Chatham Lodging Trust: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2024. In this report, we use the terms “the Company," “we” or “our” to refer to Chatham Lodging Trust and its consolidated subsidiaries, unless the context indicates otherwise.

Statement Regarding Forward-Looking Information

The following information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include information about possible or assumed future results of the lodging industry and our business, financial condition, liquidity, results of operations, cash flow and plans and objectives. These statements generally are characterized by the use of the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may,” “will,” “could” or similar expressions. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, such forward-looking statements relate to future events, our plans, strategies, prospects and future financial performance, and involve known and unknown risks that are difficult to predict, uncertainties and other factors that are, in some cases, beyond our control and which could differ materially from those set forth in the forward-looking statements. Important factors that we think could cause our actual results to differ materially from expected results are summarized below. Some factors that might cause such a difference include the following: local, national and global economic conditions, uncertainty surrounding the financial stability of the United States, Europe and China, increased direct competition, changes in government regulations or accounting rules, changes in local, national and global real estate conditions, declines in lodging industry fundamentals, increased operating costs, a potential recessionary environment, seasonality of the lodging industry, our ability to obtain debt and equity financing on satisfactory terms, changes in interest rates, our ability to identify suitable investments, our ability to close on identified investments, inaccuracies of our accounting estimates, the uncertainty and economic impact of pandemics like COVID-19, epidemics or other public health emergencies or fear of such events, the impact of and changes to various government programs, and our ability to dispose of selected hotel properties on the terms and timing we expect, if at all. Given these uncertainties, undue reliance should not be placed on such statements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances or to reflect the occurrence of unanticipated events. The forward-looking statements should also be read in light of the risk factors identified in the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 as updated by the Company's subsequent filings with the SEC under the Exchange Act.

Overview

We are a self-advised hotel investment company organized in October 2009 that commenced operations in April 2010. Our investment strategy is to invest in upscale extended-stay and premium-branded select-service hotels in geographically diverse markets with high barriers to entry near strong demand generators. We may acquire portfolios of hotels or single hotels. We expect that a significant portion of our portfolio will consist of hotels in the upscale extended-stay or select-service categories, including brands such as Homewood Suites by Hilton®, Residence Inn by Marriott®, Hyatt Place®, Courtyard by Marriott®, SpringHill Suites by Marriott®, Hilton Garden Inn by Hilton®, Embassy Suites®, Hampton Inn®, Hampton Inn and Suites®, Home2 Suites by Hilton® and TownePlace Suites by Marriott®.

The Company's future hotel acquisitions may be funded by issuances of both common and preferred shares or the issuance of partnership interests in our operating partnership, Chatham Lodging, L.P. (the "Operating Partnership"), draw-downs under our revolving credit facility, the incurrence or assumption of debt, available cash, or proceeds from dispositions of assets. We intend to acquire quality assets at attractive prices and improve their returns through knowledgeable asset management and seasoned, proven hotel management while remaining prudently leveraged.

At September 30, 2025, our leverage ratio was 20.6% measured as the ratio of our net debt (total debt outstanding before deferred financing costs less unrestricted cash and cash equivalents) to hotel investments at cost. Over the past several years, we have maintained a leverage ratio between the low 20s and the low 50s. As of September 30, 2025, we have total debt of $343.2 million at a weighted-average interest rate of approximately 6.29%.

We are a real estate investment trust (“REIT”) for federal income tax purposes. In order to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), we cannot operate our hotels. Therefore, the Operating Partnership and its subsidiaries lease our hotel properties to taxable REIT subsidiary lessees (“TRS Lessees”), who in turn engage eligible independent contractors to manage the hotels. Each of the TRS Lessees is treated as a taxable REIT subsidiary for federal income tax purposes and is consolidated within our financial statements for accounting purposes. However, since we control both the Operating Partnership and the TRS Lessees, our principal source of funds on a consolidated basis is from the operations of our hotels. The earnings of the TRS Lessees are subject to taxation as regular C corporations, as defined in the Code, potentially reducing the TRS Lessees’ cash available to pay dividends to us, and therefore our funds from operations and the cash available for distribution to our shareholders.

