1、Annual Report2014 Massachusetts(4%)Connecticut(1%)Minnesota(1%):Pennsylvania(5%)Nashville(1%)Orlando(1%)Houston(9%)Dallas(3%)San Diego(14%)Los Angeles(4%)San Antonio(3%)Washington D.C.(5%)New York(5%)Portland,ME(2%)Exeter,NH(1%)Denver(5%)Seattle(6%)Savannah,GA(6%):Silicon Valley(27%)Chatham Lodging
2、Trust is a self-advisedreal estate investment trust organized toinvest in upscale extended-stay hotels andpremium-branded select service hotels.Our properties are located in majormarkets with high barriers to entry,nearprimary demand generators for bothbusiness and leisure guests.Hotel Locations2014
3、 Chairmans LetterAfter a very successful 2013,Chatham continued building on those achievements to deliver outstandingresults in 2014.Our long-term goal is to be the leading lodging real estate investment trust(REIT)focused oninvesting in premium-branded,upscale,extended-stay and select-service hotel
4、s.We made significant stridestoward that goal in 2014 through a number of important measures:generated a total shareholder return of 47 percent,this on top of a 40 percent increase in 2013expanded equity market capitalization 87 percent to$985 millionnamed to the MSCI US REIT Index(RMZ)which represe
5、nts approximately 85 percent of the US REITuniverserealized a tax-free gain of approximately$80 million,or approximately$3 per share,on therecapitalization of the Innkeepers joint venturegrew hotel investments by approximately$500 million,or nearly 70 percent,including the acquisitionof four Silicon
6、 Valley Residence Innsincreased EBITDA 64 percentadvanced adjusted FFO almost 75 percent and adjusted FFO per share 28 percentOperating PerformanceWe achieved excellent operating performance results in our wholly-owned portfolio of 34 hotels comprising5,115 rooms.We focus on acquiring premium-brande
7、d,select-service hotels in high demand growth markets in locationswhere land costs or land availability constrain new supply.This creates an excellent opportunity for our ownedportfolio to achieve high absolute Revenue per Available Room(RevPAR).For our portfolio,RevPAR at our 34hotels rose a strong
8、 8.2 percent to$122.This comes on top of 6.4 percent in 2013 and 8 percent RevPAR growthin 2012.Industry-wide RevPAR growth of 8.3 percent in 2014 easily surpassed projections from most lodgingexperts and analysts at the beginning of the year as most people didnt expect lodging demand to grow 4.5per
9、cent against a very modest 0.9 percent increase in room supply.New supply remains well below historicallevels,and we expect that demand will outpace supply growth again in 2015.Our RevPAR performance continued its aggressive growth across our portfolio with 14 of our hotelsproducing double-digit Rev
10、PAR gains throughout the year,a remarkable accomplishment and a testament to thequality of the hotels we have in our portfolio.Boston,Nashville,Dallas,Seattle,Denver,Silicon Valley,Anaheim and Washington,D.C.,were our strongest markets.Our recently acquired hotels drove our overall portfolio RevPAR
11、growth.Our acquisition strategy focuseson acquiring hotels where RevPAR growth is projected to be higher than our current portfolio and markets matchour specific criteria.During 2014,we acquired nine hotels,including four fantastic Residence Inn by Marriott hotels in the heartof Silicon Valley,one o
12、f the strongest markets in the country and the perfect brand/segment for that market giventhe high level of longer term travelers staying in the Valley.In 2014,excluding the Hyatt Place Cherry Creekwhich was closed for a portion of 2013,the eight acquired hotels generated RevPAR growth of 10.1 perce
13、nt.RevPAR at our four Silicon Valley hotels grew 11.2 percent to$166.Adjusted EBITDA rose 64 percent to$84.5 million,adjusted FFO grew 74 percent to$55.0 million from$31.7 million,and adjusted FFO per share advanced 28 percent to$1.91 per share,driven by acquisitions andrising margins.Chatham has a
14、unique hotel platform employing Island Hospitality,our affiliated managementcompany,to aggressively operate all but two of our hotels.With RevPAR growth primarily caused by increasedrates,our unique platform demonstrated its experience and strength in accelerating profits to the bottom line andgener
15、ating strong internal profit growth.This past year,we enhanced our operating margins a stunning 340 basispoints on an already enviable 44.9 percent to 48.3 percent,and our hotel EBITDA margins improved 400 basispoints to 41.8 percent.Both margins were the highest of all lodging REITs in 2014.In addi
16、tion to generatingsuperior margins and profit growth,our hotels are recognized annually by the leading brands for their operatingexcellence and guest satisfaction scores.Acquisitions2014 was the most active year in our history with the acquisition of nine hotels for approximately$500million,a 70 per
17、cent increase for the year.The nine high quality hotels,comprising 1,520 rooms,are:231-room Residence Inn by Marriott Silicon Valley#1 Sunnyvale,Calif.248-room Residence Inn by Marriott Silicon Valley#2 Sunnyvale,Calif.160-room Residence Inn by Marriott San Mateo,Calif.112-room Residence Inn by Marr
18、iott Mountain View,Calif.194-room Hyatt Place Denver/Cherry Creek,Colo.179-room Hilton Garden Inn Burlington,Mass.176-room Courtyard by Marriott Dallas(Addison),Texas120-room Residence Inn by Marriott West University Houston,Texas100-room Courtyard by Marriott West University Houston,TexasThese hote
19、ls are located in major markets and benefit from substantial corporate demand generators andmarkets we believe are great lodging markets for the long-term.We plan to partially redevelop and expand allfour Silicon Valley Residence Inn hotels,increasing the room count by 36 percent to a total of 1,023
20、 rooms.Inaddition to the 272-room expansion,we will be developing entirely new lobby and public spaces that willenhance the guest experience.Solid Balance Sheet and Capital StructureDespite the significant acquisition growth,our balance sheet remains in excellent condition with ourleverage ratio a h
21、ealthy 43.7 percent.The average interest rate on our debt is 4.6 percent,and the weightedaverage maturity date for our fixed rate debt is December 2023.During 2014,we issued$306 million of debt at an average rate of 4.6 percent and opportunistically accessedthe equity markets to raise$165 million vi
22、a an overnight equity offering,our“At the Market Equity OfferingPlan”and our“Dividend Reinvestment and Stock Purchase Plans.”Our balance sheet is in great shape and has Chatham positioned for further portfolio growth in 2015.Weonly have$22.5 million outstanding on our line of credit that is secured
23、by ten hotels and 6 hotels areunencumbered.When we identify the right acquisition opportunities,we have the flexibility and balance sheet touse either borrowings under our line of credit or property specific debt to fund that growth.Joint VenturesIn January 2014,along with our joint venture partners
24、 Cerberus Capital Management,we marketed theInnkeepers Joint Venture portfolio for sale.In June 2014,a joint venture between Chatham and NorthStar RealtyFinance Corp.,acquired the Innkeepers portfolio.As a result of the sale,Chatham earned a significant promoteon the transaction,realizing a gain of
25、approximately$80 million on our original$37 million investment in 2011.Additionally,we rolled our gain tax-free into the new Innkeepers Joint Venture along with acquiring four SiliconValley hotels directly out of the Innkeepers Joint Venture.At the time of the transaction,the gain amounted toapproxi
26、mately$3 per share.Like the former Innkeepers Joint Venture,we are able to earn a promote interestbased on the ultimate returns generated by the joint venture.In November 2014,we formed a second joint venture partnership with NorthStar,to acquire a 52-hotelportfolio comprising 6,976 rooms from Inlan
27、d American.Chatham acquired four hotels comprising 575 roomsfor approximately$107 million from the portfolio.Concurrently,the remaining 48 upscale,extended-stay hotelsand premium-branded,select-service hotels were purchased by the NorthStar/Chatham joint venture for a grosspurchase price of$964 mill
28、ion.NorthStar owns a 90 percent ownership interest in the joint venture,and Chathamowns a 10 percent interest.Like the Innkeepers joint venture,Chatham has the potential to earn a promoteinterest in the new joint venture with terms identical to those in the Innkeepers joint venture.Both of these tra
29、nsactions provided Chatham with the opportunity to acquire eight hotels that we would nothave been able to acquire had there not been a larger transaction associated with the purchase.This is one keyreason why the joint ventures are an attractive option for us.Our ability to work with NorthStar to g
30、row intandem is meaningful to our growth strategy.Furthermore,the two joint venture transactions provide us withpartial ownership in approximately$2 billion of hotels and allow us the opportunity to leverage the infrastructurerequired for the much larger platform to Chathams benefit.Significant Divi
31、dend IncreaseAfter a strong 2014,our Board of Trustees approved in January 2015 a 25 percent increase in our monthlydividend from$0.08 per share to$0.10 per share.On an annualized basis,the dividend will increase$0.24 to$1.20 per share in 2015,compared to$0.96 in 2014.We have raised our annual divid
32、end each year since our2010 IPO,from$0.35 per share in 2010 to$1.20 per share for 2015,an increase of 243 percent and a testamentto the strong cash flow that our platform is generating.We are gratified that our Board of Trustees has the confidence to increase our monthly dividend once again,reflecti
33、ng our strong 2014 performance and significant portfolio growth.We have stated since our IPO that wewould increase our dividend in tandem with growth in cash flow,EBITDA and adjusted FFO per share.Since2010,adjusted FFO per share has improved by approximately 30 percent per annum.We expect continued
34、 stronggrowth in 2015,giving us the confidence to support this significant increase and maintain a healthy and prudentFFO per share payout ratio at approximately 50 percent in 2015,based on the mid-point of our current guidance.Outlook Points to Meaningful Growth Again in 2015Most of us in the indus
35、try believe we still have running room remaining in this lodging cycle.Two leadingindustry forecasters,STR,Inc.,and PKF Hospitality Research,LLC,currently estimate RevPAR growth of 6.4percent and 7.6 percent,respectively for 2015.They estimate new supply growth will be 1.3 percent in 2015 andon aver
36、age 1.6 percent in 2016,measures that remain at historical lows.Our financial outlook for 2015 is robust,and we expect another year of significant growth.Based on themid-point of our 2015 guidance,our best-in-class operating margins are estimated to rise approximately 240basis points from 41.8 perce
37、nt to 44.2 percent,and our adjusted FFO per share is projected to increase animpressive 25 percent to$2.38.We estimate our 2015 RevPAR will improve 5 to 7 percent to approximately$130.These are strong growth dynamics and one of the reasons why we remain bullish on our portfolio and ourexternal growt
38、h opportunities.Our portfolio is in great shape,and we are well-positioned to benefit greatly asthese metrics improve further.Externally,we maintain an active pipeline,and we expect to make additionalacquisitions in 2015.We continue to seek market transactions in targeted markets that provide enhanc
39、edRevPAR growth opportunities above both national averages and our current owned portfolio.We have one of thehighest quality,select-service and upscale,extended-stay investment portfolios in the hotel REIT space,and wewill continue to identify and acquire assets that exceed our very strict acquisiti
