Chris Daly – IR, Daly Gray, Inc. Jeff Fisher - Chairman, President and CEO Dennis Craven - EVP and CFO.

Anthony Powell - Barclays Capital Gaurav Mehta - Cantor Fitzgerald.

Good day. And welcome to the Daly Gray Public Relations’ Chatham Lodging Announces Fourth Quarter Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Chris Daly. Please go ahead..

Thank you, Christy. Good morning, everyone. Welcome to the Chatham Lodging Trust fourth quarter 2014 results conference call. This morning, before the opening of the market, Chatham released results for the fourth quarter of 2014 and I hope you’ve had a chance to review the press release.

If you did not receive a copy of the release or you would like one, please call my office at (703) 435-6293 and we’ll be more than happy to email you one, or you may view the release online on Chatham’s website, www.chathamlodgingtrust.com.

Today’s conference call is being transmitted live via telephone and by webcast over Chatham’s website and at streetevents.com. A recording of the call will be available by telephone until 2 p.m. Eastern on Tuesday, March 3rd, 2015, by dialing 1 (888) 203-1112, reference number 7528365.

A replay of the conference call will be posted on Chatham’s website. As a reminder, this conference call is the property of Chatham Lodging Trust and any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Chatham is prohibited.

Before we begin, management has asked me to remind you that in keeping with the SEC’s Safe Harbor guidelines, today’s conference call may contain forward-looking statements about Chatham Lodging Trust, including statements regarding future operating results and the timing and composition of revenues amongst others.

Except for historical information, these forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, including the volatility of the national economy, economic conditions generally in the hotel and real estate markets specifically, international and geopolitical difficulties or health concerns, governmental actions, legislative and regulatory changes, availability of debt and equity capital, interest rates, competition, weather conditions or natural disasters, supply and demand for lodging facilities in our current and proposed market areas, and the company’s ability to manage integration and growth.

Additional risks are discussed in the company’s filings with the Securities and Exchange Commissions. All information in this call is as of February 24, 2014 unless otherwise noted, and the company undertakes no obligation to update any forward-looking statements to conform the statement to actual results or changes in the company’s expectations.

During this call, we may refer to certain non-GAAP financial measures, such as EBITDA and adjusted EBITDA, which we believe to be common in the industry, and helpful indicators of our performance. In keeping with SEC regulations, we have provided and encourage you to refer to reconciliations of these measures to GAAP results in our earnings release.

Now, to provide you with some insight into Chatham’s 2014 fourth quarter results, allow me to introduce Jeff Fisher, Chairman, President and Chief Executive Officer and Dennis Craven, Executive Vice President and Chief Financial Officer. Let me turn over the session to Jeff.

Jeff?.

Thanks. Good morning, everyone.

Before we look forward, I think it’s worthy of note to think that to what more than 12 months ago that we were closing out what was a very strong 2013 for Chatham, arguably the best year since our IPO and here we are again today closing out 2014, which will go down certainly as a year filled with some very significant accomplishments and huge I think growth in many respects for us.

First just to kind of recap back for a moment. We essentially doubled our equity market cap to a $1 billion propelled by our shareholder return of 47%. The addition to the RMZ in May and accessing public markets to raise approximately $155 million in 2014 through an overnight offering in the use of our ATM share program.

Our operating results were outstanding with EBITDA and FFO growing 64% and 75% respectively and FFO per share jumping 28%. Accordingly, we rewarded our investors with a 25% jump in dividends per share. We consummated to recap of the Innkeepers JV, crystallizing a tax free gain of approximately $80 million on our original $37 million investment.

We then turned around in tax free manner and acquired four fantastic Residence Inns in Silicon Valley, in essence investing that $80 million with zero cost of capital at a little over a seven cap going in.

We significantly increased the size of our investment portfolio last year, making investments of approximately $500 million easily our largest year ever through the acquisition of nine hotels for approximately $450 million and the investment in the two JVs of approximately $50 million.

These investments maintain our earnings growth momentum with FFO per share expected to grow by approximately 25% in 2015. And I want to emphasize that number is without and assumes no further acquisitions this year, which we definitely do not believe will be the case, and that 25% growth is on top of the 30% growth we've experienced since 2010.

