UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K/A

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

CHATHAM LODGING TRUST

(Exact name of Registrant as specified in its charter)

Maryland		001-34693		27-1200777
(State or Other Jurisdiction		(Commission File Number)		(I.R.S. Employer Identification No.)
of Incorporation or Organization)

50 Cocoanut Row, Suite 216
Palm Beach, Florida		33480
(Address of principal executive offices)		(Zip Code)

(561) 802-4477
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed from last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

This Form 8-K/A amends and supplements the registrant’s Form 8-K, as filed on October 5, 2010, to include historical financial statements and unaudited pro forma financial information required by Item 9.01 (a) and (b).

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

Residence Inn by Marriott^® New Rochelle, NY
New Roc Hotels, LLC

Independent Auditors Report

Balance Sheets as of June 30, 2010 (Unaudited) and December 31, 2009 and 2008

Statements of Operations for the six-month period ended June 30, 2010 (Unaudited), and for the years ended December 31, 2009 and 2008

Statements of Changes in Members’ Equity for the six-month period ended June 30, 2010 (Unaudited), and for the years ended December 31, 2009 and 2008.

Statements of Cash Flows for the six-month period ended June 30, 2010 (Unaudited), and for the years ended December 31, 2009 and 2008

Notes to Financial Statements

(b) Pro Forma Financial Information.

Chatham Lodging Trust

Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2010

Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended June 30, 2010

Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2009

(d) Exhibits.

Exhibit
Number		Description
23.1		Consent of DeLeon and Stang

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT INDEX

Exhibit
Number		Description
23.1		Consent of DeLeon and Stang

NEW ROC HOTELS, LLC
(A Limited Liability Company)

FINANCIAL STATEMENTS
For The Six Month Periods ended June 30, 2010 and 2009

 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Balance Sheets
June 30, 2010 and December 31, 2009

 

 

See Notes to the Financial Statements

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statements of Operations
For the Six Month Periods Ended June 30, 2010 and 2009

 

 

See Notes to the Financial Statements

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statement of Changes in Members’ Equity
For the Six Month Periods Ended June 30, 2010

 

 

See Notes to the Financial Statements

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statements of Cash Flows
For the Six Month Periods Ended June 30, 2010 and 2009

 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements

 

 

The New Roc Hotels, LLC (the Company) was incorporated in the State of New York for the purpose of operating a hotel known as Residence Inn by Marriott (Property), a 124-room hotel located in New Rochelle, New York.

 

The Company operates in one geographic market: New Rochelle, New York. Accordingly, the Company’s ability to meet its obligations is dependent on the tourism and business conditions in the New York metropolitan area. Management believes that the risk arising from this concentration is mitigated by the scarcity of reasonably-priced, quality hotel rooms in the immediate area, the market being one of the largest in the world and the Property’s proximity near many important entertainment and sports venues.

 

Organization and Partnership Agreement

 

During 2008, the Company changed the structure of its ownership. Under the third amended and restated operating agreement of New Roc Hotels, LLC, Donald J. Urgo & Associates, LLC withdrew as a member of the Company leaving Cappelli Hotels, LLC with one hundred percent (100%) of the membership interest. Effective May 1, 2008 Cappelli Hotels, LLC assigned 50% of its rights, title and interest to Kylie Cappelli and 25% of its rights, title and interest to the Louis R. Cappelli Family Limited Partnership.

 

 

A summary of the major accounting policies followed by the Company is set forth below:

 

Use of Estimates

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Basis of Accounting

 

The Company prepares its financial statements on the accrual basis of accounting, in accordance with generally accepted accounting principles.

 

Cash and Cash Equivalents

 

The Company considers all highly-liquid debt instruments, purchased with a maturity of three months or less, to be cash equivalents

 

Escrows

 

Under the terms of the mortgage and management agreements, the Company is required to establish escrow reserve accounts to cover the costs of real estate taxes, insurance, replacements and renewals related to the furniture, fixtures and equipment, and certain repairs and maintenance to the hotel.

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)

 

Accounts and Guest Receivable

 

Accounts receivable are stated at the amount billed to the customer plus any accrued and unpaid interest. The Company considers guest receivables to be delinquent after thirty days, and begin collection activities on that date. The delinquent receivables at June 30, 2010 and December 31, 2009, aggregated $27,204 and $25,257, respectively.

 

Allowance for Doubtful Accounts

 

The Company provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off though a charge to the valuation allowance and a credit to accounts receivable. Changes in the valuation allowance have not been material to the financial statements.

 

Inventory

 

Inventory of food, beverages and supplies are stated at the lower of cost or market using the first-in, first-out method.

 

Fair Value

 

The Company does not value any of its assets or liabilities at fair value, under Financial Accounting Standards Board (FASB) Statement No. 157, Fair Value Measurements.