Key Indicators of Operating Performance and Financial Condition

We measure financial condition and hotel operating performance by evaluating non-financial and financial metrics and measures such as:

• Average Daily Rate (“ADR”), which is the quotient of room revenue divided by total rooms sold;
• Occupancy, which is the quotient of total rooms sold divided by total rooms available;
• Revenue Per Available Room (“RevPAR”), which is the product of occupancy and ADR, and does not include food and beverage revenue, or other operating revenue;
• Funds From Operations (“FFO”);
• Adjusted FFO;
• Earnings before interest, taxes, depreciation and amortization (“EBITDA”);
• EBITDAre;
• Adjusted EBITDA; and
• Adjusted Hotel EBITDA.

We evaluate the hotels in our portfolio and potential acquisitions using these metrics to determine each hotel’s contribution toward providing income to our shareholders through increases in distributable cash flow and increasing long-term total returns through appreciation in the value of our common shares. RevPAR, ADR and Occupancy are hotel industry measures commonly used to evaluate operating performance.

See “Non-GAAP Financial Measures” for further discussion of FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA.

Results of Operations

Industry Outlook

Smith Travel Research reported that U.S. lodging industry RevPAR decreased 1.4% for the three months ended September 30, 2025, with RevPAR down 1.1% in July 2025, down 1.0% in August 2025 and down 2.1% in September 2025. RevPAR growth slowed starting in March 2025 and we believe there is relatively limited visibility toward industry performance for the remainder of 2025.

Comparison of the three months ended September 30, 2025 to the three months ended September 30, 2024

Results of operations for the three months ended September 30, 2025 include the operating activities of the hotels we owned during the period. We sold one hotel located in Maitland, FL on December 6, 2024, sold one hotel located in Bloomington, MN on December 16, 2024, sold one hotel located in Brentwood, TN on January 30, 2025, sold one hotel located in Houston, TX on March 17, 2025, and sold one hotel located in Houston, TX on April 22, 2025. The changes in results described below were driven primarily by a decline in RevPAR, the sales of five hotels, and inflationary cost pressures.

Revenues

Revenue, which consists primarily of room, food and beverage and other operating revenues from our hotels, was as follows for the periods indicated (dollars in thousands):

Total revenue was $78.4 million for the three months ended September 30, 2025, down $8.8 million compared to total revenue of $87.2 million for the corresponding 2024 period. The decrease in total revenue primarily was related to the 2.5% decrease in same property RevPAR and the sales of five hotels. The five sold hotels contributed zero revenue during the three months ended September 30, 2025, down $7.0 million from the $7.0 million that the sold hotels contributed for the corresponding 2024 period. Since all of our hotels are select-service or limited-service hotels, room revenue is the primary revenue source as these hotels do not have significant food and beverage revenue or large group conference facilities. Room revenue comprised 91.7% and 92.0% of total revenue for the three months ended September 30, 2025 and 2024, respectively.

Food and beverage revenue was $1.6 million for the three months ended September 30, 2025, down $0.2 million compared to $1.8 million for the corresponding 2024 period.

Other operating revenue is comprised of parking, meeting room, gift shop, in-room movie and other ancillary amenities revenue. Other operating revenue was $4.6 million and $4.8 million for the three months ended September 30, 2025 and 2024, respectively.

Reimbursable costs from related parties were $0.3 million and $0.3 million for the three months ended September 30, 2025 and 2024, respectively. The cost reimbursements were offset by the reimbursed costs from related parties included in operating expenses.

In the table below, we present both actual and same property room revenue metrics. Actual Occupancy, ADR and RevPAR metrics reflect the performance of the hotels for the actual days such hotels were owned by the Company during the periods presented. Same property Occupancy, ADR and RevPAR reflect results for the hotels owned by us as of September 30, 2025 that have been in operation for a full year regardless of our ownership during the period presented, which is a non-GAAP financial measure. Results for the hotels for periods prior to our ownership were provided to us by prior owners and have not been adjusted by us.

For the three months ended September 30, 2025 same property RevPAR decreased 2.5% due to a decrease in occupancy of 0.6% and a decrease in ADR of 1.8%. Same property RevPAR decreased 1.9% in July 2025, decreased 2.9% in August 2025, and decreased 2.6% in September 2025. Same property RevPAR was $156.48 in July 2025, $143.78 in August 2025 and $153.81 in September 2025.

Hotel Operating Expenses

Hotel operating expenses consist of the following for the periods indicated (dollars in thousands):

Hotel operating expenses decreased $4.2 million, or 8.7%, to $44.0 million for the three months ended September 30, 2025 from $48.2 million for the three months ended September 30, 2024. The five sold hotels contributed zero in operating expenses for the three months ended September 30, 2025, down $4.6 million from the $4.6 million that the sold hotels contributed for the corresponding 2024 period. This was partially offset by inflationary cost increases.