Talking about other significant acquisitions in 2014, of course in the fourth quarter, along with Northstar we closed on the $1.1 billion acquisition of the 52 hotel Inland portfolio, a portfolio of premium branded upscale extended stay in select service hotels, and as part of that acquisition we acquired 4 hotels for $107 million.

A key benefit of partnering with Northstar to acquire these large portfolios is our ability to acquire hotels out of the portfolio for our balance sheet at Chatham.

In these four hotels, we acquired two hotels in Houston, a Residence Inn and a Courtyard near our other two hotels at the medical center that will work very well together and be great investments for the long haul.

In the Addison suburb of Dallas, where we have lots of experience, we acquired a Courtyard by Marriott in a market where we already own a Hyatt House hotel and a Residence Inn.

And finally, we already own the Homewood Suites in Billerica Mass in the Route 128 corridor and the Hilton Garden Inn Burlington, Mass was acquired again, allowing us to leverage our local knowledge and our art for operational and sales expertise in that market to we believe enhance RevPAR significantly in all those hotels, as we move forward.

I think it’s important also to emphasize that we expect to remain as acquisitive in 2015 as we were in 2014. When we raised the equity last month to fund the acquisition of the San Diego Gaslamp Residence Inn, we were provided the opportunity to upsize the offering.

And because of our deep pipeline that exist here or potential acquisitions, we decided to raise the additional equity that, a role on the short term it dilutes our current earnings from our expected run rate was in 2015 and Dennis will talk about that in a little more detail.

We certainly looked at that, looked at the near term dilution and looked at our pipeline and certainly found that we will be able to utilize that capital and having the flexibility to make additional acquisitions early this year we think will substantially grow our FFO, and propel really some returns and some growth that as I mentioned should exceed to 25% number.

Approximately 90% of our portfolio was located in the top 25 MSAs and 72% of our portfolio was located on the West Coast and in the Northeast.

A key differentiation for our portfolio as we've got a significant presence out west would now approximately 46% of our hotels located in key West Coast markets like Seattle, Silicon Valley, San Diego and Los Angles which of course continue to be the higher growth markets in the US.

We expect that trend to continue through this year and beyond and we're continuing to look for acquisitions out west where job employment and corporate office development and general employment and growth is strongest.

And as most of you know, again we announced in January the pending acquisition of our hotel in the down town San Diego Gaslamp quarter. The Residence Inn and I would encourage everybody to Google that and take a peak, this again exemplifies our infill urban strategy.

The hotel is a fantastic piece of real estate in AAA location are blocked down from the conventions turner and right on the main drag, its where, it’s certainly where you want to be in that market and although you may read about other supply coming into downtown San Diego, the supply does not line-up in the Gaslamp district where we are.

We've also had a few additional demand generators, one corporate large demand generator actually coming into the market, around a corner from the hotel. So we think that asset will be the strong, strong earner for us as we move forward.

In the quarter, we saw our RevPAR rise 6.5% for the 34 hotels, excluding the four recently acquired hotels, out of Inland portfolio, RevPAR grew at 6.9%.

Our RevPAR growth was adversely impacted by a 100 basis points due to the unexpected replacement of all the copper supply piping at water piping and our Maitland, Florida, Homewood Suites, absolute RevPAR was $112 on occupancy of 75% which was down 140 basis points offset by an increase in ADR of 8.1% to $149.

Within our markets occupancy continues to climb up 1% to 73%, a sign that demand continues to grow and since our hotels are typically the strongest brands in those markets, we stand a benefit the most.

We continue to see strong growth across the portfolio with 10 of our 30 hotels posting double-digit RevPAR growth in the quarter, some of the other markets that are not the prime coastal markets in the US are obviously picking up their growth rate and you've seen that with other hotel REITs that have reported earnings already.

In our four West Coast markets RevPAR grew 10.3% to $140 with all four markets performing well. Within our West Coast markets RevPAR and our recently acquired Silicon Valley portfolio was up 10.6% for the quarter to $156, all driven by an increase in rate to approximately $200, fantastic results.

But as I actually look at January and February numbers, I see that that ADR number is growing substantially again. So, those acquisitions obviously as I said have been and will be very good for the company.

Going forward, Silicon Valley of course is really the epicenter of high tech job growth and lot's of corporate and headquarter buildings being expanded and plenty of hiring in the market and our Residence Inns of course are perfectly suited for that kind of business for the long stay and for the folks that are coming also engineers, et cetera from overseas.