 

Deferred Costs

 

Deferred costs represent costs incurred in connection with the purchase and development of the property, and in obtaining its long-term financing. These costs are being amortized on a straight-line basis as follows:

 

 

Fixed Assets and Depreciation

 

Property, hotel furniture and equipment are recorded at cost. Depreciation of real property is computed using the straight-line method over a 40-year estimated useful life. Depreciation of furniture, fixtures and equipment is provided over the estimated economic lives of the related assets, using the straight-line method over five to seven years. Maintenance and repair costs are charged to expense when incurred. At the time fixed assets are retired or otherwise disposed of, the foxed assets and related accumulated depreciation or amortization accounts are relieved of the applicable amounts, and any gain or loss is credited or charged to income.

 

Depreciation expense was $464,878 and $457,059 for six month periods ended June 30, 2010 and 2009, respectively.

 

Advertising Costs

 

The costs of advertising, promotion and marketing programs are charged to operations in the year incurred and are included as operating expenses in the accompanying statements of operations

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)

 

Income Taxes

 

The Company has elected for income tax purposes to be treated as a partnership. Accordingly, federal and state income taxes have not been provided, as the Company’s income or loss is passed through and reported by the members on their individual tax returns. The Company has determined that there are no uncertain positions required to be disclosed or recorded under Accounting Standards Codification 740, Accounting for Uncertainty in Income Taxes.

 

Subsequent Events

 

The Company has evaluated the financial statements for subsequent events that could require accrual or disclosure through the financial statement report date of October 27, 2010.

 

 

Property and equipment consists of the following at June 30 2010 and December 31, 2009:

 

 

 

The Company has an air rights lease with the City of New Rochelle. The Company paid a one-time payment of $3,203,750 and has an annual base rent of $10. The lease initially expires on December 1, 2047. During 2007, the Company extended the lease with an additional payment of $75,000. The lease extension expires on December 1, 2062. The additional payment is amortized over the life of the lease extension.

 

Deferred costs and accumulated amortization are as follows at June 30, 2010 and December 31, 2009:

 

 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)

 

The annual amortization of deferred costs is expected to be as follows:

 

 

NOTE 5 — GARAGE LEASE AGREEMENT

 

The Company has an agreement with the town of New Rochelle to lease 128 parking spaces in a municipal parking garage for their guests and employees. The annual base rent for the lease is $10 plus the Company’s proportionate share of the city’s adopted budget for the operation, management and maintenance of the garage and the proportionate share of the established reserve fund for the cost of capital repairs.

 

The lease has been accounted for as an operating lease, rent and expense was $62,700 and $63,051 for six month periods ended June 30, 2010 and 2009, respectively.

 

 

During 2008, the Company borrowed $16,800,000 pursuant to a loan agreement with CIBC, Inc. The mortgage bears an interest rate of 5.45% and is collateralized by the Hotel and related real estate and equipment. The loan was extended on December 18, 2009 and is interest-only for the entire duration of the loan. The entire outstanding principal of the note, together with all accrued and unpaid interest, shall be due and payable on November 30, 2011. Interest expense was $460,343 and $461,864 for the six month periods ended June 30, 2010 and 2009, respectively.

 

Annual maturities of long-term debt are as follows:

 

 

 

Due from affiliate consists of net advances to an affiliate of a Member of $29,033 at June 30, 2009. The advances were non-interest bearing and fully repaid during 2009.

 

 

The Company has entered into a management agreement with Urgo Hotels, LLC to manage the operations of the Property.

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)

 

The management fee is 3% of adjusted gross revenues and additional fees, which will vary depending on the Property’s achieving certain profit goals. The management fee was $116,528 and $97,642 for the six month periods ended June 30, 2010 and 2009, respectively.

 

 

Eligible employees of the Company participate in a defined contribution plan maintained by the Company, as described in section 401(k) of the Internal Revenue Code (IRC). Employees are eligible to participate after six months of employment. Employees may make contributions to the plan up to the maximum amount allowed by the Internal Revenue Code if they wish. Through June 1, 2009 the employer matched employee contributions dollar for dollar the first 3% of an employee’s gross salary and 50% of the next 2% of an employee’s salary, not to exceed a maximum of 4%. The matching provision was amended in 2009 whereby future employer contributions were strictly discretionary. The company made did not make any contributions for the six month periods ended June 30 2010 and 2009.

 

 

Franchise Agreement

 

On December 21, 2000, the Company entered into a franchise agreement with Marriot Corporation (Marriot) for the use of its trade name for an initial term of 20 years with an option to renew for an additional 10 years. The following fees are payable quarterly:

 

a. 5% of gross room revenue, as defined

 

b. 2.5% of gross room revenue, as defined, which is paid into a fund for the purposes of paying marketing and advertising costs in connection with the operation or promotion of the Property.

 

The franchise expense paid was $211,769 and $209,652 for the six month periods ended June 30, 2010 and 2009, respectively.