Room expenses, which are the most significant component of hotel operating expenses, decreased $1.5 million from $17.0 million for the three months ended September 30, 2024 to $15.5 million for the three months ended September 30, 2025. The decrease in room expenses was related primarily to the decrease in costs from the sales of five hotels, partially offset by the increase in costs from the impact of inflation.

The remaining hotel operating expenses decreased $2.6 million, from $31.2 million for the three months ended September 30, 2024 to $28.6 million for the three months ended September 30, 2025.

Depreciation and Amortization

Depreciation and amortization expense was $14.7 million and $15.3 million for the three months ended September 30, 2025 and 2024, respectively. The decrease was primarily related to the sales of five hotels.

Property Taxes, Ground Rent and Insurance

Total property taxes, ground rent and insurance expenses decreased $1.2 million from $6.5 million for the three months ended September 30, 2024 to $5.3 million for the three months ended September 30, 2025. The decrease was primarily related to the sales of five hotels and successful property tax appeals at multiple hotel properties.

General and Administrative

General and administrative expenses principally consist of employee-related costs, including base payroll, bonuses and amortization of restricted stock and awards of long-term incentive plan units ("LTIP units"). These expenses also include corporate operating costs, professional fees and trustees’ fees. Total general and administrative expenses (excluding amortization of share-based compensation of $1.5 million and $1.7 million for the three months ended September 30, 2025 and 2024, respectively) was $2.6 million for the three months ended September 30, 2025 versus $2.7 million for the three months ended September 30, 2024.

Reimbursable Costs from Related Parties

Reimbursable costs from related parties, comprised of shared office expenses and rent, were $0.3 million and $0.3 million for the three months ended September 30, 2025 and 2024, respectively. The cost reimbursements were offset by the cost reimbursements from related parties included in revenues.

Interest and Other Income

Interest on cash and cash equivalents and other income was $0.1 million and $0.1 million for the three months ended September 30, 2025 and 2024, respectively.

Interest Expense, Including Amortization of Deferred Fees

Interest expense decreased $2.1 million from $8.3 million for the three months ended September 30, 2024 to $6.2 million for the three months ended September 30, 2025 and is comprised of the following (dollars in thousands):

The decrease in interest expense was due to lower debt balances during the three months ended September 30, 2025 than during the three months ended September 30, 2024.

Loss on Early Extinguishment of Debt

Loss on early extinguishment of debt was $0.2 million and zero for the three months ended September 30, 2025 and 2024, respectively. The loss in 2025 was related to the Company entering into a new unsecured revolving credit facility and the write-off of unamortized deferred financing fees from the prior facility.

Income Tax Expense

Income tax expense remained unchanged at zero for the three months ended September 30, 2025 and 2024. We are subject to income taxes based on the taxable income of our TRS Lessees at a combined federal and state tax rate of approximately 25%. The Company’s TRS continues to have cumulative three-year taxable losses and recognizes a full valuation allowance equal to 100% of the gross deferred tax assets due to the uncertainty of the TRS's ability to utilize these deferred tax assets.

Net Income (Loss)

Net income was $3.6 million for the three months ended September 30, 2025, compared to net income of $4.3 million for the three months ended September 30, 2024. The change in net income was primarily due to the factors discussed above.

Comparison of the nine months ended September 30, 2025 to the nine months ended September 30, 2024

Results of operations for the nine months ended September 30, 2025 include the operating activities of the hotels we owned during the period. We sold one hotel located in Denver, CO on January 9, 2024, sold one hotel located in Maitland, FL on December 6, 2024, sold one hotel located in Bloomington, MN on December 16, 2024, sold one hotel located in Brentwood, TN on January 30, 2025, sold one hotel located in Houston, TX on March 17, 2025, and sold one hotel located in Houston, TX on April 22, 2025. We acquired one hotel located in Phoenix, AZ on May 30, 2024. The changes in results described below were driven primarily by the sales of six hotels, the acquisition of one hotel and inflationary cost pressures.