And actually when you look at our West Coast holdings, you've got and particularly in Silicon Valley, but thoroughwort the West Coast, you've got all Residence Inns and all upscale extended stay hotels because even in Carlsbad, which is the only non- Residence Inns, that’s you know, the very strong branded flag Homewood suites by Hilton.

So, that kind of hotel and our specific acquisition strategy I think really dovetails well with the kind of growth that is occurring in those markets.

The four hotels we recently acquired out of the Inland portfolio saw a modest RevPAR growth of only 2.9% in the quarter, which really is a combination of challenges related to transition of the hotels, also Island's efforts in repositioning the right mix at the hotels, which is an important part of our strategy that we identified when we acquired those hotels, that in the longer haul will drive strong ADR increases and strong RevPAR.

Of course, couple of those hotels are in Huston. We all know that the Houston market in the fourth quarter and so far in the first quarter is not one of the strongest markets in the United States. So we have a little bit of drag there.

Although, again, we are budgeting and continue to feel good about the kind of growth through the entire year that we expect to see out of those hotels. The D.C. area continues to show signs of recovery, with both of our D.C. hotel and our Tysons Corner, Virginia market seeing RevPAR growth of more than 10%.

So we're feeling a little better as we move ahead. Of course, we'll come in up with some pretty lousy numbers out there generally, particularly, as to ADR. The converted D.C. Residence Inns has maintained a strong RevPAR index of approximately 110 through 2014 compared to its highest index as double three which is topped out at 106.

So we're pleased with the outcome of that re-branding and continue to see that as a very strong long-term haul. With the significant development also occurring in Tysons Corner as a result of the long awaited re-zoning there, that hotel I think is poised to have great numbers and outperformed over the long haul.

So top line revenue growth exceeding our expectations, our hotel EBITDA margins advanced to very strong 370 basis points to 39.7, slightly down from our guidance of 40%, but still the highest among all lodging companies and REITs and evidence that our strategy really of acquiring high quality hotels and pairing them with a great operator does produce great results.

Profit flow through in the quarter was a strong 68%, operating leverage which we measure as a percentage increase in GOP over the percent increase in revenue was a very solid 1.7 times in the quarter. And we should be able to maintain flow through in the 60% range as ADR makes up most, but if not all the RevPAR gains over the next couple of years.

As you know, we've got the best-in-class portfolio through our affiliation with Island with three decades of experience investing and operating primarily select service and upscale extended stay hotels.

And I believe certainly that we've got a unique understanding of how to generate significant value in this space and I think we've proven it so far and I expect will continue to prove that as we move forward.

Dennis?.

Thank you, Jeff. Good morning, everybody. For the fourth quarter, we reported a net loss of $5.3 million or $0.16 per diluted share, compared to a net loss of $0.1 million or $0.01 per diluted share in the 2013 fourth quarter. Adjusted FFO for the quarter was $12.7 million.

The primary differences between net income and FFO relate to the non-cash cost such as depreciation, which was $10.7 million in the quarter, expenses related to the Innkeepers joint venture of $1 million and acquisition cost of approximately $3 million, related to the inland joint venture transactions.

Additionally another reconciling item between net income or net loss and adjusted FFO is our share of those particular items within the joint ventures and in the quarter that was $3.3 million. Fourth quarter RevPAR was up 6.5% to $112 within our guidance range of 5.5% to 7.5%.

As Jeff spoke to earlier, our Homewood Suites in Maitland was adversely impacted due to the significant displacement related to the replacement of the copper water supply lines, providing water throughout the hotel.

At various times throughout the fourth quarter, we had as much as 50% of the hotel out of service and consequently RevPAR at the hotel was down almost 50% in the fourth quarter. The expected replacement of the copper wire -- the copper water supply lines is expected to be completed here within the next couple of weeks.

Almost all of our markets have performed strongly over the year with essentially half of our 34 hotels seeing double-digit RevPAR growth throughout 2014 and as we've spoken about previously really the only challenging hotel that we knew would be in 2014 we bought was the Hampton Inn in Portland Maine, which saw new supply coming into the Downtown market.

Having said that, it actually performed much better than we expected with RevPAR down 3.4% for the full year versus the 10% that we underwrote when we bought the deal. Even when you look at 2014, after the RevPAR decline, our own leverage return was still double-digits for 2014.