 

Contingencies

 

The Company is involved in various legal actions and claims arising in the ordinary course of its business. Management believes that current litigation and claims will be resolved without any material effect on the Company’s financial position.

 

 

Sale of Hotel

 

On October 4, 2010 the Company sold the Property to Chatham New Rochelle RI, LLC for $21,000,000. Chatham New Rochelle RI, LLC received the building, all of its contents and a portion of the guest receivables and also assumed the mortgage payable to CBIC, Inc. in the amount of $16,800,000.

NEW ROC HOTELS, LLC

(A Limited Liability Company)

 

INDEPENDENT AUDITORS’ REPORT AND

FINANCIAL STATEMENTS

For the years ended December 31, 2009 and 2008

 

 

INDEPENDENT AUDITORS’ REPORT

 

New Roc Hotels, LLC

(A limited liability company)

New Rochelle, New York

 

We have audited the accompanying balance sheets of New Roc Hotels, LLC (a limited liability company) as of December 31, 2009 and 2008, and the related statements of operations, cash flows and changes in members’ equity for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above fairly present, in all material respects, the financial position of New Roc Hotels, LLC as of December 31, 2009 and 2008 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

 

DeLeon & Stang, CPAs

Gaithersburg, Maryland

 

100 Lakeforest Blvd., Suite 650 •  Gaithersburg, MD 20877 •  Phone 301-948-9825

 • Fax 301-948-3220 e-mail: info@deleonandstang.com • www.deleonandstang.com

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Balance Sheets
December 31, 2009 and 2008

 

 

See Notes to the Financial Statements

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statements of Operations
For the Years Ended December 31, 2009 and 2008

 

 

See Notes to the Financial Statements

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statements of Changes in Members’ Equity
For the Years Ended December 31, 2009 and 2008

 

 

See Notes to the Financial Statements

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Statements of Cash Flows
For the Years Ended December 31, 2009 and 2008

 

 

See Notes to the Financial Statements

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements

For the Years Ended December 31, 2009 and 2008

 

 

The New Roc Hotels, LLC (the Company) was incorporated in the State of New York for the purpose of operating a hotel known as Residence Inn by Marriott (Property), a 124-room hotel located in New Rochelle, New York.

 

The Company operates in one geographic market: New Rochelle, New York. Accordingly, the Company’s ability to meet its obligations is dependent on the tourism and business conditions in the New York metropolitan area. Management believes that the risk arising from this concentration is mitigated by the scarcity of reasonably-priced, quality hotel rooms in the immediate area, the market being one of the largest in the world and the Property’s proximity near many important entertainment and sports venues.

 

Organization and Partnership Agreement

 

During 2008, the Company changed the structure of its ownership. Under the third amended and restated operating agreement of New Roc Hotels, LLC, Donald J. Urgo & Associates, LLC withdrew as a member of the Company leaving Cappelli Hotels, LLC with one hundred percent (100%) of the membership interest. Effective May 1, 2008 Cappelli Hotels, LLC assigned 50% of its rights, title and interest to Kylie Cappelli and 25% of its rights, title and interest to the Louis R. Cappelli Family Limited Partnership.

 

 

A summary of the major accounting policies followed by the Company is set forth below:

 

Use of Estimates

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Basis of Accounting

 

The Company prepares its financial statements on the accrual basis of accounting, in accordance with generally accepted accounting principles.

 

Cash and Cash Equivalents

 

The Company considers all highly-liquid debt instruments, purchased with a maturity of three months or less, to be cash equivalents

 

Escrows

 

Under the terms of the mortgage and management agreements, the Company is required to establish escrow reserve accounts to cover the costs of real estate taxes, insurance, replacements and renewals related to the furniture, fixtures and equipment, and certain repairs and maintenance to the hotel.

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)

 

Accounts and Guest Receivable

 

Accounts receivable are stated at the amount billed to the customer plus any accrued and unpaid interest. The Company considers guest receivables to be delinquent after thirty days, and begin collection activities on that date. The delinquent receivables at December 31, 2009 and 2008 aggregated $25,257 and $25,353, respectively.

 

Allowance for Doubtful Accounts

 

The Company provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off though a charge to the valuation allowance and a credit to accounts receivable. Changes in the valuation allowance have not been material to the financial statements.

 

Inventory

 

Inventory of food, beverages and supplies are stated at the lower of cost or market using the first-in, first-out method.

 

Fair Value

 

The Company does not value any of its assets or liabilities at fair value, under Financial Accounting Standards Board (FASB) Statement No. 157, Fair Value Measurements.