40、on criteria.As the current lodging cycle develops,experience matters.Our team has navigated through many lodgingcycles.We will continue to pursue our goal of building Chatham into the premier,select-service hotel REITthrough disciplined acquisitions financed with the right balance of equity and debt
41、.Thank you for your support.We truly appreciate it.Sincerely,Jeffrey H.FisherChairman,Chief Executive Officer and PresidentApril 9,2015UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For th
42、e fiscal year ended December 31,2014OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period fromtoCommission File Number:001-34693CHATHAM LODGING TRUST(Exact Name of Registrant as Specified in Its Charter)Maryland27-1200777(State or Other Ju
43、risdiction ofIncorporation or Organization)(I.R.S.EmployerIdentification No.)50 Cocoanut Row,Suite 211Palm Beach,Florida33480(Zip Code)(Address of Principal Executive Offices)(561)802-4477(Registrants Telephone Number,Including Area Code)Securities registered pursuant to Section 12(b)of the Act:Titl
44、e of Each ClassName of Each Exchange on Which RegisteredCommon Shares of Beneficial Interest,par value$0.01 pershareNew York Stock ExchangeSecurities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of
45、the Securities Act.Yes NoIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes NoIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of
46、 1934 during thepreceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90days.Yes NoIndicate by check mark whether the registrant has submitted electronically and posted on its corporate We
47、b site,if any,every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrantwas required to submit and post such files).Yes NoIndicate by check mark if disclos
48、ure of delinquent filers pursuant to Item 405 of Regulation S-K(229.405 of this chapter)is not contained herein,and will not becontained,to the best of registrants knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendmentto the F
49、orm 10-K.Yes NoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smaller reporting company.See thedefinitions of“large accelerated filer,”“accelerated filer”and“smaller reporting company”in Rule 12b-2 of the Exchange Act.Larg
50、e accelerated filer Accelerated filerNon-accelerated filer(Do not check if a smaller reporting company)Smaller reporting company Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes NoIndicate the number of shares outstanding of each of t
51、he issuers classes of common stock,as of the latest practicable date.The aggregate market value of the 26,877,757 common shares of beneficial interest held by non-affiliates of the registrant was$588,622,878.30 based on theclosing sale price on the New York Stock Exchange for such common shares of b
52、eneficial interest as of June 30,2014.The number of common shares of beneficial interest outstanding as of March 16,2015 was 38,298,287.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrants Definitive Proxy Statement for its 2015 Annual Meeting of Shareholders(to be filed with the Securitie
53、s and Exchange Commission onor before April 30,2015)are incorporated by reference into this Annual Report on Form 10-K in response to Part III hereof.TABLE OF CONTENTSPagePART I.Item 1.Business.4Item 1A.Risk Factors.15Item 1B.Unresolved Staff Comments.33Item 2.Properties.34Item 3.Legal Proceedings.3
54、5Item 4.Mine Safety Disclosures.35PART II.Item 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases ofEquity Securities.36Item 6.Selected Financial Data.40Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.41Item 7A.Quantita
55、tive and Qualitative Disclosures about Market Risk.63Item 8.Consolidated Financial Statements and Supplementary Data.64Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.64Item 9AControls and Procedures.64Item 9B.Other Information.65PART III.Item 10.Trustees,
56、Executive Officers and Corporate Governance.66Item 11.Executive Compensation.66Item 12.Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters.66Item 13.Certain Relationships and Related Transactions,and Trustee Independence.66Item 14.Principal Accountant Fees a
57、nd Services.66PART IVItem 15.Exhibits and Financial Statement Schedules.672CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis report contains forward-looking statements within the meaning of Section 27A of the Securities Act of1933 and Section 21E of the Securities Exchange Act of 1934,and as
58、such may involve known and unknownrisks,uncertainties and other factors which may cause our actual results,performance or achievements to bematerially different from future results,performance or achievements expressed or implied by such forward-looking statements.Forward-looking statements,which ar
59、e based on certain assumptions and describe our futureplans,strategies and expectations,are generally identified by our use of words,such as“intend,”“plan,”“may,”“should,”“will,”“project,”“estimate,”“anticipate,”“believe,”“expect,”“continue,”“potential,”“opportunity,”or similar expressions,whether i
60、n the negative or affirmative.All statements regarding our expected financialposition,business and financing plans are forward-looking statements.Factors which could have a materialadverse effect on our operations and future prospects include those discussed in“Business,”“Risk Factors,”“Managements
61、Discussion and Analysis of Financial Condition and Results of Operations,”and elsewhere inthis Annual Report on Form 10-K.These risks and uncertainties should be considered in evaluating any forward-looking statement contained in this report or incorporated by reference herein.All forward-looking st
62、atements speak only as of the date of this report or,in the case of any documentincorporated by reference,the date of that document.All subsequent written and oral forward-looking statementsattributable to us or any person acting on our behalf are qualified by the cautionary statements in this secti
63、on.Weundertake no obligation to update or publicly release any revisions to forward-looking statements to reflectevents,circumstances or changes in expectations after the date of this report,except as required by law.3PART IItem 1.BusinessOverviewChatham Lodging Trust(“we,”“us”or the“Company”)was fo
64、rmed as a Maryland real estate investmenttrust on October 26,2009.We elected to be taxed as a real estate investment trust for federal income tax purposes(a“REIT”)commencing with our 2010 taxable year.The Company is internally-managed and was organized toinvest primarily in premium-branded upscale e
65、xtended-stay and select-service hotels.The Company had no operations prior to the consummation of its initial public offering(“IPO”)in April2010.The net proceeds from our share offerings are contributed to Chatham Lodging,L.P.,our operatingpartnership(the“Operating Partnership”),in exchange for part
66、nership interests.Substantially all of theCompanys assets are held by,and all of its operations are conducted through,the Operating Partnership.Chatham Lodging Trust is the sole general partner of the Operating Partnership and owns 100%of the commonunits of limited partnership interest in the Operat
67、ing Partnership.Certain of the Companys executive officershold vested and unvested long-term incentive plan units in the Operating Partnership,which are presented asnon-controlling interests on our consolidated balance sheets.From its inception through December 31,2014,the Company has completed the
68、following offerings of itscommon shares of beneficial interest,$0.01 par value per share(“common shares”):Type of OfferingDateShares IssuedPriceperShareGross Proceeds(in millions)Net Proceeds(in millions)Initial public offering.4/21/20108,625,000$20.00$172,500.0$158,700.0Private placement offering(1
69、).4/21/2010500,00020.0010,000.010,000.0Follow-on common share offering.2/8/20114,000,00016.0064,000.060,300.0Over-allotment option.2/8/2011600,00016.009,600.09,100.0Follow-on common share offering.1/14/20133,500,00014.7051,400.048,400.0Over-allotment option.1/31/201392,67714.701,400.01,300.0Follow-o
70、n common share offering.6/18/20134,500,00016.3573,600.070,000.0Over-allotment option.6/28/2013475,82316.357,800.07,400.0Follow-on common share offering.9/30/20133,250,00018.3559,600.056,700.0Over-allotment option.10/11/2013487,50018.358,900.08,500.0Follow-on common share offering.9/24/20146,000,0002
71、1.85131,100125,600Over-allotment option.9/24/2014900,00021.8519,70018,90032,931,000$609,600$574,900(1)The Company sold 500,000 common shares to Jeffrey H.Fisher,the Companys Chairman,President andChief Executive Officer(“Mr.Fisher”)in a private placement concurrent with the closing of its IPO.In Jan
72、uary 2014,the Company established a$25 million dividend reinvestment and stock purchase plan(“DRSPP”).Under the DRSPP,shareholders may purchase additional common shares by reinvesting some or allof the cash dividends received on the Companys common shares.Shareholders may also make optional cashpurc
73、hases of the Companys common shares subject to certain limitations detailed in the prospectus for theDRSPP.As of December 31,2014 and 2013,respectively,we had issued 2,083 and 0 shares under the DRSP at aweighted average price of$24.38.As of December 31,2014,there was approximately$24.9 million of c
74、ommonsshares available for issuance under the DRSPP.In January 2014,the Company established an At the Market Equity Offering(“ATM Plan”)whereby,fromtime to time,we may publicly offer and sell up to$50 million of our common shares by means of ordinarybrokerstransactions on the New York Stock Exchange
75、(the“NYSE”),in negotiated transactions or intransactions that are deemed to be“at the market”offerings as defined in Rule 415 under the Securities Act of41933,with Cantor Fitzgerald&Co.(“Cantor”)acting as sales agent.As of December 31,2014 and 2013,respectively,we had issued 880,820 and 0 shares und
76、er the ATM Plan at a weighted average price of$23.54 inaddition to the offerings discussed above.As of December 31,2014,there was approximately$29.3 millioncommons shares available for issuance under the ATM Plan.On January 13,2015,the Company entered into a Sales Agreement(the“Barclays Sales Agreem
77、ent”)withBarclays Capital Inc.(“Barclays”)to add Barclays as an additional sales agent under the Companys existing“at-the-market”offering program for its common shares of beneficial interest,par value$0.01 per share(the“Common Shares”).As of December 31,2014,the Company owned 34 hotels with an aggre
78、gate of 5,115(unaudited)roomslocated in 15 states and the District of Columbia.The Company also(i)held a 10.3%noncontrolling interest in ajoint venture(the“NewINK JV”)with NorthStar Realty Finance Corp(“NorthStar”),which was formed in thesecond quarter of 2014 and acquired 47 hotels from a joint ven
79、ture(the“Innkeepers JV”)between the Companyand Cerberus Capital Management(“Cerberus”),comprising an aggregate of 6,094(unaudited)rooms,(ii)held a10.0%noncontrolling interest in a separate joint venture(the“Inland JV”)with NorthStar,which was formed inthe fourth quarter of 2014 and acquired 48 hotel
80、s from Inland American Real Estate Trust,Inc.(“Inland”),comprising an aggregate of 6,401(unaudited)rooms,and(iii)held a 5.0%noncontrolling interest in a jointventure(the“Torrance JV”)with Cerberus that owns the 248-room(unaudited)Residence Inn by Marriott inTorrance,CA.We sometimes refer to the NewI
81、NK JV,Inland JV and Torrance JV collectively as the(“JVs”).To qualify as a REIT,the Company cannot operate its hotels.Therefore,the Operating Partnership and itssubsidiaries lease our wholly owned hotels to taxable REIT subsidiary lessees(“TRS Lessees”),which arewholly owned by one of the Companys t
