Chesapeake Lodging Trust Reports First Quarter Results; Pro Forma RevPAR Increased 8.9% and Pro Forma Hotel EBITDA Margin Increased 320 Basis Points

Chesapeake Lodging Trust (NYSE:CHSP), a lodging real estate investment trust (REIT), reported today its financial results for the quarter ended March 31, 2011.

CONSOLIDATED FINANCIAL RESULTS

The Company’s consolidated financial results for the three months ended March 31, 2011 and 2010 include the following (in millions, except per share amounts):

"Our portfolio of five hotels owned during the quarter performed strongly with pro forma RevPAR for the first quarter 2011 increasing 8.9% over the same period in 2010,” said James L. Francis, Chesapeake’s President and Chief Executive Officer. "The pro forma RevPAR increase was driven by double-digit average rate growth, resulting in pro forma Hotel EBITDA growth of 27.3% and a very healthy improvement in pro forma Hotel EBITDA Margin of 320 basis points over the same period in 2010.” RevPAR is defined as room revenue per available room. Pro forma RevPAR, pro forma Hotel EBITDA, and pro forma Hotel EBITDA Margin are calculated irrespective of the hotel property owner during the periods compared.

Funds from operations (FFO), Adjusted FFO (AFFO), net income before interest, income taxes, and depreciation and amortization (Corporate EBITDA), Adjusted Corporate EBITDA, Hotel EBITDA, and Hotel EBITDA Margin are non-GAAP financial measures within the meaning of the rules of the Securities and Exchange Commission. See the discussion included in this press release for information regarding these non-GAAP financial measures.

ACQUISITION ACTIVITY

On February 23, 2011, the Company entered into a definitive agreement to acquire the 204-room Courtyard Washington Capitol Hill/Navy Yard located in Washington, DC for a purchase price of $68.0 million, or approximately $333,000 per key. The Company intends to assume approximately $37.6 million of existing mortgage debt, which has a fixed interest rate of 5.90% per annum and matures in November 2016. The Company expects the acquisition to close in June 2011.

BALANCE SHEET / LIQUIDITY

On January 21, 2011, the Company amended its credit agreement, increasing the maximum amount that the Company may borrow under the secured revolving credit facility from $115.0 million to $150.0 million. The amended credit agreement also provides for the possibility of further future increases, up to a maximum of $200.0 million, in accordance with certain terms.

On March 4, 2011, the Company completed an underwritten public offering of 12,500,000 common shares. On March 30, 2011, the Company sold an additional 1,050,000 common shares as a result of the exercise of the underwriters’ option to purchase additional shares. After deducting underwriting fees and offering costs, the Company generated total net proceeds of approximately $229.9 million.

For the quarter ended March 31, 2011, the Company generated $0.7 million of cash flows from operating activities, used $4.6 million in net investing activities, and obtained $180.6 million from net financing activities, including $229.9 million from the sale of common shares, offset by a repayment of $45.0 million on outstanding borrowings under the Company’s revolving credit facility.

As of March 31, 2011, the Company had $187.2 million of cash and cash equivalents. Total assets were $604.7 million, including $397.7 million of real estate, long-term debt was $60.0 million, and shareholders’ equity was $527.5 million.

DIVIDENDS

On January 14, 2011, the Company paid a dividend of $0.20 per share to its common shareholders of record as of December 31, 2010. On March 17, 2011, the Company declared a dividend in the amount of $0.20 per share payable to its common shareholders of record as of March 31, 2011. The dividend was paid on April 15, 2011.

SUBSEQUENT EVENT

On May 2, 2011, the Company acquired the 195-room Homewood Suites Seattle Convention Center located in Seattle, Washington for approximately $53.0 million. The Company funded the acquisition with proceeds from its equity offering completed in March 2011. The Company entered into an agreement with Evolution Hospitality (formerly Tarsadia Hotels) to manage the hotel under the Homewood Suites flag.

After the funding of the acquisition of the Homewood Suites Seattle Convention Center and the pending acquisition of the Courtyard Washington Capitol Hill/Navy Yard, the Company will have approximately $430 million of remaining investment capacity based upon targeted leverage levels.

2011 OUTLOOK

Based on the operating trends and fundamentals of the Company’s current six-hotel portfolio, the Company reaffirms its previously provided estimates that these assets will produce the following results for 2011:

• Year-over-year increase in RevPAR will range from 8.0% to 10.0%; and
• Hotel EBITDA will range from $39.0 million to $41.0 million.