 

Deferred Costs

 

Deferred costs represent costs incurred in connection with the purchase and development of the property, and in obtaining its long-term financing. These costs are being amortized on a straight-line basis as follows:

 

 

Fixed Assets and Depreciation

 

Property, hotel furniture and equipment are recorded at cost. Depreciation of real property is computed using the straight-line method over a 40-year estimated useful life. Depreciation of furniture, fixtures and equipment is provided over the estimated economic lives of the related assets, using the straight-line method over five to seven years. Maintenance and repair costs are charged to expense when incurred. At the time fixed assets are retired or otherwise disposed of, the foxed assets and related accumulated depreciation or amortization accounts are relieved of the applicable amounts, and any gain or loss is credited or charged to income.

 

Depreciation expense was $914,118 and $902,449 for 2009 and 2008, respectively.

 

Advertising Costs

 

The costs of advertising, promotion and marketing programs are charged to operations in the year incurred and are included as operating expenses in the accompanying statements of operations

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)

 

Income Taxes

 

The Company has elected for income tax purposes to be treated as a partnership. Accordingly, federal and state income taxes have not been provided, as the Company’s income or loss is passed through and reported by the members on their individual tax returns. The Company has determined that there are no uncertain positions required to be disclosed or recorded under Accounting Standards Codification 740, Accounting for Uncertainty in Income Taxes.

 

Subsequent Events

 

The Company has evaluated the financial statements for subsequent events that could require accrual or disclosure through the financial statement report date of October 27, 2010.

 

 

Property and equipment consists of the following at December 31, 2009 and 2008:

 

 

 

The Company has an air rights lease with the City of New Rochelle. The Company paid a one-time payment of $3,203,750 and has an annual base rent of $10. The lease initially expires on December 1, 2047. During 2007, the Company extended the lease with an additional payment of $75,000. The lease extension expires on December 1, 2062. The additional payment is amortized over the life of the lease extension.

 

In connection with the 2008 refinancing of the Company’s mortgage debt (Note 6), previously deferred fees of $423,427 were written off to amortization expense during the year ended December 31, 2008.

 

Deferred costs and accumulated amortization are as follows at December 31, 2009 and 2008:

 

 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)

 

 

The annual amortization of deferred costs is expected to be as follows:

 

 

NOTE 5 — GARAGE LEASE AGREEMENT

 

The Company has an agreement with the town of New Rochelle to lease 128 parking spaces in a municipal parking garage for their guests and employees. The annual base rent for the lease is $10 plus the Company’s proportionate share of the city’s adopted budget for the operation, management and maintenance of the garage and the proportionate share of the established reserve fund for the cost of capital repairs.

 

The lease has been accounted for as an operating lease, rent and expense for the years ended December 31, 2009 and 2008 was $126,092 and $109,779, respectively.

 

 

During 2008, the Company borrowed $16,800,000 pursuant to a loan agreement with CIBC, Inc. The mortgage bears an interest rate of 5.45% and is collateralized by the Hotel and related real estate and equipment. The loan was extended on December 18, 2009 and is interest-only for the entire duration of the loan. The entire outstanding principal of the note, together with all accrued and unpaid interest, shall be due and payable on November 30, 2011. Interest expense was $930,069 for 2009 and $933,782 for 2008.

 

Annual maturities of long-term debt are as follows:

 

NEW ROC HOTELS, LLC
(A Limited Liability Company)

Notes to the Financial Statements — (Continued)

 

 

Due from affiliate consists of net advances to an affiliate of a Member of $29,033 at December 31, 2008. The advances were non-interest bearing and fully repaid during 2009.

 

 

The Company has entered into a management agreement with Urgo Hotels, LLC to manage the operations of the Property.

 

The management fee is 3% of adjusted gross revenues and additional fees, which will vary depending on the Property’s achieving certain profit goals. The management fee was $182,928 and $286,865 for the years ended December 31, 2009 and 2008, respectively.

 

 

Eligible employees of the Company participate in a defined contribution plan maintained by the Company, as described in section 401(k) of the Internal Revenue Code (IRC). Employees are eligible to participate after six months of employment. Employees may make contributions to the plan up to the maximum amount allowed by the Internal Revenue Code if they wish. Through June 1, 2009 the employer matched employee contributions dollar for dollar the first 3% of an employee’s gross salary and 50% of the next 2% of an employee’s salary, not to exceed a maximum of 4%. The matching provision was amended in 2009 whereby future employer contributions were strictly discretionary. The company made contributions of $0 and $21,423 for 2009 and 2008, respectively.

 

 

Franchise Agreement

 

On December 21, 2000, the Company entered into a franchise agreement with Marriot Corporation (Marriot) for the use of its trade name for an initial term of 20 years with an option to renew for an additional 10 years. The following fees are payable quarterly:

 

a. 5% of gross room revenue, as defined

 

b. 2.5% of gross room revenue, as defined, which is paid into a fund for the purposes of paying marketing and advertising costs in connection with the operation or promotion of the Property.

 

The franchise expense paid was $425,459 and $509,996 for the years ended December 31, 2009 and 2008, respectively.