82、axable REIT subsidiary(“TRS”)holding companies.Each hotel isleased to a TRS Lessee under a percentage lease that provides for rental payments equal to the greater of(i)afixed base rent amount or(ii)a percentage rent based on hotel room revenue.The initial term of each of the TRSleases is 5 years.Lea
83、se revenue from each TRS Lessee is eliminated in consolidation.The Company indirectlyowns its(i)10.3%interest in 47 of the NewINK JV hotels,(ii)10%interest in 48 of the Inland JV hotels and(iii)its 5%interest in the Torrance JV through the Operating Partnership.All of the NewINK JV hotels,InlandJV h
84、otels and the Torrance JV hotel are leased to TRS Lessees,in which the Company indirectly ownsnoncontrolling interests through one of its TRS holding companies.The TRS Lessees have entered into management agreements with third-party management companies thatprovide day-to-day management for the hote
85、ls.As of December 31,2014,Island Hospitality Management Inc.(“IHM”),which was 90%owned by Mr.Fisher,managed 32 of the Companys wholly owned hotels andConcord Hospitality Enterprises Company(“Concord”)managed two of the Companys wholly owned hotels.Asof December 31,2014,all of the NewINK JV hotels we
86、re managed by IHM.As of December 31,2014,34 of theInland JV hotels are managed by IHM and 14 hotels are managed by Marriott International,Inc.(“Marriott”).The Torrance JV hotel is managed by Marriott.As of December 31,2014,our wholly owned hotels include upscale extended-stay hotels that operate und
87、erthe Residence Inn by Marriottbrand(twelve hotels)and Homewood Suites by Hiltonbrand(nine hotels),aswell as premium-branded select-service hotels that operate under the Courtyard by Marriottbrand(four hotels),the Hampton Inn or Hampton Inn and Suites by Hiltonbrand(three hotels),the SpringHill Suit
88、es by Marriottbrand(two hotels),the Hilton Garden Inn by Hiltonbrand(two hotels)and the Hyatt Placebrand(two hotels).We primarily invest in upscale extended-stay hotels such as Homewood Suites by Hiltonand ResidenceInn by Marriott.Upscale extended-stay hotels typically have the following characteris
89、tics:principal customer base includes business travelers who are on extended assignments and corporaterelocations;5services and amenities include complimentary breakfast and evening hospitality hour,high-speedinternet access,in-room movie channels,limited meeting space,daily linen and room cleaning
90、service,24-hour front desk,guest grocery services,and an on-site maintenance staff;andphysical facilities include large suites,quality construction,full separate kitchens in each guest suite,quality room furnishings,pool,and exercise facilities.We also invest in premium-branded select-service hotels
91、 such as Courtyard by Marriott,Hampton Inn andSuites,Hyatt Place,Hilton Garden Inn by Hiltonand SpringHill Suites by Marriott.The service andamenity offerings of these hotels typically include complimentary breakfast,high-speed internet access,localcalls,in-room movie channels,and daily linen and ro
92、om cleaning service.6The following sets forth certain information with respect to our 34 wholly-owned hotels at December 31,2014:PropertyLocationManagementCompanyDate ofAcquisitionYearOpenedNumber ofRoomsPurchase PricePurchase Priceper RoomMortgage DebtBalanceHomewood Suites by HiltonBoston-Billeric
93、a/Bedford/BurlingtonBillerica,MassachusettsIHM4/23/20101999147$12.5 million$85,714$16.2 millionHomewood Suites by HiltonMinneapolis-Mall of AmericaBloomington,MinnesotaIHM4/23/20101998144$18.0 million$125,000Homewood Suites by HiltonNashville-BrentwoodBrentwood,TennesseeIHM4/23/20101998121$11.3 mill
94、ion$93,388Homewood Suites by HiltonDallas-Market CenterDallas,TexasIHM4/23/20101998137$10.7 million$78,102Homewood Suites by HiltonHartford-FarmingtonFarmington,ConnecticutIHM4/23/20101999121$11.5 million$95,041Homewood Suites by HiltonOrlando-MaitlandMaitland,FloridaIHM4/23/20102000143$9.5 million$
95、66,433Homewood Suites by HiltonCarlsbad(North San DiegoCounty)Carlsbad,CaliforniaIHM11/3/20102008145$32.0 million$220,690$19.9 millionHampton Inn&Suites Houston-Medical CenterHouston,TexasIHM7/2/20101997120$16.5 million$137,500$18.3 millionCourtyard AltoonaAltoona,PennsylvaniaConcord8/24/20102001105
96、$11.3 million$107,619$6.2 millionSpringhill Suites WashingtonWashington,PennsylvaniaConcord8/24/2010200086$12.0 million$139,535$4.8 millionResidence Inn Long IslandHoltsvilleHoltsville,New YorkIHM8/3/20102004124$21.3 million$171,774Residence Inn White PlainsWhite Plains,New YorkIHM9/23/20101982134$2
97、1.2 million$159,398Residence Inn New RochelleNew Rochelle,New YorkIHM10/5/20102000127$21.0 million$169,355$14.8 millionResidence Inn Garden GroveGarden Grove,CaliforniaIHM7/14/20112003200$43.6 million$218,000$34.0 millionResidence Inn Mission ValleySan Diego,CaliforniaIHM7/14/20112003192$52.5 millio
98、n$273,438$30.1 millionHomewood Suites by Hilton SanAntonio River WalkSan Antonio,TexasIHM7/14/20111996146$32.5 million$222,603$17.2 millionResidence Inn Washington DCWashington,DCIHM7/14/20111974103$29.4 million$280,000Residence Inn Tysons CornerVienna,VirginiaIHM7/14/20112001121$37.0 million$305,78
99、5$23.5 millionHampton Inn Portland DowntownPortland,MaineIHM12/27/20122011122$28.0 million$229,508Courtyard HoustonHouston,TexasIHM2/5/20132010197$34.8 million$176,395$19.5 millionHyatt Place Pittsburgh North Shore Pittsburgh,PennsylvaniaIHM6/17/20132010178$40.0 million$224,719$23.6 millionHampton I
100、nn ExeterExeter,New HampshireIHM8/9/20132010111$15.2 million$136,937Hilton Garden Inn Denver TechDenver,ColoradoIHM9/26/20131999180$27.9 million$155,000Residence Inn BellevueBellevue,WashingtonIHM10/31/20132008231$71.8 million$316,883$47.6 millionSpringhill Suites SavannahSavannah,GeorgiaIHM12/5/201
101、32009160$39.8 million$248,438$30.0 millionResidence Inn Silicon Valley ISunnyvale,CAIHM6/9/20141983231$92.8 million$401,776$64.8 millionResidence Inn Silicon Valley IISunnyvale,CAIHM6/9/20141985248$102 million$411,103$70.7 millionResidence Inn San MateoSan Mateo,CAIHM6/9/20141985160$72.7 million$454
102、,097$48.6 millionResidence Inn Mountain ViewMountain View,CAIHM6/9/20141985112$56.4 million$503,869$37.9 millionHyatt Place Cherry CreekGlendale,COIHM8/29/20141987194$32 million$164,948Courtyard AddisonAddison,TXIHM11/17/20142000176$24.1 million$137,178Courtyard West UniversityHoustonHouston,TXIHM11
103、/17/20142004100$20.1 million$201,481Residence Inn West UniversityHoustonHouston,TXIHM11/17/20142004120$29.4 million$245,363Hilton Garden Inn BurlingtonBurlington,MAIHM11/17/20141975179$33.0 million$184,392Total5,115$1,123.8 million$219.707$527.7 million7Financial Information About Industry SegmentsW
104、e evaluate all of our hotels as a single industry segment because all of our hotels have similar economiccharacteristics and provide similar services to similar types of customers.Accordingly,we do not report segmentinformation.Business StrategyOur primary objective is to generate attractive returns
105、 for our shareholders through investing in hotelproperties(whether wholly owned or through a joint venture)at prices that provide strong returns on investedcapital,paying dividends and generating long-term value appreciation.We believe we can create long-term valueby pursuing the following strategie
106、s:Disciplined acquisition of hotel properties:We invest primarily in premium-branded upscale extended-stay and select-service hotels with a focus on the 25 largest metropolitan markets in the United States.We focus on acquiring hotel properties at prices below replacement cost in markets that have s
107、trongdemand generators and where we expect demand growth will outpace new supply.We also seek toacquire properties that we believe are undermanaged or undercapitalized.We currently do not intend toengage in new hotel development.Opportunistic hotel repositioning:We employ value-added strategies,such
108、 as re-branding,renovating,expanding or changing management,when we believe such strategies will increase the operatingresults and values of the hotels we acquire.Aggressive asset management:Although as a REIT we cannot operate our hotels,we proactivelymanage our third-party hotel managers in seekin
109、g to maximize hotel operating performance.Our assetmanagement activities seek to ensure that our third-party hotel managers effectively utilize franchisebrandsmarketing programs,develop effective sales management policies and plans,operate propertiesefficiently,control costs,and develop operational
110、initiatives for our hotels that increase guestsatisfaction.As part of our asset management activities,we regularly review opportunities to reinvestin our hotels to maintain quality,increase long-term value and generate attractive returns on investedcapital.Flexible selection of hotel management comp
111、anies:We are flexible in our selection of hotelmanagement companies and select managers that we believe will maximize the performance of ourhotels.We utilize independent management companies,including IHM,a hotel management company90%owned by Mr.Fisher,that currently manages 32 of our wholly owned h
112、otels,all of the hotelsowned by the NewINK JV and 34 hotels owned by the Inland JV.We believe this strategy increasesthe universe of potential acquisition opportunities we can consider because many hotel properties areencumbered by long-term management contracts.Selective investment in hotel debt:We
113、 may consider selectively investing in debt collateralized by hotelproperty if we believe we can foreclose on or acquire ownership of the underlying hotel property in therelative near term.We do not intend to invest in any debt where we do not expect to gain ownership ofthe underlying property or to
114、 originate any debt financing.We plan to maintain a prudent capital structure and intend to maintain our leverage over the long term at aratio of net debt to investment in hotels(at cost)(defined as our initial acquisition price plus the gross amount ofany subsequent capital investment and excluding
115、 any impairment charges)at a level that will be lower than thelevel at which we currently operate.A subsequent decrease in hotel property values will not necessarily cause usto repay debt to comply with this limitation.While we intend to maintain our leverage over the long term atlower levels,our Bo
116、ard of Trustees believes that maintaining higher leverage levels at this stage of the lodgingcycle is appropriate,as interest rates on a historical basis are very attractive.At December 31,2014,our leverageratio was approximately 44 percent,which increased from 36 percent at December 31,2013.Over ti
117、me,weintend to finance our growth with issuances of common shares,preferred shares and debt.Our debt may includemortgage debt collateralized by our hotel properties and unsecured debt.8When purchasing hotel properties,we may issue limited partnership interests in our operating partnership asfull or
118、partial consideration to sellers who may desire to take advantage of tax deferral on the sale of a hotel orparticipate in the potential appreciation in value of our common shares.CompetitionWe face competition for investments in hotel properties from institutional pension funds,private equityinvesto
119、rs,REITs,hotel companies and others who are engaged in hotel investments.Some of these entities havesubstantially greater financial and operational resources than we have or may be willing to use higher leverage.This competition may increase the bargaining power of property owners seeking to sell,re
120、duce the number ofsuitable investment opportunities available to us and increase the cost of acquiring our targeted hotel properties.The lodging industry is highly competitive.Our hotels compete with other hotels for guests in each marketin which they operate.Competitive advantage is based on a numb