So again we bought the hotel at the right price and still see very good results in 2014 and moving forward.

Adjusted EBITDA for the company rose 68% to $21.4 million for the quarter within our guidance range of $21.2 million to $22 million but with RevPAR at the middle of our guidance, our margins did come in at 39.7%, which was slightly below our range of 40% to 40.5%, which when you factor those two things together, it gives you kind of implies where we ultimately relate to in terms of EBITDA and FFO.

Margins at our Maitland Hotel were up 32% due to the impact of the replacement of the piping and consequently EBITDA at that hotel was off approximately $350,000 year-over-year, which is about a penny to our diluted share count. Having said that, our margins remain at the top of the industry.

Hotel EBITDA margins were up 370 basis points for the quarter and 400 basis points for the year to an industry leading 41.8%.

Prior peak EBITDA margins for this portfolio would still be in the mid 40s and given our RevPAR projections for 2015 and beyond, we believe we still have plenty of room for growth when it comes to margin and profit performance.

In the fourth quarter, our three joint ventures contributed approximately $2.25 million of adjusted EBITDA to our results, which was below our initial expectations of approximately $2.45 million with the shortfall due to the half a month delay in closing the inland transactions in the latter part of November.

Adjusted FFO jumped 68% to $12.7 million, up $5.1 million from the 2013 fourth quarter and on a per share basis, FFO per share rose 28% to $0.37 compared to $0.29 in 2013.

The joint venture $0.9 million or approximately $0.03 of FFO per share versus our expectation of almost a $1 million and our FFO per share of $0.37 was within our guidance range of $0.36 to $0.39.

As we eluded to in the press release, the impact from the delay in the closing of the Inland transaction as well as the Maitland piping replacement, both impacted FFO per share by a penny each and pro forma for those items, our adjusted FFO per share for the quarter would have been $0.39.

Net debt was approximately $535 million at the end of the quarter, comprised of debt of $550 million, offset by approximately $15 million of available cash and at December 31, our leverage ratio calculated as net debt divided by our hotel investments was approximately 44% at the end of the year.

During the fourth quarter, we closed on three loans aggregating $55 million, all 10-year CMBS debt with an interest rate of approximately 4.3%, bringing our average interest rate on all of our debt down to 4.6%.

Weighted average maturity on our fixed rate debt is now December of 2023, we have only $11 million of debt maturing over the next seven years with $5 million maturing next month on our Washington and Pennsylvania hotel, which currently has a rate of 5.84% and $6 million maturing in 2016.

During the fourth quarter, we accessed our ATM program delving about 176,000 shares at an average price of $27 raising proceeds of almost $5 million. For 2014 we raised over $20 million of implementing our ATM program.

In January we raised almost $120 million in a $4.025 million share offering to fund the acquisition of the $90 million residents in San Diego Gaslamp quarter. After the acquisition, we will have no borrowings outstanding on our line of credit, about $20 million of cash on our balance sheet and a leverage ratio of approximately 39%.

Our balance sheet is in excellent condition as we move forward in 2015 and our debt ratios are very healthy.

Looking at 2015, our debt service coverage ratio will be approximately 3.2 times after corporate G&A, our net debt to hotel EBITDA of approximately -- will be approximately 4.9 times on a standalone basis and 5.4 times including our share of the debt and EBITDA of our joint ventures.

As we've emphasized many times, we're comfortable in operating at higher leverage levels given our confidence in the lodging industry, our bullish outlook and the fact that borrowing rates are historically still very attractive. We will continue to use our balance sheet to fund our growth as opportunities arise.

From a leverage perspective if you assume that we will make another $200 million of acquisitions, our leverage ratio would be approximately 47%, which again is very manageable percentage given our healthy coverage ratios. As Jeff indicated we have a deep and quality pipeline that we're working to hopefully get a few deals locked up early this year.

Transitioning to 2015, our guidance assumes the renovation of the residents in Bellevue, Washington during the first quarter, Houston, Texas at West University during the second quarter and the SpringHill Suites Savannah during the fourth quarter.

Our guidance does assume that we close the San Diego Gaslamp acquisition by March 1, which we still believe we're on track to do and it also factors in the recent share offering in January.