 

Contingencies

 

The Company is involved in various legal actions and claims arising in the ordinary course of its business. Management believes that current litigation and claims will be resolved without any material effect on the Company’s financial position.

 

 

Sale of Hotel

 

On October 4, 2010 the Company sold the Property to Chatham New Rochelle RI, LLC for $21,000,000. Chatham New Rochelle RI, LLC received the building, all of its contents and a portion of the guest receivables and also assumed the mortgage payable to CBIC, Inc. in the amount of $16,800,000.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION OF CHATHAM LODGING TRUST

     Chatham Lodging Trust (the “Company”) was formed as a Maryland real estate investment trust (“REIT”) on October 26, 2009. The Company completed its initial public offering (“IPO”) and concurrent private placement of common shares of beneficial interest on April 21, 2010. The Company raised approximately $158.9 million, net of underwriting discounts and commissions and other offering costs paid or payable to third parties as of June 30, 2010.

     On April 23, 2010, the Company acquired six Homewood Suites by Hilton^® hotels (the “Initial Hotels”) for an aggregate purchase price of $73.5 million, plus customary pro-rated amounts and closing costs from wholly owned subsidiaries of RLJ Development, LLC (“RLJ”). The Initial Hotels which contain an aggregate of 813 rooms are as follows:

	•		Homewood Suites by Hilton® Boston – Billerica/Bedford/Burlington; Billerica, Mass.; 147 rooms.
	•		Homewood Suites by Hilton® Hartford – Farmington; Farmington, Conn.; 121 rooms.
	•		Homewood Suites by Hilton® Minneapolis – Mall of America; Bloomington, Minn., 144 rooms.
	•		Homewood Suites by Hilton® Dallas – Market Center; Dallas, Texas; 137 rooms.
	•		Homewood Suites by Hilton® Orlando – Maitland; Maitland, Fla.; 143 rooms.
	•		Homewood Suites by Hilton® Nashville – Brentwood; Brentwood, Tenn.; 121 rooms.

     On July 2, 2010, the Company acquired the 120-room Hampton Inn & Suites^® Houston-Medical Center in Houston, Texas (the “Houston Hotel”) for a cash purchase price of $16.2 million, plus customary pro-rated amounts and closing costs, from Moody National 1715 OST Houston S, LLC and Moody National 1715 OST Houston MT, LLC (collectively “Moody”). The Houston Hotel will be managed by Island Hospitality Management (“IHM”), a hotel management company 90 percent-owned by Jeffrey H. Fisher, the Company’s chief executive officer, pursuant to a management agreement between one of the Company’s taxable REIT subsidiaries (“TRS”) and IHM. The Company funded the purchase price for the Houston Hotel from the proceeds of its IPO.

     On August 3, 2010, the Company acquired the 124-room Residence Inn by Marriott^® Holtsville in Holtsville, New York (the “Holtsville Hotel”) for a cash purchase price of $21.3 million, plus customary pro-rated amounts and closing costs, from Holtsville Hotel Group, LLC (collectively “Holtsville Group”). The Holtsville Hotel will be managed by IHM pursuant to a management agreement between a TRS and IHM. The Company funded the purchase price for the Holtsville Hotel from the proceeds of its IPO.

     On August 24, 2010, the Company acquired the 105-room Courtyard by Marriott^® Altoona in Altoona, Pennsylvania (the “Altoona Hotel”) for a cash purchase price of $11.0 million, plus customary pro-rated amounts and closing costs, from Moody National CY Altoona PA, LLC (collectively “Moody Altoona”) and the 86-room SpringHill Suites by Marriott^® Washington in Washington, Pennsylvania (the “Washington Hotel”) for a cash purchase price of $11.7 million, plus customary pro-rated amounts and closing costs, from Moody National SHS Washington PA, LLC (collectively “Moody Washington”). The Hotels will be managed by Concord Hospitality Enterprises (“Concord”) pursuant to a management agreement between the TRS and Concord. The Company funded the purchase price for the Hotels from the proceeds of its IPO.

     On September 23, 2010, the Company acquired the 133-room Residence Inn by Marriott^® White Plains in White Plains, New York (the “White Plains Hotel”) for a cash purchase price of $20.9 million, plus customary pro-rated amounts and closing costs, from Moody National White Plains S, LLC and Moody National White Plains MT, LLC (collectively “Moody White Plains”). The Hotel will be managed by IHM pursuant to a management agreement between the TRS and IHM. The Company funded the purchase price for the White Plains Hotel from the proceeds of its IPO.

     The acquisitions of the Altoona, Washington and White Plains Hotels are hereafter referred to as the “Moody Acquisition”.

     On October 5, 2010, the Company acquired the 124-room Residence Inn by Marriott^® New Rochelle in New Rochelle, New York (the “New Rochelle Hotel”) for a cash purchase price of $20.7 million, plus customary pro-rated amounts and closing costs, from New Roc Hotels, LLC (collectively “New Roc”). The Hotel will be managed by IHM pursuant to a management agreement between the TRS and IHM. The Company funded the purchase price for the New Rochelle Hotel from the proceeds of its IPO.