121、er of factors,including location,convenience,brand affiliation,room rates,range of services and guest amenities or accommodations offered and quality ofcustomer service.Competition is often specific to the individual markets in which our hotels are located andincludes competition from existing and n
122、ew hotels.Competition could adversely affect our occupancy rates,ouraverage daily rates(“ADR”)and revenue per available room(“RevPAR”),and may require us to provideadditional amenities or make capital improvements that we otherwise would not have to make,which may reduceour profitability.Seasonality
123、Demand for our hotels is affected by recurring seasonal patterns.Generally,we expect that we will havelower revenue,operating income and cash flow in the first and fourth quarters and higher revenue,operatingincome and cash flow in the second and third quarters.These general trends are,however,influ
124、enced by overalleconomic cycles and the geographic locations of our hotels.To the extent that cash flow from operations isinsufficient during any quarter,due to temporary or seasonal fluctuations in revenue,we expect to utilize cash onhand or borrowings under our credit facility to pay expenses,debt
125、 service or to make distributions to our equityholders.RegulationOur properties are subject to various covenants,laws,ordinances and regulations,including regulationsrelating to common areas and fire and safety requirements.We believe each of our hotels has the necessarypermits and approvals to oper
126、ate its business,and each is adequately covered by insurance.Americans with Disabilities ActOur properties must comply with Title III of the Americans with Disabilities Act of 1990(“ADA”)to theextent that such properties are“public accommodations”as defined by the ADA.Under the ADA,all publicaccommo
127、dations must meet federal requirements related to access and use by disabled persons.The ADA mayrequire removal of structural barriers to access by persons with disabilities in certain public areas of ourproperties where such removal is readily achievable.Although we believe that the properties in w
128、hich we owninterests(including the JV properties)substantially comply with present requirements of the ADA,we have notconducted a comprehensive audit or investigation of all of our properties to determine our compliance,and oneor more properties may not be fully compliant with the ADA.In March 2012,
129、a substantial number of changes to the Accessibility Guidelines under the ADA took effect.The new guidelines have caused us to renovate some of our hotel properties and to incur costs to become fullycompliant.9If we or any of our joint ventures are required to make substantial modifications to our w
130、holly-owned orjoint venture hotel properties,whether to comply with the ADA or other changes in governmental rules andregulations,our financial condition,results of operations,the market price of our common shares and our abilityto make distributions to our shareholders could be adversely affected.T
131、he obligation to make readily achievableaccommodations is an ongoing one,and we will continue to assess our properties and to make alterations asappropriate.Environmental RegulationsUnder various federal,state and local laws,ordinances and regulations,an owner of real property may beliable for the c
132、osts of removal or remediation of certain hazardous or toxic substances on or in such property.Such laws often impose such liability without regard to whether the owner knew of or was responsible for,thepresence of such hazardous or toxic substances.The cost of any required remediation and the owner
133、s liabilitytherefore as to any property are generally not limited under such laws and could exceed the value of the propertyand/or the aggregate assets of the owner.The presence of such substances,or the failure to properly remediatecontamination from such substances,may adversely affect the owners
134、ability to sell the real estate or to borrowfunds using such property as collateral,which could have an adverse effect on our return from such investment.Furthermore,various court decisions have established that third parties may recover damages for injurycaused by release of hazardous substances an
135、d for property contamination.For instance,a person exposed toasbestos while working at or staying in a hotel may seek to recover damages if he or she suffers injury from theasbestos.Lastly,some of these environmental issues restrict the use of a property or place conditions on variousactivities.One
136、example is laws that require a business using chemicals to manage them carefully and to notifylocal officials if regulated spills occur.Although it is our policy to require an acceptable Phase I environmental survey for all real property in whichwe invest prior to our investment,such surveys are lim
137、ited in scope.As a result,there can be no assurance that aPhase I environmental survey will uncover any or all hazardous or toxic substances on a property prior to ourinvestment in that property.We cannot assure you that:there are not existing environmental liabilities related to our properties of w
138、hich we are not aware;future laws,ordinances or regulations will not impose material environmental liability;orthe current environmental condition of a hotel will not be affected by the condition of properties in thevicinity of the hotel(such as the presence of leaking underground storage tanks)or b
139、y third partiesunrelated to us.Tax StatusWe elected to be taxed as a REIT for federal income tax purposes commencing with our short taxable yearended December 31,2010 under the Internal Revenue Code of 1986,as amended(the“Code”).Our qualificationas a REIT depends upon our ability to meet,on a contin
140、uing basis,through actual investment and operatingresults,various complex requirements under the Code relating to,among other things,the sources of our grossincome,the composition and values of our assets,our distribution levels and the diversity of ownership of ourshares of beneficial interest.We b
141、elieve that we are organized in conformity with the requirements forqualification as a REIT under the Code and that our current and intended manner of operation will enable us tomeet the requirements for qualification and taxation as a REIT for federal income tax purposes.As a REIT,we generally will
142、 not be subject to federal income tax on our REIT taxable income that wedistribute currently to our shareholders.Under the Code,REITs are subject to numerous organizational andoperational requirements,including a requirement that they distribute each year at least 90%of their taxableincome,determine
143、d without regard to the deduction for dividends paid and excluding any net capital gains.If wefail to qualify for taxation as a REIT in any taxable year and do not qualify for certain statutory relief provisions,10our income for that year will be taxed at regular corporate rates,and we will be disqu
144、alified from taxation as aREIT for the four taxable years following the year during which we ceased to qualify as a REIT.Even if wequalify as a REIT for federal income tax purposes,we may still be subject to state and local taxes on our incomeand assets and to federal income and excise taxes on our
145、undistributed income.Additionally,any income earnedby our TRS Lessees will be fully subject to federal,state and local corporate income tax.Hotel Management AgreementsThe management agreements with Concord have an initial ten-year term that expire on February 28,2017and will renew automatically for
146、successive one-year terms unless terminated by the TRS lessee or the managerby written notice to the other party no later than 90 days prior to the then current terms expiration date.Themanagement agreements may be terminated for cause,including the failure of the managed hotel operatingperformance
147、to meet specified levels.If the Company were to terminate the management agreements during thefirst nine years of the initial term other than for breach or default by the manager,the Company would beresponsible for paying termination fees to the manager.The management agreements with IHM have an ini
148、tial term of five years and may be renewed for two five-year periods at IHMs option.The IHM management agreements provide for early termination at the Companysoption upon sale of any IHM-managed hotel for no termination fee,with six months advance notice.The IHMmanagement agreements may be terminate
149、d for cause,including the failure of the managed hotel to meetspecified performance levels.11Terms of our management agreements for our 34 wholly owned hotels are as follows:PropertyManagementCompanyBaseManagementFeeMonthlyAccountingFeeMonthlyRevenueManagementFeeIncentiveManagementFeeCourtyard Altoo
150、naConcord4.0%1,211Springhill Suites WashingtonConcord4.0%991Homewood Suites by Hilton Boston-Billerica/Bedford/BurlingtonIHM2.0%1,0005501.0%Homewood Suites by Hilton Minneapolis-Mall of AmericaIHM2.0%1,0005501.0%Homewood Suites by Hilton Nashville-BrentwoodIHM2.0%1,0005501.0%Homewood Suites by Hilto
151、n Dallas-Market CenterIHM2.0%1,0005501.0%Homewood Suites by Hilton Hartford-FarmingtonIHM2.0%1,0005501.0%Homewood Suites by Hilton Orlando-MaitlandIHM2.0%1,0005501.0%Homewood Suites by Hilton Carlsbad(North San Diego County)IHM3.0%1,0001.0%Hampton Inn&Suites Houston-Medical CenterIHM3.0%1,0001.0%Res
152、idence Inn Long Island HoltsvilleIHM3.0%1,0001.0%Residence Inn White PlainsIHM3.0%1,0001.0%Residence Inn New RochelleIHM3.0%1,0001.0%Residence Inn Garden GroveIHM2.5%1,0001.0%Residence Inn Mission ValleyIHM2.5%1,0001.0%Homewood Suites by Hilton San Antonio River WalkIHM2.5%1,0001.0%Residence Inn Was
153、hington DCIHM2.5%1,0001.0%Residence Inn Tysons CornerIHM2.5%1,0001.0%Hampton Inn Portland DowntownIHM3.0%1,0005501.0%Courtyard HoustonIHM3.0%1,0005501.0%Hyatt Place Pittsburgh North ShoreIHM3.0%1,5001,0001.0%Hampton Inn ExeterIHM3.0%1,2001,0001.0%Hilton Garden Inn Denver TechIHM3.0%1,5001,0001.0%Res
154、idence Inn BellevueIHM3.0%1,2001,0001.0%Springhill Suites SavannahIHM3.0%1,2001,0001.0%Residence Inn Silicon Valley IIHM3.0%1,2001,0001.0%Residence Inn Silicon Valley IIIHM3.0%1,2001,0001.0%Residence Inn San MateoIHM3.0%1,2001,0001.0%Residence Inn Mountain ViewIHM3.0%1,2001,0001.0%Hyatt Place Cherry
155、 CreekIHM3.0%1,5001,0001.0%Courtyard AddisonIHM3.0%1,5001,0001.0%Courtyard West University HoustonIHM3.0%1,5001,0001.0%Residence Inn West University HoustonIHM3.0%1,2001,0001.0%Hilton Garden Inn BurlingtonIHM3.0%1,5001,0001.0%Base management fees are calculated as a percentage of the hotels gross re
156、venue.If certain financialthresholds are met or exceeded,an incentive management fee is calculated as 10%of the hotels net operatingincome less fixed costs,base management fees and a specified return threshold.The incentive management fee iscapped at 1%of gross hotel revenues for the applicable calc
157、ulation.Management fees totaled approximately$6.1 million,$3.8 million and$2.9 million,respectively,for theyears ended December 31,2014,2013 and 2012.Incentive management fees paid to IHM for the years endedDecember 31,2014,2013 and 2012 were$0.2 million,$0.1 million and$16.0 thousand,respectively.T
158、here havebeen no incentive management fees paid to Concord.12Hotel Franchise AgreementsThe fees associated with the franchise agreements are calculated on the specified percentage of the hotelsgross room revenue.Terms of the Companys franchise agreements for its 34 wholly owned hotels as ofDecember
159、31,2014 are as follows:PropertyFranchise CompanyFranchise/Royalty FeeMarketing/Program FeeExpirationHomewood Suites by Hilton Boston-Billerica/Bedford/BurlingtonPromus Hotels,Inc4%4%2025Homewood Suites by Hilton Minneapolis-Mall ofAmericaPromus Hotels,Inc4%4%2025Homewood Suites by Hilton Nashville-B