Revenues

Revenue, which consists primarily of room, food and beverage and other operating revenues from our hotels, was as follows for the periods indicated (dollars in thousands):

Total revenue was $227.3 million for the nine months ended September 30, 2025, down $14.8 million compared to total revenue of $242.1 million for the corresponding 2024 period. The decrease in total revenue primarily was related to the decrease in revenue from the sales of six hotels that contributed $3.7 million in revenue for the nine months ended September 30, 2025, down $17.9 million from the $21.6 million that the sold hotels contributed for the corresponding 2024 period. This was partially offset by a 0.2% increase in same property RevPAR and the increase in revenue from the acquisition of one hotel that contributed $6.4 million of revenue during the nine months ended September 30, 2025, up $4.6 million from the $1.8 million that the acquired hotel contributed for the corresponding 2024 period. Since all of our hotels are select-service or limited-service hotels, room revenue is the primary revenue source as these hotels do not have significant food and beverage revenue or large group conference facilities. Room revenue comprised 91.4% and 91.6% of total revenue for the nine months ended September 30, 2025 and 2024, respectively.

Food and beverage revenue was $5.1 million for the nine months ended September 30, 2025, down $0.7 million compared to $5.8 million for the corresponding 2024 period.

Other operating revenue is comprised of parking, meeting room, gift shop, in-room movie and other ancillary amenities revenue. Other operating revenue was $13.7 million and $13.7 million for the nine months ended September 30, 2025 and 2024, respectively.

Reimbursable costs from related parties were $0.8 million and $0.8 million for the nine months ended September 30, 2025 and 2024, respectively. The cost reimbursements were offset by the reimbursed costs from related parties included in operating expenses.

In the table below, we present both actual and same property room revenue metrics. Actual Occupancy, ADR and RevPAR metrics reflect the performance of the hotels for the actual days such hotels were owned by the Company during the periods presented. Same property Occupancy, ADR and RevPAR reflect results for the hotels owned by us as of September 30, 2025 that have been in operation for a full year regardless of our ownership during the period presented, which is a non-GAAP financial measure. Results for the hotels for periods prior to our ownership were provided to us by prior owners and have not been adjusted by us.

For the nine months ended September 30, 2025 same property RevPAR increased 0.2% due to an increase in occupancy of 1.0% and a decrease in ADR of 0.7%.

Hotel Operating Expenses

Hotel operating expenses consist of the following for the periods indicated (dollars in thousands):

Hotel operating expenses decreased $7.9 million, or 5.7%, to $128.8 million for the nine months ended September 30, 2025 from $136.7 million for the nine months ended September 30, 2024 The six sold hotels contributed $2.4 million in operating expenses for the nine months ended September 30, 2025, down $11.6 million from the $14.0 million that the sold hotels contributed for the corresponding 2024 period. This was partially offset by the increase in operating expenses from the acquisition of one hotel that contributed $3.4 million in operating expenses for the nine months ended September 30, 2025, up $2.2 million from the $1.2 million that the acquired hotel contributed for the corresponding 2024 period. The remaining change in operating expenses was related to inflationary cost pressures.

Room expenses, which are the most significant component of hotel operating expenses, decreased $3.8 million from $49.1 million for the nine months ended September 30, 2024 to $45.3 million for the nine months ended September 30, 2025. The decrease in room expenses was related primarily to the decrease in costs from the sales of six hotels, partially offset by the increase in costs from the acquisition of one hotel and an increase in costs related to an increase in same property occupancies at our hotels.

The remaining hotel operating expenses decreased $3.9 million, from $87.5 million for the nine months ended September 30, 2024 to $83.6 million for the nine months ended September 30, 2025.

Depreciation and Amortization

Depreciation and amortization expense was $45.1 million and $45.5 million for the nine months ended September 30, 2025 and 2024, respectively.

Property Taxes, Ground Rent and Insurance

Total property taxes, ground rent and insurance expenses decreased $0.5 million from $17.7 million for the nine months ended September 30, 2024 to $17.2 million for the nine months ended September 30, 2025. The decrease was primarily related to the sales of six hotels partially offset by increases in property tax assessments.

General and Administrative

General and administrative expenses principally consist of employee-related costs, including base payroll, bonuses and amortization of restricted stock and awards of long-term incentive plan units ("LTIP units"). These expenses also include corporate operating costs, professional fees and trustees’ fees. Total general and administrative expenses (excluding amortization of share-based compensation of $4.7 million and $4.9 million for the nine months ended September 30, 2025 and 2024, respectively) was $8.0 million for the nine months ended September 30, 2025 versus $8.7 million for the nine months ended September 30, 2024.

Reimbursable Costs from Related Parties

Reimbursable costs from related parties, comprised of shared office expenses and rent, were $0.8 million and $0.8 million for the nine months ended September 30, 2025 and 2024, respectively. The cost reimbursements were offset by the cost reimbursements from related parties included in revenues.