     The unaudited pro forma condensed consolidated balance sheet as of June 30, 2010 is based on the unaudited consolidated balance sheet of the Company as of June 30, 2010 and is presented as if the acquisition of the Houston, Holtsville, Moody Acquisition and New Rochelle Hotels occurred on June 30, 2010. The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2010 and for the year ended December 31, 2009 are presented as if the completion of the IPO and the acquisitions of the Initial Hotels, the Houston, Holtsville, Moody Acquisition and New Rochelle Hotels had occurred on January 1, 2009.

     The unaudited pro forma financial information is not necessarily indicative of what the Company’s results of operations or financial condition would have been assuming such transactions had been completed at the beginning of the periods presented, nor is it indicative of the Company’s results of operations or financial condition for future periods. In management’s opinion, all material adjustments necessary to reflect the effects of the significant acquisitions described above have been made. In addition, the unaudited pro forma financial information is based upon available information and upon assumptions and estimates, some of which are set forth in the notes to the unaudited pro forma financial information, which we believe are reasonable under the circumstances. The unaudited pro forma financial information and accompanying notes should be read in conjunction with the historical financial statements and notes thereto of the Company and the Initial Hotels included in the Company’s Form S-11 and the Quarterly Reports on Form 10-Q for the three months ended March 31, 2010 and six months ended June 30, 2010.

CHATHAM LODGING TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2010
(In thousands, except share data)

		Chatham																								Pro Forma
		Lodging				Houston				Holtsville				Moody								Pro Forma				Chatham
		Trust (1)				Acquisition (2)				Acquisition (3)				Acquisition (4)				New Rochelle (5)				Adjustments (6)				Lodging Trust
Assets:
Investment in hotel properties, net		$	73,132			$	16,233			$	21,300			$	43,242			$	20,715			$	—			$	174,622
Cash and cash equivalents			98,700				(15,610	)			(20,262	)			(32,377	)			(20,957	)			(1,687	)			7,807
Restricted cash			2,500				(500	)			(1,065	)			1,142				—				—				2,077
Hotel receivables (net of allowance for doubtful accounts of approximately $4)			699				24				—				106				46				—				875
Deferred costs, net			567				—				—				191				62				—				820
Prepaid expenses and other assets			157				—				83				311				170				—				721
Total assets		$	175,755			$	147			$	56			$	12,615			$	36			$	(1,687	)		$	186,922
Liabilities and Equity:
Mortgage payable		$	—			$	—			$	—			$	12,435			$	—			$	—			$	12,435
Accounts payable and accrued expenses			2,086				140				45				150				28				—				2,449
Accrued underwriter fees			5,175				—				—				—				—				—				5,175
Advance deposits			59				7				11				30				8				—				115
Total liabilities			7,320				147				56				12,615				36				—				20,174
Commitments and contingencies
Equity:
Shareholders’ Equity:
Preferred shares, $0.01 par value, 100,000,000 shares authorized and unissued at June 30, 2010			—				—				—				—				—				—				—
Common shares, $0.01 par value, 500,000,000 shares authorized; 9,201,550 shares issued and outstanding at June 30, 2010			92				—				—				—				—				—				92
Additional paid-in capital			170,240				—				—				—				—				—				170,240
Unearned compensation			(1,404	)			—				—				—				—				—				(1,404	)
Retained earnings (deficit)			(642	)			—				—				—				—				(1,687	)			(2,329	)
Total shareholders’ equity			168,286				—				—				—				—				(1,687	)			166,599
Noncontrolling Interests:
Noncontrolling interest in Operating Partnership			149				—				—				—				—				—				149
Total equity			168,435				—				—				—				—				(1,687	)			166,748
Total liabilities and equity		$	175,755			$	147			$	56			$	12,615			$	36			$	(1,687	)		$	186,922

See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except share data)

     The accompanying Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2010 is based on the unaudited historical consolidated balance sheet of the Company as of June 30, 2010, adjusted to reflect the purchase of the Houston, Holtsville, Moody Acquisition and New Rochelle Hotels.

     The Unaudited Pro Forma Condensed Consolidated Balance Sheet assumes the following occurred on June 30, 2010:

	•		Completion of the purchase of the Houston Hotel
	•		Completion of the purchase of the Holtsville Hotel
	•		Completion of the purchase of the Moody Acquisition
	•		Completion of the purchase of the New Rochelle Hotel
	•		Payment of costs and expenses of approximately $1,687 after June 30, 2010 related to the Houston, Holtsville, Moody Acquisitions and New Rochelle Hotels

Notes and Management Assumptions:

1) Represents the Company’s unaudited historical consolidated balance sheet as of June 30, 2010. Included in deferred costs are franchise fees of $59 for the Houston Hotel, $62 for the Holtsville Hotel, $60 for the Altoona Hotel, $50 for the Washington Hotel that were paid prior to June 30, 2010 and will be amortized over 10 years for the Houston Hotel, 15 years for the Holtsville Hotel and 20-years for the Altoona and Washington Hotels term of the new franchise agreement. Included in retained earnings (deficit) at June 30, 2010 are expenses of $29 related to the purchase of the Houston Hotel, $61 for the Holtsville Hotel and $83 for the Moody Acquisition Hotels that were expensed prior to June 30, 2010.

