I think it's probably going to say in the low-2% range, it's not going to go down much further than where it is today. I think it's still a manageable number, and I think what's a little bit confusing so if you look at, for example, Nashville, which is one of the top market for new supply are we have a hotel in Brentwood which is outside of Nashville, now it might not -- it's not going to be impacted like a hotel that's placed on downtown. But we'll probably feel a little bit of the penny. So for the most part we're pleased with the new supply in the directly competitive markets staying in kind of the low 2% range. But there also be some pressures from the surrounding areas that have a little bit more supply.

Got it, thanks. And can you talk a little bit more about the Dallas acquisition what cap rate are you underwriting, kind of ramp up you expect this year. How much EBITDA contribution this year and next, and probably some market attracted you?

Well listen, I think first just to talk about the numbers. Then I'll let Jeff talk about the market and where we like it to be. We've got essentially a ramp brand yet opened in late third quarter 2018. It's going to be ramping throughout 2019. And probably into 2020 because it is pretty closely tie to the events at the convention center and being able to get involved with the convention center takes a little bit of time to establish those relationships and be involved in their room block pricing. So if you go to kind of 2019, we expect Courtyard Dallas to contribute what seems to be about $3.1 million of EBITDA in 2019 and then ultimately ramping in 2020 to more of a midcap type range.

And as to the market, look, we know Dallas really well, this is consistent theme as we've talked about with acquisitions. We, at Island manage 809 hotels obviously Chatham Lodge, other hotels in Dallas. So we identified downtown as a market frankly that we weren't in and of course our favorite brands generally are going to be residential center at Courtyard anyway. We pursued this opportunity direct with the builder. And we saw an enormous amount of growth we think and demand coming late frankly, as compared to some other American cities urban with justification, but Dallas is definitely there and definitely come in. And this hotel was located perfectly and really is the only the purpose built live-in and service hotel in that downtown market to take advantage of that office growth and as Dennis was talking about the convention center too. I talked a little bit about also just looking at food and beverage opportunities particularly beverage opportunities in limited service hotels. Well, when we underwrote this deal, we had given some projected numbers for our rooftop bar, and they were pretty aggressive. We cut those to zero that they'll still look like a ACAP or better after a ramp up. And we decided that we would put some extra effort into that rooftop bar overtime and also used it as a facility rental opportunity in the market as well, because it's the entire floor that has adjoining meeting rooms as well as pre-function areas. So again, what's kind of looking at incremental revenue opportunities everywhere during this phase let's say of the cycle.

Great. That's it for me. Thank you.

Thank you.

Our next question is from Bryan Maher with B. Riley FBR. Please proceed with your question.

Yes. Good morning guys. You talked a little bit about kind of acquisitions and the widespread out there. But can you tell us is the spread narrow enough at least that you are still underwriting deals. And how do you think of 2019 from the prospect of bringing onboard another property or two?

Okay, Bryan I'll take that one. We are still underwriting deals. As a matter of fact we're probably even broadened our underwriting for deals that on surface we may not have underwritten before, only because we do have that dry powder. We did say that when we de-levered and raised the equity that we were going to try to acquire some more hotels than we’ve been, than we have since that de-levering event which of course has negatively impacted our FFO per share. So I think that the bid-ask spread is more coming on the market this year it appears. So therefore maybe that spread narrows a little bit and a little more focus I think in terms of underwriting deals and looking for the new losses in the deal that I think for us, A1 hospitality can bring the bear in more of a value add situation. So that’s the focus. It’s not a stabilized asset probably because in today’s world you buy a stabilized asset and with flattish RevPAR and declining margins you probably go on backwards faster than you go on forward right. So we’re looking for more of the value-add opportunity.

All right that kind of segues well into my next question on wages and benefits, still hanging out in the 3% to 4% range. Is there anything more than can be done there or is that just something we’re going to have to live with for the next year or two or three?

Listen unfortunately I don’t know about year two or year three but I think Smith Travel had a slide in their latest deck talking about almost a million open hospitality and food service jobs in locations we find themselves having to use casual labor more than we'd like to fill open gaps on a short term basis. It’s certainly hard to find that qualified labor in most of our -- especially our urban markets is really where you feel it the most. But I think [indiscernible] we projected to still be kind of in the upper 3% range for 2019 and I think that’s probably less than what others may feel this year as it kind of slipped throughout the country but it’s a challenge.