Interest and Other Income

Interest on cash and cash equivalents and other income decreased $1.4 million from $1.6 million for the nine months ended September 30, 2024 to $0.2 million for the nine months ended September 30, 2025. The decrease was due to lower cash balances during the nine months ended September 30, 2025.

Interest Expense, Including Amortization of Deferred Fees

Interest expense decreased $3.8 million from $23.3 million for the nine months ended September 30, 2024 to $19.5 million for the nine months ended September 30, 2025 and is comprised of the following (dollars in thousands):

The decrease in interest expense was due to lower debt balances during the nine months ended September 30, 2025 than during the nine months ended September 30, 2024.

Loss on Early Extinguishment of Debt

Loss on early extinguishment of debt was $0.2 million and $17 thousand for the nine months ended September 30, 2025 and 2024, respectively. The loss in 2025 was related to the Company entering into a new unsecured revolving credit facility and the write-off of unamortized deferred financing fees from the prior facility.

Income Tax Expense

Income tax expense remained unchanged at zero for the nine months ended September 30, 2025 and 2024. We are subject to income taxes based on the taxable income of our TRS Lessees at a combined federal and state tax rate of approximately 25%. The Company’s TRS continues to have cumulative three-year taxable losses and recognizes a full valuation allowance equal to 100% of the gross deferred tax assets due to the uncertainty of the TRS's ability to utilize these deferred tax assets.

Net Income (Loss)

Net income was $10.6 million for the nine months ended September 30, 2025, compared to net income of $5.9 million for the nine months ended September 30, 2024. The change in net income was primarily due to the factors discussed above.

Non-GAAP Financial Measures

We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our operating performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) EBITDAre, (5) Adjusted EBITDA and (6) Adjusted Hotel EBITDA. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as prescribed by GAAP as a measure of our operating performance.

FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA do not represent cash generated from operating activities under GAAP and should not be considered as alternatives to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA are not measures of our liquidity, nor are FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA indicative of funds available to fund our cash needs, including our ability to make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that have been and will be incurred. FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA may include funds that may not be available for management’s discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties.

We calculate FFO in accordance with standards established by Nareit, which defines FFO as net income or loss (calculated in accordance with GAAP), excluding gains or losses from sales of real estate, impairment write-downs, the cumulative effect of changes in accounting principles, plus depreciation and amortization (excluding amortization of deferred financing costs), and after adjustments for unconsolidated partnerships and joint ventures following the same approach. We believe that the presentation of FFO provides useful information to investors regarding our operating performance because it measures our performance without regard to specified non-cash items such as real estate depreciation and amortization, gain or loss on sale of real estate assets and certain other items that we believe are not indicative of the property level performance of our hotel properties. We believe that these items reflect historical cost of our asset base and our acquisition and disposition activities and are less reflective of our ongoing operations, and that by adjusting to exclude the effects of these items, FFO is useful to investors in comparing our operating performance between periods and between REITs that also report FFO using the Nareit definition.

We calculate Adjusted FFO by further adjusting FFO for certain additional items that are not addressed in Nareit’s definition of FFO, including other charges, losses on the early extinguishment of debt and similar items related to unconsolidated real estate entities that we believe do not represent costs related to hotel operations. We believe that Adjusted FFO provides investors with another financial measure that may facilitate comparisons of operating performance between periods and between REITs that make similar adjustments to FFO.

The following is a reconciliation of net income (loss) to FFO and Adjusted FFO for the three and nine months ended September 30, 2025 and 2024 (in thousands, except share data):

Diluted weighted average common share and unit count used for calculation of Adjusted FFO per share may differ from diluted weighted average common share count used for calculation of GAAP Net Income per share due to the inclusion of LTIP units, which may be converted to common shares of beneficial interest if Net Income per share is negative and Adjusted FFO is positive. Unvested restricted shares and unvested LTIP units that could potentially dilute basic earnings per share in the future would not be included in the computation of diluted loss per share for the periods where a loss has been recorded because they would have been anti-dilutive for the periods presented.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") is defined as net income or loss excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sales of assets; (3) depreciation and amortization; and (4) unconsolidated real estate entity items including interest, depreciation and amortization excluding gains and losses from sales of real estate. We consider EBITDA useful to an investor in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results. In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and dispositions.