Our guidance assumes RevPAR growth of 5% to 7% to a range of $128 to $131 for the year, which is basically in line with the RevPAR growth than most of the brands are forecasting at 5% to 7%, Smith Travel, PwC and PKF are all projecting RevPAR growth of 6.4%, 7.4% and 7.6% respectively in 2015 and when you actually look beyond 2015, Smith Travel and PKF have also put out initial RevPAR guidance for 2016 of 5.9% growth and 6.6% growth respectively.

In 2015, our strongest markets are projected to be the Denver market, Brooklyn Tennessee, Tysons Corner Virginia and Silicon Valley. Denver and Nashville were two of the strongest markets across the country in 2014 and we expect those trends will continue into 2015.

Our only stock markets are really projected to be Portland, Maine and Carlsbad, California. Portland, Maine we've talked about with the new supplier that came in -- came online in 2014.

Carlsbad, California again a little bit of new supply coming in, in the market not overly impactful, but still is causing RevPAR to not be at that 5% to 7% level, but still growing.

On a comparable same-store basis, 2014 hotel quarter by quarter RevPAR was $109 in the first quarter, $130 in the second quarter, $138 in the third quarter and $112 in the fourth quarter and $122 for the full year, that's for the 35 hotel that we’ll own here within the next week.

And in 2000 -- by quarter end 2015, our RevPAR is projected $113 to $116 in the first quarter $136 to $139 in the second quarter $145 to $148 in the third quarter, and $118 to $121 in the fourth quarter. And for the full year RevPAR is projected to range from $128 to $131.

Room revenue is expected to be in the range of $248 million to $253 million, up approximately 36% over 2014. Other revenue comprises miscellaneous revenue F&B revenue and we expect that to be approximately 5.2% to 5.5% of total revenue for the portfolio.

With the increased rate comprising all of our room revenue growth, our operating platform and quality of assets enable us to drive -- continue to drive margins higher. Accordingly we’re projecting hotel's EBITDA margins to rise 200 to 280 basis points to a range of 43.8% to 44.6% up from 41.8% in 2014.

If we look back at the last cycle, our hotel EBITDA margins were in the mid-40s, so again we still have plenty of room for growth there over the next couple of years and in fact when you go below the hotel operating line with respect to guidance from a corporate perspective, we anticipate corporate cash, administrative expenses to be $8 million up approximately 4% from 2014 of $7.7 million.

Corporate non-cash administrative expenses, which represent primarily share based amortization for the Board and for the executives is expected to be $2.7 million up from $2.5 million in 2013.

Interest expense is projected to be approximately $25.6 million or $6.4 million per quarter up from the $19.8 million in 2014 obviously due to the new debt issued to fund the $500 million of hotel investment that we made in 2014.

We are forecasting LIBOR to grow approximately 30 basis points over the course of 2015, and our projections do not include any other changes to our capital stack or equity offerings through the balance of the year.

We are forecasting non-cash amortization of deferred financing fees to be $1.9 million, which is up from $1.7 million in 2014 due to the new loans that we issued in 2014 and the amortization of franchise fee that we paid on the acquisitions that we made in 2014.

On a full year basis the three joint ventures are expected to contribute $17.8 million to $18.8 million of EBITDA in 2014 and $11.3 million to $12.3 million of FFO or approximately $0.29 to $0.33 per share in 2015. From a cash flow perspective, capital expenditures for Chatham are expected to be $17 million in 2015, in line with our spending in 2014.

The CapEx spend is broken down as follows, $9.5 million on major innovations, $2.5 million related to major mechanical items such as heating and cooling equipment, $1 million related to periodic mattress replacements, $1 million related to key brand required upgrades such as technology and room amenities.

The balance of $3 million pertains to miscellaneous and unexpected emergency type items that will occur. We do have the Silicon Valley expansions as well that are not included in that capital expense number.

We do expect to begin construction on the 32 room addition in Mountain View in the second quarter with an expected completion date sometime around the end of the year.

And looking ahead to 2016 for the Mountain View Tower, the additional 32 rooms is expected to add approximately $1.1 million of FFO or approximately $0.03 per share on a run rate basis in 2016. We expect construction on the two Sunnyvale locations to start later this year with limited spending occurring this year.

In the San Antonio, excuse me, the San Mateo expansion, the times are little bit longer because although the land is properly entitled special approvals have to be obtained in an area called Mariners Island that we’re currently working on and hopefully we’ll be able to bring that timing a little bit sooner.