And then lastly we noticed the write-off that you talked about on the Silicon Valley expansion plans, is there any chance that you in the next year or two revisit that or is that just definitely off the table at this point?

Listen, I think yeah, we’ve invested a lot of time into those. We believe that expanding our presence in those markets is not a bad way to go. It’s one of the -- on the long term basis we love that market. So I think just given where construction cost and especially labor cost has gone over the last 36 months makes it very difficult to take a chunk of rooms out of service and to do those expansions right now. We still, like I said, I think we still love that market and would still like to increase our exposure in that market in some form of traction.

Yeah I think the accountants made us write that off frankly but we’ve got some pretty good plans and pretty good overall concepts for redeveloping those sites in different ways. So that money was well spend I think and certainly as we move down the road I can expect double-digit huge inflation in terms of construction labor being up forever Mountain Trail [ph] there and so yes, we’ve got great real estate and we’ll look at ways to enhance it.

All right. Thank you. That’s all for me.

Thanks Bryan.

[Operator Instructions] Our next question is from Tyler Batory with Janney Capital Markets. Please proceed with your question.

Hi, good morning, thanks for taking my question. Couple of things from me first I just want to circle back on the 2019 RevPAR guidance, if I could, and I appreciate you guys quantifying the impact of some of those one-time items but even if I add back some of that stuff, there’s still a gap between your guidance range and the industry range that was provided. So can you provide a little bit more color on what’s driving that delta, maybe anything else that might be negatively impacting your results?

Yeah, this is Jeff. I think I’ll start by saying, it certainly will be interesting for example to see what Marriott says about RevPAR guidance I think we all know the range the industry’s in and the range that most boats are going to put out. But do they take into account an separately state limited service hotel They take into account and separately stay limited service hotels particularly in the see first for example Courtyard Dreyfus Residence town place. Genre, because I think what you're going to find is that in our asset class you really are flat and I think when you add back our one-time adjustments we're flat or a little better than flat and I expect to be better than flat, but I think we need to position ourselves carefully with our guidance. We know our first quarter already has been negatively really impacted by the government shutdown. I mean, we got a couple of hotels that clearly have seen some numbers that just didn't produce what we expected them to produce because they do have a large component of government business like our Springfield Embassy Suites in Virginia just outside of DC or Tysons Corner and you know you'll hear a little bit of that probably from some others or maybe you won't but, we tend to kind of try to come clean early and look for upside down the road.

Okay, guys that's helpful and then on the follow up on the development side of things, any update there outside of what you were just talking about with the Silicon Valley properties?

No, update yet on that, I mean Tyler we're still working pretty diligently on a couple of things but hopefully we’ll have leads to report on that later this year.

Okay great and then maybe a last question for me, the customer acquisition costs and whatnot, can you talk a little bit about what was driving that in the fourth quarter and the full year and then your thoughts on where those could trends in 2019 as well.

Yeah, listen I think overall certainly the negotiations between Marriott and Hilton over the past couple of years have helped for us in terms of just the overall commission rate. So when you look at our productivity volume is still up slightly with our OTA type business but now as you kind of move into 2019 you know there's a little bit of a change in the way that Marriott is reimbursing its franchise -- franchisees related to guest reward cost and more reimbursement So, that is going to turn a little bit and we think it's a net benefit to us in 2019 by maybe a few hundred thousand dollars. But we'll have to see how that develops. But listen I think for us it's been a trend that has been down for the past kind of four six quarters and hope and again, hopefully given where Marriott is changing the program, it'll continue to benefit us a little bit in 2019.

Okay, great. That's all for me. Thank you.

And we do have a follow-up question from Anthony Powell with Barclays. Please proceed. Q – Anthony Powell: Hi, just one more for me, kind of on that Marriott topic. Have you seen any impact positive or negative from the loyalty program merger in August or the data breach and news in later in the year for did that have any impact on your bookings or revenues?

For us, no. For us Anthony it doesn’t. I mean, we've got such a little exposure to the Starwood side of things, it does impact a few hotels on the JVs, but for us it really hasn't -- we haven't seen any impact.

All right, thank you.

We have reached the end of our question-and-answer session. I would like to turn the call back over to management for closing remarks.

I think that does it for us. We appreciate all the callers, we appreciate everybody's attention and we're looking forward to a better year as we move forward. Thank you.

Thank you for participation in today’s conference. You may disconnect your lines at this time and thank you for your participation.