2) Pursuant to the purchase and sale agreement for the Houston Hotel, there was a proration of operating results on the date of closing between the Company and Moody and this proration is reflected in pro forma adjustment 2b below. Other than the liabilities described in note 2c, which are based upon the amounts in the audited combined statement of financial position of the Houston Hotel at December 31, 2009, no other assets and liabilities will be acquired pursuant to the purchase and sale agreement between the Company and Moody.

a. Investment in hotels of $16,233 is recorded at acquisition cost and depreciated using the straight line method over the estimated useful lives of the assets (5 years for furniture and equipment, 15 years for land improvements and 40 years for buildings and improvements). No intangible assets are expected to be recognized in connection with the purchase of the Houston Hotel based on the estimated values of the identifiable assets acquired. The allocation of the purchase price for the Houston Hotel is as follows:

		Purchase
		Price												Furniture &
Property		Allocation				Land				Building				Equipment
Hampton Inn & Suites® Houston-Medical Center		$	16,233			$	3,200			$	12,708			$	325

b. Accounts receivable of $24 related to the Company’s 50% share of the July 1, 2010 hotel revenue.

c. Accounts payable and accrued expenses of $140, comprised of accrued real estate and personal property taxes of $116, sales taxes of $5, accounts payable of $19 and advance deposits of $7.

3) Pursuant to the purchase and sale agreement for the Holtsville Hotel, there was a proration of operating results on the date of closing between the Company and Holtsville Group and this proration is reflected in pro forma adjustment 3b below. Other than the liabilities described in note 3c, which are based upon the amounts in the audited combined statement of financial position of the Holtsville Hotel at December 31, 2009, no other assets and liabilities will be acquired pursuant to the purchase and sale agreement between the Company and Holtsville Group.

a. Investment in hotels of $21,300 is recorded at acquisition cost and depreciated using the straight line method over the estimated useful lives of the assets (5 years for furniture and equipment, 15 years for land improvements and 40 years for buildings and improvements). No intangible assets are expected to be

recognized in connection with the purchase of the Holtsville Hotel based on the estimated values of the identifiable assets acquired. The allocation of the purchase price for the Holtsville Hotel is as follows:

		Purchase
		Price												Furniture &
Property		Allocation				Land				Building				Equipment
Residence Inn by Marriott® Holtsville		$	21,300			$	2,200			$	18,765			$	335

b. Prepaid expenses and other assets of $83 related to prepaid expenses of $7 and real estate taxes of $76.

c. Accounts payable and accrued expenses of $45, comprised of accrued sales taxes of $8 and accounts payable of $37 and advance deposits of $11.

4) Pursuant to the purchase and sale agreement for the Moody Hotels, there was a proration of operating results on the date of closing between the Company and Moody Altoona and this proration is reflected in pro forma adjustment 4c below. Other than the liabilities described in note 4e, which are based upon the amounts in the audited combined statement of financial position of the Altoona Hotel at December 31, 2009, no other assets and liabilities will be acquired pursuant to the purchase and sale agreement between the Company and Moody Altoona.

a. Investment in hotels of $43,242 is recorded at acquisition cost and depreciated using the straight line method over the estimated useful lives of the assets (5 years for furniture and equipment, 15 years for land improvements and 40 years for buildings and improvements). No intangible assets are expected to be recognized in connection with the purchase of the Altoona Hotel based on the estimated values of the identifiable assets acquired. The allocation of the purchase price for the Moody Acquisition is as follows:

		Purchase
		Price												Furniture &
Property		Allocation				Land				Building				Equipment
Courtyard by Marriott® Altoona		$	11,013			$	1,100			$	9,630			$	283
SpringHill Suites by Marriott® Washington		$	11,754			$	1,000			$	10,692			$	62
Residence Inn by Marriott® White Plains		$	20,475			$	2,200			$	17,677			$	598

b. Restricted cash of $1,142 comprised of escrow accounts with the mortgage lender of $2,642 and ($1,500) of earnest money deposits.

c. Accounts receivable of $106 related to the Company’s 50% share of the closing night hotel revenue. Prepaid expenses and other assets of $311 comprised of prepaid expenses of $7 and real estate taxes of $304.

d. Deferred expenses of $191 comprised of $125 for loan costs that will be amortized over the term of the mortgages and franchise fees of $66 for the White Plains Hotel that will be amortized over the 20 year term of the franchise agreement. The Altoona hotel’s loan matures April 1, 2016 and the Washington hotel matures April 1, 2015.

e. Mortgage Loan of $12,435, accounts payable and accrued expenses of $150, comprised of accrued sales taxes of $26, accounts payable of $26, accrued payroll of $52, accrued interest of $46 and advance deposits of $30.