So when you rolled all up 2015 is yet again going to be a year of outperformance and that's before we acquire any additional hotels.

Based on the mid-point of our guidance, adjusted EBITDA projected up 50% year-over-year and we expect the quarterly contribution of EBITDA per share or EBITDA to be approximately 18% in the first quarter, 29% in the second quarter, 31% in the third quarter and 22% in the fourth quarter.

Adjusted FFO likewise is expected to rise year-over-year approximately 53% to $90 million and on a per share basis, FFO per share is expected to rise almost 25% to a range of $2.30 to $2.45.

The quarterly contribution of FFO is expected to be 16% in the first quarter, 30% in the second quarter, 33%, in the third quarter, and 21% in the fourth quarter. I do want to take a minute just to clarify that our guidance is down from the hypothetical 2015 range that we provided in our December 2014 road show of $2.45 to $2.55 per share.

As Jeff spoke to earlier, the primary driver of the change is the upsize of the offering in late January, which reduced on an annualized basis FFO per share by approximately $0.09 for 2015. But to be clear that assumes that we make no additional acquisitions in 2015 outside the San Diego hotel and that’s just not going to happen.

We certainly expect to be acquisitive and when you actually look at our expectation of acquiring additional hotels for every $100 million of acquisitions that we acquire between a seven and an eight cap on 2015 depending on the financing that’s applied at the acquisitions.

Those acquisitions would be approximately $0.10 to $0.15 accretive to our earnings and that’s for our $100 million of acquisitions. So again, we got a lot of deals in the pipeline. We expect to continue to grow the company. And we expect to move that run rate of FFO subsequently higher.

The phenomenal growth already projected for 2015, we stated since our IPO that we would continue to grow our dividends in tandem with our earnings. And in January, we announced a 25% increase in our dividend to $1.20 per share, which represents a strong yield by almost 4%. The dividend is well covered at approximately 51% of our 2015 adjusted FFO.

And as a percentage of FFO per share, we paid out approximately 60% in 2012, 56% in 2013, 49% in 2014, and 50% and again likewise 51% planned in 2015. Again very strong operating performance projected for the company, strong dividends and expected continued acquisitions. So I think at this point, that concludes my remarks.

Operator, I think we’ll open it up for questions..

[Operator Instructions] And we’ll take our first question from Anthony Powell with Barclays..

Hi good morning, everyone..

Good morning Anthony..

Question on Houston like you mentioned Houston was a bit weaker in the quarter, could you elaborate on that and explain what different segments maybe underperformed, business trends you had longer term stay. And I believe you also when you mentioned your 2015 markets you did not include Houston as a weaker market.

So are you seeing any improvement in there or how do you look at Houston going forward?.

Yeah Anthony this Dennis, I think first to talk about 2015, with respect to the four Houston hotels, they certainly in the latter part of the fourth quarter and even early part of the 2015 first quarter, there’s been some weakness.

But when we actually look at those four hotels especially once you get past February, we've got -- we see double-digit RevPAR growth in those four hotels already basically on the books for March, which I think we believe that the market again a little bit of over reaction with the company certainly cutting back travel in the short-term we do believe that, that will change and behavior will modify a little bit as we get through 2015.

So we don’t think it’s going to be all doom and gloom there for the full year. For the four hotels, we’re projecting RevPAR growth in the range with the overall portfolio 5% to 7%, but yes, we did see some weakness in the fourth quarter and some weakness to start the year, but that has improved in the last few weeks..

All right just have a follow-up on that one and so we’re seeing cancellations I guess in the fourth quarter.

And do you expect those cancellations increase or decline as you go along?.

Well like I said for -- at least we don’t have an outlook in our hotel base that goes six months down the road, we can tell you what fairly short-term in the next 45 days. What we can tell you is that the trends do appear to be improving beginning like I said was kind of with March. So we’re confident that we will start to see better results there..

Let me just add one thing Anthony, we want to focus also that of course the two hotels that are right in the middle of the medical center as we look at top 10 or even 20 accounts in those hotels, we do not see oil and gas names.

The two new hotels that we acquired Residence Inn and the Courtyard at West University we do have 10% or 15% of the business let’s say attributable to names like Chevron, Shell etcetera.

And you got a little bit obviously of less production coming from those accounts in those hotels and with compression generally being in a market that has been growing at double-digit as you know generally speaking.