In addition to EBITDA, we present EBITDAre in accordance with Nareit guidelines, which defines EBITDAre as net income or loss excluding interest expense, income tax expense, depreciation and amortization expense, gains or losses from sales of real estate, impairment, and adjustments for unconsolidated joint ventures. We believe that the presentation of EBITDAre provides useful information to investors regarding the Company's operating performance and can facilitate comparisons of operating performance between periods and between REITs.

We also present Adjusted EBITDA, which includes additional adjustments for items such as other charges, gains or losses on extinguishment of indebtedness, the amortization of share-based compensation, and certain other expenses that we consider outside the normal course of operations. We believe that Adjusted EBITDA provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income, EBITDA and EBITDAre, is beneficial to an investor's understanding of our performance.

The following is a reconciliation of net income (loss) to EBITDA, EBITDAre and Adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024 (in thousands):

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Adjusted Hotel EBITDA is defined as net income before interest, income taxes, depreciation and amortization, corporate general and administrative, impairment loss, loss on early extinguishment of debt, other charges, interest and other income, losses on sales of hotel properties and income or loss from unconsolidated real estate entities. We present Adjusted Hotel EBITDA because we believe it is useful to investors in comparing our hotel operating performance between periods and comparing our Adjusted Hotel EBITDA to those of our peer companies.

The following is a presentation of, and a reconciliation of net income (loss) to, Adjusted Hotel EBITDA for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Although we present FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA because we believe they are useful to investors in comparing our operating performance between periods and between REITs that report similar measures, these measures have limitations as analytical tools. Some of these limitations are:

• FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
• FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
• FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect funds available to make cash distributions;
• EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may need to be replaced in the future, and FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect any cash requirements for such replacements;
• Non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period using Adjusted EBITDA;
• Adjusted FFO, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect the impact of certain cash charges (including acquisition transaction costs) that result from matters we consider not to be indicative of the underlying performance of our hotel properties; and
• Other companies in our industry may calculate FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA differently than we do, limiting their usefulness as comparative measures.

In addition, FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA do not represent cash generated from operating activities as determined by GAAP and should not be considered as alternatives to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA are not measures of our liquidity. Because of these limitations, FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA only supplementally. Our consolidated financial statements and the notes to those statements included elsewhere are prepared in accordance with GAAP.

Sources and Uses of Cash

Our principal sources of cash include net cash from operations, availability under our credit facility, proceeds from debt and equity issuances, and proceeds from the sale of hotel properties. Our principal uses of cash include acquisitions, capital expenditures, operating costs, corporate expenditures, interest costs, debt repayments, common share repurchases, and distributions to equity holders.

Cash, cash equivalents, and restricted cash totaled $21.4 million as of September 30, 2025, a decrease of $8.5 million from December 31, 2024, primarily due to net cash provided by operating activities of $51.8 million, net cash provided by investing activities of $32.4 million, and net cash used in financing activities of $92.7 million.

Cash from Operations

Net cash flows provided by operating activities decreased $9.1 million to $51.8 million during the nine months ended September 30, 2025 compared to $60.9 million during the nine months ended September 30, 2024. The decrease in cash from operating activities was primarily due to the sales of six hotels.

Investing Activities Cash Flows

Net cash flows provided by investing activities increased $84.5 million to $32.4 million during the nine months ended September 30, 2025 compared to $(52.1) million during the nine months ended September 30, 2024. For the nine months ended September 30, 2025, net cash flows provided by investing activities of $32.4 million consisted of $53.0 million in net proceeds related to the sales of three hotels, partially offset by $20.4 million related to capital improvements on our hotels and $0.1 million of payments of franchise application costs. For the nine months ended September 30, 2024, net cash flows used in investing activities of $52.1 million consisted of $24.9 million related to capital improvements on our hotels, $43.7 million related to the acquisition of one hotel, and $0.7 million of payments of franchise application costs, partially offset by $17.2 million in net proceeds related to the sale of one hotel.

We expect to invest approximately $5.7 million on renovations, discretionary and emergency expenditures on our existing hotels during the remainder of 2025, including improvements required under any brand PIP.