5) Pursuant to the purchase and sale agreement for the New Rochelle Hotel, there was a proration of operating results on the date of closing between the Company and New Roc and this proration is reflected in pro forma adjustment 5b below. Other than the assets and liabilities described in note 5c and 5d, which are based upon the amounts in the audited combined statement of financial position of the New Rochelle Hotel at December 31, 2009, no other assets and liabilities will be acquired pursuant to the purchase and sale agreement between the Company and New Roc.

a. Investment in hotels of $20,715 is recorded at acquisition cost and depreciated using the straight line method over the estimated useful lives of the assets (5 years for furniture and equipment, 15 years for land improvements and 40 years for buildings and improvements). No intangible assets are expected to be

recognized in connection with the purchase of the Altoona Hotel based on the estimated values of the identifiable assets acquired. The allocation of the purchase price for the Moody Acquisition is as follows:

		Purchase
		Price												Furniture &
Property		Allocation				Land				Building				Equipment
Residence Inn by Marriott® New Rochelle		$	20,715			$	0			$	20,281			$	434

b. Accounts receivable of $46 related to the Company’s 50% share of the closing night hotel revenue.

c. Deferred expenses of $62 for franchise fees for the New Rochelle Hotel that will be amortized over the 20 year term of the franchise agreement.

d. Prepaid expenses and other assets of $170 comprised of prepaid expenses of $11 and real estate taxes of $159.

e. Accounts payable and accrued expenses of $36, comprised of accrued sales taxes of $9, accounts payable of $19 and advance deposits of $8.

6) Represents the costs incurred by the Company after June 30, 2010 to complete the purchase of the Houston, Holtsville, Moody Acquisition and New Rochelle Hotels:

a. Closing costs of $968.

b. Costs associated with due diligence of $86.

c. Accounting fees of $398 for services related to the audit and reviews.

d. Legal fees of $235.

CHATHAM LODGING TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
(In thousands, except share and per share data)

		Chatham																												Pro Forma
		Lodging				Initial				Houston				Holtsville				Moody								Pro Forma				Chatham
		Trust (1)				Hotels (2)				Hotel (3)				Hotel (4)				Acquisition (5)				New Rochelle (6)				Adjustments				Lodging Trust
Revenue:
Hotel operating:
Rooms		$	4,544			$	6,634			$	1,931			$	2,197			$	5,317			$	2,819			$	—			$	23,442
Other operating			114				170				46				55				232				106				—				723
Total revenue			4,658				6,804				1,977				2,252				5,549				2,925				—				24,165
Expenses:
Operating expenses:
Rooms			1,070				1,352				368				479				1,183				648				—				5,100
Other			79				577				24				35				162				6				—				883
General and administrative			917				1,279				495				491				1,017				691				—				4,890
Sales and marketing fees			147				632				20				74				211				134				—				1,218
Franchise fees			343				266				207				165				399				212				24	(7)			1,616
Management fees			109				139				130				67				268				117				(143)	(8)			687
Condominium fees			—				—				—				—				264				—				—				264
Depreciation and amortization			402				—				218				193				875				525				1,197	(9)			3,410
Ground rent			—				—				—				—				60				—				—				60
Property taxes			247				525				144				124				439				312				—				1,791
Corporate general and administrative			972				—				—				—				—				—				1,021	(10)			1,993
Acquisition transaction costs			1,005				—				—				—				—				—				(1,005)	(11)			—
Total expenses			5,291				4,770				1,606				1,628				4,878				2,645				1,094				21,912
Operating income (loss)			(633	)			2,034				371				624				671				280				(1,094	)			2,253
Gain on insurance proceeds			—				—				—				—				236				—				(236)	(12)			—
Interest expense			—				(1,084	)			(402	)			(361	)			(1,254	)			(460	)			2,724	(13)			(837	)
Interest income			38				—				—				—				—				—				—				38
Income (loss) from continuing operations before income tax expense			(595	)			950				(31	)			263				(347	)			(180	)			1,394				1,454
Income taxes			(47	)			—				—				—				—				—				(59)	(14)			(106	)
Income(loss) from continuing operations		$	(642	)		$	950			$	(31	)		$	263			$	(347	)		$	(180	)		$	1,335			$	1,348
Earnings per share data:
Basic and diluted — continuing operations		$	(0.18	)																										$	0.15
Basic and diluted — weighted average shares			3,580,028																								(15	)			8,993,015