160、rentwoodPromus Hotels,Inc4%4%2025Homewood Suites by Hilton Dallas-Market CenterPromus Hotels,Inc4%4%2025Homewood Suites by Hilton Hartford-FarmingtonPromus Hotels,Inc4%4%2025Homewood Suites by Hilton Orlando-MaitlandPromus Hotels,Inc4%4%2025Homewood Suites by Hilton Carlsbad(North SanDiego County)Pr
161、omus Hotels,Inc4%4%2028Hampton Inn&Suites Houston-Medical CenterHampton Inns Franchise LLC5%4%2020Courtyard AltoonaMarriott International,Inc5.5%2%2030Springhill Suites WashingtonMarriott International,Inc5%2.5%2030Residence Inn Long Island HoltsvilleMarriott International,Inc5.5%2.5%2025Residence I
162、nn White PlainsMarriott International,Inc5.5%2.5%2030Residence Inn New RochelleMarriott International,Inc5.5%2.5%2030Residence Inn Garden GroveMarriott International,Inc5%2.5%2031Residence Inn Mission ValleyMarriott International,Inc5%2.5%2031Homewood Suites by Hilton San Antonio River WalkPromus Ho
163、tels,Inc4%4%2026Residence Inn Washington DCMarriott International,Inc5.5%2.5%2033Residence Inn Tysons CornerMarriott International,Inc5%2.5%2031Hampton Inn Portland DowntownHampton Inns Franchise LLC6%4%2032Courtyard HoustonMarriott International,Inc5.5%2%2030Hyatt Place Pittsburgh North ShoreHyatt
164、Hotels,LLC5%3.5%2030Hampton Inn ExeterHampton Inns Franchise LLC6%4%2031Hilton Garden Inn Denver TechHilton Garden Inns Franchise LLC4.3%5.5%2028Residence Inn BellevueMarriott International,Inc5.5%2.5%2033Springhill Suites SavannahMarriott International,Inc5%2.5%2033Residence Inn Silicon Valley IMar
165、riott International,Inc5.5%2.5%2029Residence Inn Silicon Valley IIMarriott International,Inc5.5%2.5%2029Residence Inn San MateoMarriott International,Inc5.5%2.5%2029Residence Inn Mountain ViewMarriott International,Inc5.5%2.5%2029Hyatt Place Cherry CreekHyatt Hotels,LLC3-5%3.5%2034Courtyard AddisonM
166、arriott International,Inc5.5%2%2029Courtyard West University HoustonMarriott International,Inc5.5%2%2029Residence Inn West University HoustonMarriott International,Inc6%2%2024Hilton Garden Inn BurlingtonHilton Garden Inns Franchise LLC5.5%4.3%2029Franchise fees totaled approximately$15.1 million,$9.
167、4 million$7.5 million,respectively,for the yearsended December 31,2014,2013 and 2012.Ground LeasesThe Altoona hotel is subject to a ground lease with an expiration date of April 30,2029 with an extensionoption by the Company of up to 12 additional terms of five years each.Monthly payments are determ
168、ined by thequarterly average room occupancy of the hotel.Rent is equal to approximately$7,000 per month when monthlyoccupancy is less than 85%and can increase up to approximately$20,000 per month if occupancy is 100%,withminimum rent increased on an annual basis by two and one-half percent(2.5%).13A
169、t the New Rochelle Residence Inn,there is an air rights lease and garage lease that each expires onDecember 1,2104.The lease agreements with the City of New Rochelle cover the space above the parkinggarage that is occupied by the hotel as well as 128 parking spaces in a parking garage that is attach
170、ed to the hotel.The annual base rent for the garage lease is the hotels proportionate share of the citys adopted budget for theoperations,management and maintenance of the garage and established reserves to fund for the cost of capitalrepairs.Future minimum rental payments under the terms of all non
171、-cancellable operating ground leases underwhich the Company is the lessee are expensed on a straight-line basis regardless of when payments are due.Thefollowing is a schedule of the minimum future obligation payments required under the ground,air rights andgarages leases for the next five years and
172、thereafter as of December 31,2014(in thousands):Amount2015.$2102016.2122017.2142018.2172019.219Thereafter.11,009Total.$12,081EmployeesAs of March 16,2015,we had 45 employees,37 of which are shared with or allocated to the NewINK JV,Inland JV and an entity which is 2.5%owned by Mr.Fisher.All persons
173、employed in the day-to-day operationsof our hotels are employees of the management companies engaged by our TRS Lessees to operate such hotels.None of our employees is represented by a collective bargaining agreement,however,certain employees of IHMare represented under a collective bargaining agree
174、ment.Available InformationOur Internet website is .We make available free of charge through ourwebsite our annual reports on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K,Section 16 reports on Forms 3,4 and 5 and amendments to those reports filed or furnished pursuant toSectio
175、n 13(a)or 15(d)of the Securities Exchange Act of 1934,as amended(the“Exchange Act”),as soon asreasonably practicable after such documents are electronically filed with,or furnished to,the Securities andExchange Commission(“SEC”).In addition,our website includes corporate governance information,inclu
176、dingthe charters for committees of our Board of Trustees,our Corporate Governance Guidelines,Conflict of InterestPolicy and our Code of Business Conduct.This information is available in print to any shareholder who requestsit by writing to Investor Relations,Chatham Lodging Trust,50 Cocoanut Row,Sui
177、te 211,Palm Beach,FL33480.The information on our website is not,and shall not be deemed to be,a part of this report or incorporatedinto any other filings that we make with the SEC.14Item 1A.Risk FactorsOur business faces many risks.The risks described below may not be the only risks we face.Addition
178、al risksthat we do not yet know of or that we currently believe are immaterial may also impair our business operations.If any of the events or circumstances described in the following risk factors actually occurs,our business,financial condition or results of operations could suffer,our ability to m
179、ake cash distributions to ourshareholders could be impaired and the trading price of our common shares could decline.You should know thatmany of the risks described may apply to more than just the subsection in which we grouped them for the purposeof this presentation.Risks Related to Our BusinessOu
180、r investment policies are subject to revision from time to time at our Board of Trusteesdiscretion,whichcould diminish shareholder returns below expectations.Our investment policies may be amended or revised from time to time at the discretion of our Board ofTrustees,without a vote of our shareholde
181、rs.Such discretion could result in investments that may not yieldreturns consistent with investorsexpectations.We depend on the efforts and expertise of our key executive officers whose continued service is notguaranteed.We depend on the efforts and expertise of our chief executive officer,as well a
182、s our other senior executives,to execute our business strategy.The loss of their services,and our inability to find suitable replacements,couldhave an adverse effect on our business.If we are unable to successfully manage our growth,our operating results and financial condition could beadversely aff
183、ected.Our ability to grow our business depends upon our senior executive officersbusiness contacts and theirability to successfully hire,train,supervise and manage additional personnel.We may not be able to hire andtrain sufficient personnel or develop management,information and operating systems su
184、itable for our expectedgrowth.If we are unable to manage any future growth effectively,our operating results and financial conditioncould be adversely affected.Our future growth depends on obtaining new financing and if we cannot secure financing in the future,ourgrowth will be limited.The success o
185、f our growth strategy depends on access to capital through use of excess cash flow,borrowings or subsequent issuances of common shares or other securities.Acquisitions of new hotel propertieswill require significant additional capital and existing hotels(including those owned through joint ventures)
186、require periodic capital improvement initiatives to remain competitive.We may not be able to fund acquisitionsor capital improvements solely from cash provided from our operating activities because we must distribute atleast 90%of our REIT taxable income(determined before the deduction for dividends
187、 paid and excluding any netcapital gains)each year to satisfy the requirements for qualification as a REIT for federal income tax purposes.As a result,our ability to fund capital expenditures for acquisitions through retained earnings is very limited.Ourability to grow through acquisitions of hotels
188、 will be limited if we cannot obtain satisfactory debt or equityfinancing,which will depend on capital markets conditions.We cannot assure you that we will be able to obtainadditional equity or debt financing or that we will be able to obtain such financing on favorable terms.We may be unable to inv
189、est proceeds from offerings of our securities.We will have broad authority to invest the net proceeds of any offering of our securities in any real estateinvestments that we may identify in the future,and we may use those proceeds to make investments with whichyou may not agree.In addition,our inves
190、tment policies may be amended or revised from time to time at thediscretion of our Board of Trustees,without a vote of our shareholders.These factors will increase the15uncertainty,and thus the risk,of investing in our common shares.Our failure to apply the net proceeds of anyoffering effectively or
191、 to find suitable hotel properties to acquire in a timely manner or on acceptable terms couldresult in returns that are substantially below expectations or result in losses.Until appropriate investments can be identified,we may invest the net proceeds of any offering of oursecurities in interest-bea
192、ring short-term securities or money-market accounts that are consistent with ourintention to qualify as a REIT.These investments are expected to provide a lower net return than we seek toachieve from our hotel properties.We may be unable to invest the net proceeds on acceptable terms,or at all,which
193、 could delay shareholders from receiving an appropriate return on their investment.We cannot assure youthat we will be able to identify properties that meet our investment criteria,that we will successfully consummateany investment opportunities we identify,or that investments we may make will gener
194、ate income or cash flow.We must rely on third-party management companies to operate our hotels in order to qualify as a REIT underthe Code and,as a result,we have less control than if we were operating the hotels directly.In order for us to qualify as a REIT under the Code,third parties must operate
195、 our hotels.We lease each ofour hotels to our TRS Lessees.The TRS Lessees,in turn,have entered into management agreements with thirdparty management companies to operate our hotels.While we expect to have some input on operating decisionsfor those hotels leased by our TRS Lessees and operated under
196、management agreements,we have less controlthan if we were managing the hotels ourselves.Even if we believe that our hotels are not being operatedefficiently,we may not be able to require an operator to change the way it operates our hotels.If this is the case,we may decide to terminate the managemen
197、t agreement and potentially incur costs associated with thetermination.Additionally,Jeffrey H.Fisher,our chief executive officer,controls IHM,a hotel managementcompany that manages 32 of our hotels,all of the 47 hotels owned by the NewINK JV,34 of the hotels owned bythe Inland JV,as of December 31,2