"We were pleased with the significant level of investor interest and support in our recent public offering, which has given us the ability to continue taking advantage of opportunities to add high-quality hotels to our portfolio at compelling entry points,” said James L. Francis, Chesapeake’s President and Chief Executive Officer. "We are engaged in exclusive negotiations on several hotels with purchase prices aggregating approximately $240 million. In addition, based on our robust acquisition pipeline, we feel strongly that we can commit our entire remaining capacity in the next 90 days.”

NON-GAAP FINANCIAL MEASURES

The Company reports the following six non-GAAP financial measures that it believes are useful to investors as key measures of its operating performance: (1) FFO, (2) AFFO, (3) Corporate EBITDA, (4) Adjusted Corporate EBITDA, (5) Hotel EBITDA, and (6) Hotel EBITDA Margin. A reconciliation of these non-GAAP financial measures is included in the accompanying financial tables.

FFO – The Company calculates FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which defines FFO as net income (calculated in accordance with GAAP), excluding depreciation and amortization, gains (losses) from sales of real estate, the cumulative effect of changes in accounting principles, and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. By excluding the effect of depreciation and amortization and gains (losses) from sales of real estate, both of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, the Company believes that FFO provides investors a useful financial measure to evaluate the Company’s operating performance.

AFFO – The Company further adjusts FFO for certain additional recurring and non-recurring items that are not in NAREIT’s definition of FFO. Specifically, the Company adjusts for hotel property acquisition costs and non-cash amortization of intangible assets. The Company believes that AFFO provides investors with another financial measure of its operating performance that provides for greater comparability of its core operating results between periods.

Corporate EBITDA – Corporate EBITDA is defined as net income before interest, income taxes, and depreciation and amortization. The Company believes that Corporate EBITDA provides investors a useful financial measure to evaluate the Company’s operating performance, excluding the impact of the Company’s capital structure (primarily interest expense) and the Company’s asset base (primarily depreciation and amortization).

Adjusted Corporate EBITDA – The Company further adjusts Corporate EBITDA for certain additional recurring and non-recurring items. Specifically, the Company adjusts for hotel property acquisition costs and non-cash amortization of intangible assets. The Company believes that Adjusted Corporate EBITDA provides investors with another financial measure of its operating performance that provides for greater comparability of its core operating results between periods.

Hotel EBITDA – Hotel EBITDA is defined as total revenues less total hotel operating expenses. The Company believes that Hotel EBITDA provides investors a useful financial measure to evaluate the Company’s hotel operating performance.

Hotel EBITDA Margin – Hotel EBITDA Margin is defined as Hotel EBITDA as a percentage of total revenues. The Company believes that Hotel EBITDA Margin provides investors another useful financial measure to evaluate the Company’s hotel operating performance.

CONFERENCE CALL

The Company will host a conference call on Wednesday, May 4, 2011 at 10:00 a.m. Eastern Time to discuss its financial results. Interested individuals are invited to listen to the call by dialing (877) 683-0303 (U.S./Canadian callers) or (706) 643-5037 (International callers). The conference call ID is 61344144. A simultaneous webcast of the call will be available on the Company’s website at www.chesapeakelodgingtrust.com. It is recommended that participants call or log on 10 minutes ahead of the scheduled start time to ensure proper connection.

A replay of the conference call will be available two hours after the live call until midnight on May 11, 2011. To access the replay, dial (800) 642-1687 (U.S./Canadian callers) or (706) 645-9291 (International callers). The conference call ID is 61344144. A webcast replay and transcript of the conference call will be archived and available on the Company’s website for 12 months.

ABOUT CHESAPEAKE LODGING TRUST

Chesapeake Lodging Trust is a self-advised lodging real estate investment trust (REIT) focused on investments primarily in upper-upscale hotels in major business and convention markets and, on a selective basis, premium select-service and extended-stay hotels in urban settings or unique locations in the United States. The Company owns six hotel properties with an aggregate of 1,824 rooms in three states. Additional information can be found on the Company’s website at www.chesapeakelodgingtrust.com.

Note: This press release contains forward-looking statements within the meaning of federal securities regulations. These forward-looking statements are identified by their use of terms and phrases such as "anticipate,” "believe,” "could,” "estimate,” "expect,” "intend,” "may,” "should,” "plan,” "predict,” "project,” "will,” "continue” and other similar terms and phrases, including references to assumptions and forecasts, such as the Company’s expectations regarding the future Hotel EBITDA of its existing hotels, the time for completing, if at all, the pending acquisition described, and the Company’s ability and time for committing its remaining investment capacity. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: our ability to complete acquisitions; our ability to continue to satisfy complex rules in order for us to remain a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described in the Company’s filings with the SEC. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of May 3, 2011, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations, except as required by law.