So you will get less compression and therefore less fill nights and that’s probably what was starting to be experienced at the end of last year in the January and February, Dennis is referring to our on the books revenue pace.

And I’ve got that sheet in front of me here and it’s certainly for the two medical center hotels are on the books number compared to the same exact time last year is up substantially from the prior year and the two West University hotels are kind of flattish to down just a little bit.

So we’re going to have to obviously like other companies watch the developments when you’re in a limited service hotel business or upscale extended stay hotel business we do not as you know have long booking windows. So all we really are going to do is look at the next month’s booking pace for the most part..

Okay, very helpful. Thank you. And on the San Diego deal, have you provided a cap rate or a purchase multiple on that transaction? And also have you allocated the $90 million between the hotel and the retail and the parking garage. That’s all from me. Thank you..

Yeah, we haven’t talked about – yes, we will -- we do expect to close it in the next week. We’ll tell you that we on a underwritten basis, we think the year one cap rate is about 7.6%. We will be sending out the press release here within the next week, we typically disclose that cap rate so comfortable putting that out there in this point in time.

We haven’t gone through the process of allocating the value throughout the retail and the garage components to the breakout of the $90 million but we’ll provide that as part of the release..

And we’ll go to our next question Gaurav Mehta with Cantor Fitzgerald..

Yeah hi, good morning..

Good morning, Gaurav..

Yeah, on the $0.09 dilution that you mentioned in the guidance to be temporary, can you comment on the timing of new acquisition that you're expecting in 2015?.

Of our pipeline closing deals..

Of the pipeline….

We generally don’t as you know comment specifically, because we don’t want people all a sudden to start swatting in number quarterly for acquisition assumptions, but like Dennis said, here starting off the year with a $90 million acquisition and with a pipeline that probably altogether at least as of now has a couple of $100 million overall in it, I would certainly think that early as we said, let’s just say or sometime early to mid 2015 we should have more acquisitions to talk about, but we got some more work to do on these deals as well..

And then how many assets what -- how many assets can you acquire using the proceeds from the upside offering and remaining within your target leverage level?.

Yeah, Gaurav, we I think to put at pencil $200 million, I think that’s where we would sit here and tell you that’s our goal for the next few months is to try and do some decent deals adding up to somewhere around that number that will put our leverage level around 47%, which is very manageable..

Okay, and lastly you mentioned that you’re seeing a deepened quality acquisition pipeline.

Can you comment on what kind of assets you're seeing in the market, is it mostly one-off portfolios or is it large portfolios that you're seeing?.

There’s a little mix bag out there. There are no billion dollar portfolios such as 2014 started out with -- there is a few $200 million to $300 million portfolios out there and then there’s some owners we’re talking to on a direct basis as always it’s our two-prong strategy for the one-off deal.

The cherry pick deal like the gas lamp deal to start out with we have two or three of those that are being qualified now and talking about and so we still see the year as being a pretty good year on that front..

Great, that’s all I had..

Thank you..

[Operator Instructions] There are no questions in the queue at this time..

Well, I appreciate everybody being on the call again. And as I said, I certainly think we've got a unique hotel platform here at Chatham with our focus on premium branded upscale that is stay and select service hotels.

And utilizing our very targeted kind of cherry picking locations that have strong underlying demand growth with infill locations in these urban sites outside of New York City. And again I think just looking at the Gaslamp acquisition absolutely exemplifies Ontario, state that we want to own here at Chatham.

And you look back through 2014 at our one-off acquisitions whether it was the Residence Inn and Downtown Bellevue where we saw opportunity in taking that over where Marriott was managing that hotel and creating some upside there in moving around the mix of business in the hotels and in hotel which we’ve successfully accomplished and got some good strong RevPAR growth and earnings growth out of that location that’s fantastic.

By the way we haven’t talked about Gaslamp deal again an opportunity to go from Marriott managed to Island managed, so we hope although Marriott has done a great job there, we hope to see some upside on the revenue side as we move to 2015 and that hotel in a strong market.

So again I think the strategy both from an internal growth perspective and external growth perspective has certainly proven itself out. So we look forward again to continue to build on our past successes for this 2015 year and continue to grow as Dennis mentioned and enhance our cash flow as we move forward. Thanks everybody for listening today..

That concludes today’s conference. Thank you for your participation..