198、014,and may manage additional hotels that we acquire in the future.See“There are conflicts of interest between us and affiliates owned by our Chief Executive Officer”below.Our management agreements could adversely affect the sale or financing of hotel properties and,as a result,our operating results
199、 and ability to make distributions to our shareholders could suffer.While we would prefer to enter into flexible management contracts that will provide us with the ability to replacehotel managers on relatively short notice and with limited cost,we may enter into,or acquire properties subject to,man
200、agement contracts that contain more restrictive covenants.For example,the terms of some managementagreements may restrict our ability to sell a property unless the purchaser is not a competitor of the manager andassumes the related management agreement and meets specified other conditions.Also,the t
201、erms of a long-termmanagement agreement encumbering our properties may reduce the value of the property.If we enter into or acquireproperties subject to any such management agreements,we may be precluded from taking actions that would otherwisebe in our best interest or could cause us to incur subst
202、antial expense,which could adversely affect our operating resultsand our ability to make distributions to shareholders.Moreover,the management agreements that we use in connectionwith hotels managed by IHM were not negotiated on an arms-length basis due to Mr.Fishers control of IHM andtherefore may
203、not contain terms as favorable to us as we could obtain in an arms-length transaction with a third party.See“There are conflicts of interest between us and affiliates owned by our Chief Executive Officer”below.Our franchisors could cause us to expend additional funds on upgraded operating standards,
204、which mayreduce cash available for distribution to shareholders.Our hotels operate under franchise agreements,and we may become subject to the risks that are found inconcentrating our hotel properties in one or several franchise brands.Our hotel operators must comply withoperating standards and term
205、s and conditions imposed by the franchisors of the hotel brands under which ourhotels operate.Pursuant to certain of the franchise agreements,certain upgrades are required approximately everysix years,and the franchisors may also impose upgraded or new brand standards,such as substantially upgrading
206、the bedding,enhancing the complimentary breakfast or increasing the value of guest awards under its frequent16guestprogram,which can add substantial expense for the hotel.The franchisors also may require us to makecertain capital improvements to maintain the hotel in accordance with system standards
207、,the cost of which can besubstantial and may reduce cash available for distribution to our shareholders.Our franchisors may cancel or fail to renew our existing franchise licenses,which could adversely affect ouroperating results and our ability to make distributions to shareholders.Our franchisors
208、periodically inspect our hotels to confirm adherence to the franchisorsoperating standards.The failure of a hotel to maintain standards could result in the loss or cancellation of a franchise license.We relyon our hotel managers to conform to operational standards.In addition,when the term of a fran
209、chise expires,thefranchisor has no obligation to issue a new franchise.The loss of a franchise could have a material adverse effecton the operations or the underlying value of the affected hotel because of the loss of associated name recognition,marketing support and centralized reservation systems
210、provided by the franchisor.The loss of a franchise oradverse developments with respect to a franchise brand under which our hotels operate could also have a materialadverse effect on our financial condition,results of operations and cash available for distribution to shareholders.Fluctuations in our
211、 financial performance,capital expenditure requirements and excess cash flow couldadversely affect our ability to make and maintain distributions to our shareholders.As a REIT,we are required to distribute at least 90%of our REIT taxable income each year to ourshareholders(determined before the dedu
212、ction for dividends paid and excluding any net capital gains).In theevent of downturns in our operating results and financial performance or unanticipated capital improvements toour hotels(including capital improvements that may be required by franchisors or joint venture partners),wemay be unable t
213、o declare or pay distributions to our shareholders,or maintain our then-current dividend rate.Thetiming and amount of distributions are in the sole discretion of our Board of Trustees,which considers,amongother factors,our financial performance,debt service obligations and applicable debt covenants(
214、if any),andcapital expenditure requirements.We cannot assure you we will generate sufficient cash in order to continue tofund distributions.Among the factors which could adversely affect our results of operations and distributions to shareholdersare reductions in hotel revenues;increases in operatin
215、g expenses at the hotels leased to our TRS Lessees;increased debt service requirements,including those resulting from higher interest rates on variable rateindebtedness;cash demands from the joint ventures and capital expenditures at our hotels,including capitalexpenditures required by the franchiso
216、rs of our hotels.Hotel revenue can decrease for a number of reasons,including increased competition from new hotels and decreased demand for hotel rooms.These factors canreduce both occupancy and room rates at hotels and could directly affect us negatively by:reducing the hotel revenue that we recog
217、nize with respect to hotels leased to our TRS Lessees;andcorrespondingly reducing the profits(or increasing the loss)of hotels leased to our TRS Lessees.Wemay be unable to reduce many of our expenses in tandem with revenue declines,(or we may choosenot to reduce them for competitive reasons),and cer
218、tain expenses may increase while our revenuedeclines.Future debt service obligations could adversely affect our overall operating results or cash flow and mayrequire us to liquidate our properties,which could adversely affect our ability to make distributions to ourshareholders and our share price.W
219、e plan to maintain a prudent capital structure and intend to maintain our leverage over the long term at aratio of net debt to investment in hotels(at cost)(defined as our initial acquisition price plus the gross amount ofany subsequent capital investment and excluding any impairment charges)at a le
220、vel that will be lower than thelevel at which we currently operate.A subsequent decrease in hotel property values will not necessarily cause usto repay debt to comply with this limitation.While we intend to maintain our leverage over the long term atlower levels,our Board of Trustees believes that m
221、aintaining higher leverage levels at this stage of the lodging17cycle is appropriate,as interest rates on a historical basis are very attractive.As a result,we may be able to incursubstantial additional debt,including secured debt,in the future.Incurring additional debt could subject us tomany risks
222、,including the risks that:operating cash flow will be insufficient to make required payments of expenses,principal and interest;our leverage may increase our vulnerability to adverse economic and industry conditions;we may be required to dedicate a substantial portion of our cash flow from operation
223、s to payments onour debt,thereby reducing cash available for distribution to our shareholders,funds available foroperations and capital expenditures,future business opportunities or other purposes;the terms of any refinancing will not be as favorable as the terms of the debt being refinanced;andthe
224、terms of our debt may limit our ability to make distributions to our shareholders.If we violate covenants in our debt agreements,we could be required to repay all or a portion of ourindebtedness before maturity at a time when we might be unable to arrange financing for such repayment onattractive te
225、rms,if at all.If we are unable to repay our debt obligations in the future,we may be forced to refinance debt or dispose ofor encumber our assets,which could adversely affect distributions to shareholders.If we do not have sufficient funds to repay our outstanding debt at maturity or before maturity
226、 in the event webreach our debt agreements and our lenders exercise their right to accelerate repayment,we may be required torefinance the debt through additional debt or additional equity financings.Covenants applicable to our existing andfuture debt could impair our planned investment strategy and
227、,if violated,result in a default.If we are unable torefinance our debt on acceptable terms,we may be forced to dispose of hotel properties on disadvantageous terms,potentially resulting in losses.We have placed mortgages on certain of our hotel properties to secure a portion ofour credit facility,ha
228、ve assumed mortgages on other hotels we acquired and may place additional mortgages oncertain of our hotels to secure other debt.To the extent we cannot meet any future debt service obligations,we willrisk losing some or all of our hotel properties that are pledged to secure our obligations to forec
229、losure.Interest expense on our debt may limit our cash available to fund our growth strategies and shareholderdistributions.Higher interest rates could increase debt service requirements on debt under our credit facility and anyfloating rate debt that we incur in the future and could reduce the amou
230、nts available for distribution to ourshareholders,as well as reduce funds available for our operations,future business opportunities,or otherpurposes.Interest expense on our credit facility is based on floating interest rates.Failure to hedge effectively against interest rate changes may adversely a
231、ffect our results of operations andour ability to make shareholder distributions.We may obtain in the future one or more forms of interest rate protection in the form of swapagreements,interest rate cap contracts or similar agreements to hedge against the possible negative effects ofinterest rate fl
232、uctuations.However,such hedging implies costs and we cannot assure you that any hedging willadequately relieve the adverse effects of interest rate increases or that counterparties under these agreement willhonor their obligations thereunder.Furthermore,any such hedging agreements would subject us t
233、o the risk ofincurring significant non-cash losses on our hedges due to declines in interest rates if our hedges were notconsidered effective under applicable accounting standards.Joint venture investments that we make could be adversely affected by our lack of sole decision-makingauthority,our reli
234、ance on joint venture partnersfinancial condition and disputes between us and our jointventure partners.We are co-investors with NorthStar in each of the NewINK JV and Inland JV,which own 47 and 48 hotels,respectively.We are co-investors with Cerberus in the Torrance JV,which owns the 248-room Resid
235、ence Inn by18Marriott in Torrance,CA,and we may invest in additional joint ventures in the future.We may not be in aposition to exercise sole decision-making authority regarding the properties owned through the JVs or other jointventures that we may invest in.Investments in joint ventures may,under
236、certain circumstances,involve risks notpresent when a third party is not involved,including reliance on our joint venture partners and the possibility thatjoint venture partners might become bankrupt or fail to fund their share of required capital contributions,thusexposing us to liabilities in exce