Financing Activities Cash Flows

Net cash flows used in financing activities increased $27.0 million to $92.7 million during the nine months ended September 30, 2025 compared to $65.7 million during the nine months ended September 30, 2024. For the nine months ended September 30, 2025, net cash flows used in financing activities of $92.7 million were comprised of net repayments on our revolving credit facility of $110.0 million, the repayment of mortgage debt of $16.0 million, payments of financing costs of $5.9 million, repurchases of common shares of $2.0 million, distributions to common share and LTIP unit holders of $13.0 million, and distributions on preferred shares of $6.0 million, partially offset by net borrowings on our unsecured term loan of $60.0 million. For the nine months ended September 30, 2024, net cash flows used in financing activities of $65.7 million were comprised of the repayment of mortgage debt of $282.9 million, distributions to common share and unit holders of $10.8 million, distributions on preferred shares of $6.0 million, payments of financing costs of $1.1 million, and payments of offering costs on common shares of $0.3 million, partially offset by net borrowings on our revolving credit facility of $125.0 million, borrowings on our unsecured term loan of $50.0 million, and proceeds from the issuance of mortgage debt of $60.3 million.

We declared total dividends of $ 0.27 and $ 0.21 per common share and LTIP unit for the nine months ended September 30, 2025 and 2024, respectively. We declared total dividends of $1.24218 and $1.24218 per Series A preferred share for the nine months ended September 30, 2025 and 2024, respectively.

Material Cash Requirements

Our material cash requirements include the following contractual obligations:

• At September 30, 2025, we had total debt principal and interest obligations of $455.9 million with $21.6 million of principal and interest payable within the next 12 months from September 30, 2025. The Company has no debt principal obligations payable during the next 12 months. See Note 6, “Debt” to our consolidated financial statements for additional information relating to our property loans, revolving credit facility and unsecured term loan.
• Lease payments due within the next 12 months from September 30, 2025 total $2.0 million. See Note 12, “Leases” to our consolidated financial statements for additional information relating to our corporate office and ground leases.

Liquidity and Capital Resources

At September 30, 2025, our leverage ratio was approximately 20.6% measured as the ratio of our net debt (total debt outstanding before deferred financing costs less unrestricted cash and cash equivalents) to hotel investments at cost. Over the past several years, we have maintained a leverage ratio between the low 20s and the low 50s. At September 30, 2025, we had total debt of $343.2 million at an average interest rate of approximately 6.29%.

At September 30, 2025 and December 31, 2024, we had zero and $110.0 million, respectively, in outstanding borrowings under our $300.0 million revolving credit facility. We had $200.0 million and $140.0 million in outstanding borrowings under our unsecured term loan at September 30, 2025 and December 31, 2024, respectively.

Our revolving credit facility and term loan contain representations, warranties, covenants, terms and conditions customary for credit facilities of this type, including a maximum leverage ratio, a maximum secured leverage ratio, a maximum unsecured leverage ratio, a minimum fixed charge coverage ratio, a minimum unsecured interest coverage ratio, and minimum net worth financial covenants, limitations on (i) liens, (ii) incurrence of debt, (iii) investments, (iv) distributions, and (v) mergers and asset dispositions, covenants to preserve corporate existence and comply with laws, covenants on the use of proceeds and default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-performance of covenants, cross-defaults and guarantor defaults. We were in compliance with all financial covenants at September 30, 2025.

In December 2017, we established a $50.0 million dividend reinvestment and stock purchase plan (the "DRSPP") which renewed in December 2020 and renewed again in January 2024. Under the DRSPP, shareholders may purchase additional common shares by reinvesting some or all of the cash dividends received on common shares. Shareholders may also make optional cash purchases of common shares subject to certain limitations detailed in the prospectuses for the DRSPP. During the three months ended September 30, 2025, the Company issued 2,118 common shares under the DRSPP at a weighted-average price per share of $7.15, which generated $15 thousand of proceeds. During the nine months ended September 30, 2025, the Company issued 5,842 common shares under the DRSPP at a weighted-average price per share of $7.29, which generated $43 thousand of proceeds. As of September 30, 2025, there was approximately $49.9 million in common shares available for issuance under the DRSPP.

In January 2021, we established an "at-the-market" equity offering program (the "ATM Program") whereby, from time to time, we may publicly offer and sell our common shares having an aggregate maximum offering price up to $100.0 million by means of ordinary brokers transactions on the New York Stock Exchange (the "NYSE"), in negotiated transactions or in transactions that are deemed to be "at-the-market" offerings as defined in Rule 415 under the Securities Act of 1933, as amended. The Company did not issue any shares under the ATM Program during the three and nine months ended September 30, 2025. As of September 30, 2025, there was approximately $77.5 million in common shares available for issuance under the ATM Program.