237、ss of our share of the investment.Joint venture partners may have businessinterests or goals that are inconsistent with our business interests or goals,and may be in a position to takeactions contrary to our policies or objectives.Such investments may also have the potential risk of impasses ondecis
238、ions,such as a sale,because neither we nor the partner would have full control over the partnership or jointventure.Any disputes that may arise between us and our joint venture partners may result in litigation orarbitration that would increase our expenses and prevent our officers and/or trustees f
239、rom focusing their time andeffort on our business.Consequently,actions by,or disputes with,our joint venture partners might result insubjecting properties owned by the partnership or joint venture to additional risk.In addition,we may in certaincircumstances be liable for the actions of our third-pa
240、rty partners or co-venturers.It may be difficult for us to exit a joint venture after an impasse with our co-venturer.In our joint ventures,there will be a potential risk of impasse in some joint venture decisions because ourapproval and the approval of each co-venturer will be required for some dec
241、isions.The types of decisions thatwould require the approval of each co-venturer would be determined under the joint venture agreement betweenthe parties,but those types of decisions are likely to include borrowing above a certain level or disposing ofassets.In any joint venture,we may have the righ
242、t to buy our co-venturers interest or to sell our own interest onspecified terms and conditions in the event of an impasse regarding a sale.However,it is possible that neitherparty will have the funds necessary to complete such a buy-out.In addition,we may experience difficulty inlocating a third-pa
243、rty purchaser for our joint venture interest and in obtaining a favorable sale price for theinterest.As a result,it is possible that we may not be able to exit the relationship if an impasse develops.Inaddition,there is no limitation under our declaration of trust and bylaws as to the amount of fund
244、s that we mayinvest in joint ventures.Accordingly,we may invest a substantial amount of our funds in joint ventures,whichultimately may not be profitable as a result of disagreements with or among our co-venturers.The Company does not have sole control of the JVs and may be required to contribute ad
245、ditional capital in theevent of a capital call.The Companys ownership interests in the JVs are subject to change in the event that we,NorthStar orCerberus calls for additional capital contributions to a JV that is necessary for the conduct of business,includingcontributions to fund costs and expense
246、s related to capital expenditures.NorthStar or Cerberus may also approvecertain actions by the JVs in which it participates without the Companys consent,including certain propertydispositions conducted at arms length,certain actions related to the restructuring of the JVs and the removal ofthe Compa
247、ny as managing member in the event the Company fails to fulfill its material obligations under thejoint venture agreement.Our Operating Partnership acts as guarantor under certain debt obligations of the JVs.In connection with certain non-recourse mortgage loans on certain of the properties owned by
248、 the JVs,ourOperating Partnership could be required to repay portions of this indebtedness,up to an amount commensuratewith our ownership interests in those JVs,in connection with certain customary non-recourse carve-outprovisions such as environmental conditions,misuse of funds and material misrepr
249、esentations.We may from time to time make distributions to our shareholders in the form of our common shares,whichcould result in shareholders incurring tax liability without receiving sufficient cash to pay such tax.Although we have no current intention to do so,we may,if possible,in the future dis
250、tribute taxabledividends that are payable in cash or common shares at the election of each shareholder.Taxable shareholdersreceiving such dividends will be required to include the full amount of the dividend as ordinary income to the19extent of our current and accumulated earnings and profits for fe
251、deral income tax purposes.As a result,shareholders may be required to pay income taxes with respect to such dividends in excess of the cash dividendsreceived.If a U.S.shareholder sells the common shares that it receives as a dividend in order to pay this tax,thesales proceeds may be less than the am
252、ount included in income with respect to the dividend,depending on themarket price of our shares at the time of the sale.Furthermore,with respect to certain non-U.S.shareholders,wemay be required to withhold federal income tax with respect to such dividends,including in respect of all or aportion of
253、such dividend that is payable in common shares.In addition,if a significant number of ourshareholders determine to sell common shares in order to pay taxes owed on dividends,it may put downwardpressure on the trading price of our common shares.Our conflict of interest policy may not be successful in
254、 eliminating the influence of future conflicts of interestthat may arise between us and our trustees,officers and employees.We have adopted a policy that any transaction,agreement or relationship in which any of our trustees,officers or employees has a direct or indirect pecuniary interest must be a
255、pproved by a majority of ourdisinterested trustees.Other than this policy,however,we have not adopted and may not adopt additional formalprocedures for the review and approval of conflict of interest transactions generally.As such,our policies andprocedures may not be successful in eliminating the i
256、nfluence of conflicts of interest.There are conflicts of interest between us and affiliates owned by our Chief Executive Officer.Our chief executive officer,Mr.Fisher,owned 90%of IHM,a hotel management company that manages 32of our wholly owned hotels,all of the 47 hotels owned by the NewINk JV and
257、34 of the hotels owned by theInland JV as of December 31,2014,and may manage additional hotels that we acquire or own in the future.Because Mr.Fisher is our Chief Executive Officer and controls IHM,conflicts of interest may arise between usand Mr.Fisher as to whether and on what terms new management
258、 contracts will be awarded to IHM,whether andon what terms management agreements will be renewed upon expiration of their terms,enforcement of the termsof the management agreements and whether hotels managed by IHM will be sold.Risks Related to the Lodging IndustryThe lodging industry has experience
259、d significant declines in the past and failure of the lodging industry toexhibit improvement may adversely affect our ability to execute our business strategy.The performance of the lodging industry has historically been closely linked to the performance of thegeneral economy and,specifically,growth
260、 in U.S.gross domestic product,or GDP.It is also sensitive to businessand personal discretionary spending levels.Declines in corporate budgets and consumer demand due to adversegeneral economic conditions,risks affecting or reducing travel patterns,lower consumer confidence or adversepolitical condi
261、tions can lower the revenues and profitability of our future hotel properties and therefore the netoperating profits of our TRSs.A substantial part of our business strategy is based on the belief that the lodging markets in which we investwill continue to experience improving economic fundamentals i
262、n the future.We cannot predict the extent towhich lodging industry fundamentals will continue to improve.In the event conditions in the industry do notcontinue to improve as we expect,or deteriorate,our ability to execute our business strategy would be adverselyaffected,which could adversely affect
263、our financial condition,results of operations,the market price of ourcommon shares and our ability to make distributions to our shareholders.Our ability to make distributions to our shareholders may be affected by various operating risks common inthe lodging industry.Hotel properties are subject to
264、various operating risks common to the hotel industry,many of which arebeyond our control,including:competition from other hotel properties in the markets in which we and our joint ventures operate,some of which may have greater marketing and financial resources;20an over-supply or over-building of h
265、otel properties in the markets in which we and our joint venturesoperate,which could adversely affect occupancy rates and revenues;dependence on business and commercial travelers and tourism;increases in energy costs and other expenses affecting travel,which may affect travel patterns andreduce the
266、number of business and commercial travelers and tourists;increases in operating costs due to inflation and other factors that may not be offset by increased roomrates;necessity for periodic capital reinvestment to repair and upgrade hotel properties;changes in interest rates and in the availability,
267、cost and terms of debt financing;changes in governmental laws and regulations,fiscal policies and zoning ordinances and the relatedcosts of compliance with laws and regulations,fiscal policies and ordinances;unforeseen events beyond our control,such as terrorist attacks,travel related health concern
268、s includingpandemics and epidemics such as H1N1 influenza(swine flu),avian bird flu and SARS,politicalinstability,regional hostilities,imposition of taxes or surcharges by regulatory authorities,travelrelated accidents and unusual weather patterns,including natural disasters such as hurricanes,tsuna
269、misor earthquakes;disruptions to the operations of our hotels caused by organized labor activities,including strikes,workstoppages or slow-downs;adverse effects of a downturn in the economy or in the hotel industry;andrisk generally associated with the ownership of hotel properties and real estate,a
270、s we discuss in detailbelow.These factors could reduce the net operating profits of our TRSs and the rental income we receive from ourTRS Lessees,which in turn could adversely affect our ability to make distributions to our shareholders.Competition for acquisitions may reduce the number of propertie
271、s we can acquire.We compete for hotel investment opportunities with competitors that may have a different tolerance for riskor have substantially greater financial resources than are available to us.This competition may generally limit thenumber of hotel properties that we are able to acquire and ma
272、y also increase the bargaining power of hotelowners seeking to sell,making it more difficult for us to acquire hotel properties on attractive terms,or at all.Competition for guests may lower our hotelsrevenues and profitability.The upscale extended-stay and mid-price segments of the hotel business a
273、re highly competitive.Our hotelsand those of our JVs compete on the basis of location,room rates and quality,service levels,reputation,andreservation systems,among many other factors.Competitors may have substantially greater marketing andfinancial resources than our operators or us.New hotels creat
274、e new competitors,in some cases withoutcorresponding increases in demand for hotel rooms.The result in some cases may be lower revenue,whichwould result in lower cash available for distribution to shareholders.The seasonality of the hotel industry may cause fluctuations in our quarterly revenues tha
275、t cause us to borrowmoney to fund distributions to shareholders.Some hotel properties have business that is seasonal in nature.This seasonality can be expected to causequarterly fluctuations in revenues.Quarterly earnings may be adversely affected by factors outside our control,including weather con