In May 2025, the Board of Trustees authorized and approved a $25.0 million share repurchase program (the "Share Repurchase Program") of our common shares. Under the Share Repurchase Program, we have the ability to repurchase up to $25.0 million of common shares through open market purchases or other privately negotiated transactions at times and in amounts as we deem appropriate. The Share Repurchase Program has no time limit and may be suspended or discontinued at any time. During the three months ended September 30, 2025, the Company repurchased 255,213 common shares at a weighted-average price per share of $7.18 for an aggregate purchase price, including commissions, of approximately $1.8 million. During the nine months ended September 30, 2025, the Company repurchased 275,693 common shares at a weighted-average price per share of $7.17 for an aggregate purchase price, including commissions, of approximately $2.0 million. As of September 30, 2025, there was approximately $23.0 million in common shares available for repurchase under the Share Repurchase Program.

We expect to meet our short-term liquidity requirements generally through existing cash balances and availability under our credit facility. We believe that our existing cash balances and availability under our credit facility will be adequate to fund operating obligations, pay interest on any borrowings and fund dividends in accordance with the requirements for qualification as a REIT under the Code. We expect to meet our long-term liquidity requirements, such as hotel property acquisitions and development, and debt maturities or repayments through additional long-term secured and unsecured borrowings, the issuance of additional equity or debt securities or the possible sale of existing assets.

We intend to continue to invest in hotel properties as suitable opportunities arise. We intend to finance our future investments with free cash flow, the net proceeds from additional issuances of common and preferred shares, issuances of common units in our Operating Partnership or other securities, borrowings or asset sales. The success of our acquisition strategy depends, in part, on our ability to access additional capital through other sources. There can be no assurance that we will continue to make investments in properties that meet our investment criteria. Additionally, we may choose to dispose of certain hotels as a means to provide liquidity.

We had no material off-balance sheet arrangements at September 30, 2025.

Dividend Policy

Our dividend policy for common shares has been to distribute, annually, approximately 100% of our annual taxable income. During the nine months ended September 30, 2025, the Company declared total dividends on common shares of $ 0.27 per share and distributions on LTIP units of $ 0.27 per unit. We plan to pay dividends required to maintain REIT status. The amount of any dividend is determined by our Board of Trustees.

Chatham declared dividends of $1.24218 per share of 6.625% Series A Cumulative Redeemable Preferred Shares during the nine months ended September 30, 2025.

Inflation

Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. However, competitive pressures may limit the ability of our management companies to raise room rates. Inflation may also affect our expenses and costs of capital investments by increasing, among other things, the costs of construction, labor, employee-related benefits, food, commodities and other materials, taxes, property and casualty insurance and utilities.

Seasonality

Demand for our hotels is affected by recurring seasonal patterns. Generally, we expect that we will have lower revenue, operating income and cash flow in the first and fourth quarters and higher revenue, operating income and cash flow in the second and third quarters. These general trends are, however, influenced by overall economic cycles and the geographic locations of our hotels. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenue, we expect to utilize cash on hand or borrowings under our credit facility to pay expenses, debt service or to make distributions to our equity holders.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. While we do not believe the reported amounts would be materially different, application of these policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on experience and on various other assumptions that are believed to be reasonable under the circumstances. All of our significant accounting policies, including certain critical accounting estimates, are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

We may be exposed to interest rate changes primarily as a result of maintaining floating rate borrowings under our revolving credit facility and term loan, assumption of long-term debt in connection with our acquisitions, and upon refinancing of existing debt. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we seek to borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates. With respect to variable rate financing, we will assess interest rate risk by identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.

The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates. Rates take into consideration general market conditions, maturity and fair value of the underlying collateral. The estimated fair value of the Company’s fixed rate debt at September 30, 2025 and December 31, 2024 was $153.0 million and $164.8 million, respectively.

At September 30, 2025, our consolidated debt was comprised of floating and fixed interest rate debt. The fair value of our fixed rate debt indicates the estimated principal amount of debt having the same debt service requirements that could have been borrowed at the date presented, at then current market interest rates. The following table provides information about the maturities of our financial instruments as of September 30, 2025 that are sensitive to changes in interest rates (dollars in thousands):

As of September 30, 2025, we estimate that a hypothetical 100 basis points increase in SOFR would result in additional interest of approximately $2.0 million annually. This assumes that the amount of floating rate debt outstanding on our revolving credit facility and unsecured term loan remains $200.0 million, the total balance as of September 30, 2025.

Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the Risk Factors previously disclosed under Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2024.