276、ditions and poor economic factors.As a result,we may have to enter into short-termborrowings in order to offset these fluctuations in revenue and to make distributions to shareholders.21The cyclical nature of the lodging industry may cause the return on our investments to be substantially lessthan w
277、e expect.The lodging industry is cyclical in nature.Fluctuations in lodging demand and,therefore,operatingperformance,are caused largely by general economic and local market conditions,which subsequently affectslevels of business and leisure travel.In addition to general economic conditions,new hote
278、l room supply is animportant factor that can affect the lodging industrys performance and overbuilding has the potential to furtherexacerbate the negative impact of an economic recession.Room rates and occupancy,and thus RevPAR,tend toincrease when demand growth exceeds supply growth.Decline in lodg
279、ing demand,or a continued growth inlodging supply,could result in returns that are substantially below expectations or result in losses,which couldhave a material adverse effect on our business,financial condition,results of operations and our ability to makedistributions to our shareholders.Due to
280、our concentration in hotel investments,a downturn in the lodging industry would adversely affect ouroperations and financial condition.Our entire business is related to the hotel industry.Therefore,a downturn in the hotel industry,in general,will have a material adverse effect on our revenues,net op
281、erating profits and cash available to distribute toshareholders.The ongoing need for capital expenditures at our hotel properties may adversely affect our financial conditionand limit our ability to make distributions to our shareholders.Hotel properties have an ongoing need for renovations and othe
282、r capital improvements,includingreplacements,from time to time,of furniture,fixtures and equipment.The franchisors of our hotels and those ofour JVs also require periodic capital improvements as a condition of keeping the franchise licenses.In addition,our lenders require us to set aside amounts for
283、 capital improvements to our hotel properties.These capitalimprovements may give rise to the following risks:possible environmental problems;construction cost overruns and delays;possibility that revenues will be reduced temporarily while rooms or restaurants offered are out ofservice due to capital
284、 improvement projects;a possible shortage of available cash to fund capital improvements and the related possibility thatfinancing for these capital improvements may not be available on affordable terms;uncertainties as to market demand or a loss of market demand after capital improvements havebegun
285、;anddisputes with franchisors/managers regarding compliance with relevant management/franchiseagreements.The costs of all these capital improvements could adversely affect our financial condition and amountsavailable for distribution to our shareholders.The increasing use of Internet travel intermed
286、iaries by consumers may adversely affect our profitability.Some of our hotel rooms are booked through Internet travel intermediaries.As Internet bookings increase,these intermediaries may be able to obtain higher commissions,reduced room rates or other significant contractconcessions from us and our
287、 management companies.Moreover,some of these Internet travel intermediaries areattempting to offer hotel rooms as a commodity,by increasing the importance of price and general indicators ofquality(such as“three-star downtown hotel”)at the expense of brand identification.These agencies hope thatconsu
288、mers will eventually develop brand loyalties to their reservations system rather than to the brands under22which our properties are franchised.Although most of the business for our hotels is expected to be derived fromtraditional channels,if the amount of sales made through Internet intermediaries i
289、ncreases significantly,roomrevenues may flatten or decrease and our profitability may be adversely affected.We and our hotel managers rely on information technology in our operations,and any material failure,inadequacy,interruption or security failure of that technology could harm our business.We an
290、d our hotel managers rely on information technology networks and systems,including the Internet,toprocess,transmit and store electronic information,and to manage or support a variety of business processes,including financial transactions and records,personal identifying information,reservations,bill
291、ing and operatingdata.We purchase some of our information technology from vendors,on whom our systems depend.We rely oncommercially available systems,software,tools and monitoring to provide security for processing,transmissionand storage of confidential customer information,such as individually ide
292、ntifiable information,includinginformation relating to financial accounts.Although we have taken steps to protect the security of ourinformation systems and the data maintained in those systems,it is possible that our safety and security measureswill not be able to prevent the systemsimproper functi
293、oning or damage,or the improper access or disclosure ofpersonally identifiable information such as in the event of cyber attacks.Security breaches,including physical orelectronic break-ins,computer viruses,attacks by hackers and similar breaches,can create system disruptions,shutdowns or unauthorize
294、d disclosure of confidential information.Any failure to maintain proper function,security and availability of our information systems could interrupt our operations,damage our reputation,subject us to liability claims or regulatory penalties and could have a material adverse effect on our business,f
295、inancial condition and results of operations.Future terrorist attacks or changes in terror alert levels could adversely affect travel and hotel demand.Previous terrorist attacks and subsequent terrorist alerts have adversely affected the U.S.travel andhospitality industries over the past several yea
296、rs,often disproportionately to the effect on the overall economy.The impact that terrorist attacks in the U.S.or elsewhere could have on domestic and international travel and ourbusiness in particular cannot be determined but any such attacks or the threat of such attacks could have amaterial advers
297、e effect on our business,our ability to finance our business,our ability to insure our propertiesand our results of operations and financial condition.Uninsured and underinsured losses could adversely affect our operating results and our ability to makedistributions to our shareholders.We maintain c
298、omprehensive insurance on each of our hotel properties,including liability,terrorism,fire andextended coverage,of the type and amount customarily obtained for or by hotel property owners.There can beno assurance that such coverage will continue to be available at reasonable rates.Various types of ca
299、tastrophiclosses,like earthquakes and floods and losses from foreign terrorist activities such as those on September 11,2001 or losses from domestic terrorist activities such as the Oklahoma City bombing may not be insurable ormay not be insurable on reasonable economic terms.Lenders may require suc
300、h insurance and failure to obtainsuch insurance could constitute a default under loan agreements.Depending on our access to capital,liquidityand the value of the properties securing the affected loan in relation to the balance of the loan,a default couldhave a material adverse effect on our results
301、of operations and ability to obtain future financing.In the event of a substantial loss,insurance coverage may not be sufficient to cover the full current marketvalue or replacement cost of the lost investment.Should an uninsured loss or a loss in excess of insured limitsoccur,we could lose all or a
302、 portion of the capital we invested in a hotel property,as well as the anticipatedfuture revenue from that particular hotel.In that event,we might nevertheless remain obligated for any mortgagedebt or other financial obligations related to the property.Inflation,changes in building codes and ordinan
303、ces,environmental considerations and other factors might also keep us from using insurance proceeds to replace orrenovate a hotel after it has been damaged or destroyed.Under those circumstances,the insurance proceeds wereceive might be inadequate to restore our economic position on the damaged or d
304、estroyed property.23Noncompliance with environmental laws and governmental regulations could adversely affect our operatingresults and our ability to make distributions to shareholders.Under various federal,state and local laws,ordinances and regulations,an owner of real property may beliable for th
305、e costs of removal or remediation of certain hazardous or toxic substances on or in such property.Such laws often impose such liability without regard to whether the owner knew of or was responsible for,thepresence of such hazardous or toxic substances.The cost of any required remediation and the ow
306、ners liabilitytherefore as to any property are generally not limited under such laws and could exceed the value of the propertyand/or the aggregate assets of the owner.The presence of such substances,or the failure to properly remediatecontamination from such substances,may adversely affect the owne
307、rs ability to sell the real estate or to borrowfunds using such property as collateral,which could have an adverse effect on our return from such investment.Furthermore,various court decisions have established that third parties may recover damages for injurycaused by release of hazardous substances
308、 and for property contamination.For instance,a person exposed toasbestos while working at or staying in a hotel may seek to recover damages if he or she suffers injury from theasbestos.Lastly,some of these environmental issues restrict the use of a property or place conditions on variousactivities.O
309、ne example is laws that require a business using chemicals to manage them carefully and to notifylocal officials if regulated spills occur.Although it is our policy to require an acceptable Phase I environmental survey for all real property in whichwe invest prior to our investment,such surveys are
310、limited in scope.As a result,there can be no assurance that aPhase I environmental survey will uncover any or all hazardous or toxic substances on a property prior to ourinvestment in that property.We cannot assure you:There are no existing liabilities related to our properties of which we are not a
311、ware;that future laws,ordinances or regulations will not impose material environmental liability;orthat the current environmental condition of a hotel will not be affected by the condition of properties inthe vicinity of the hotel(such as the presence of leaking underground storage tanks)or by third
312、 partiesunrelated to us.Compliance with the ADA and other changes in governmental rules and regulations could substantiallyincrease our cost of doing business and adversely affect our operating results and our ability to makedistributions to our shareholders.Our hotel properties are subject to the A
313、DA.Under the ADA,all places of public accommodation arerequired to meet certain federal requirements related to access and use by disabled persons.Although we intendto continue to acquire assets that are substantially in compliance with the ADA,we may incur additional costs ofcomplying with the ADA
314、at the time of acquisition and from time-to-time in the future to stay in compliance withany changes in the ADA.A number of additional federal,state and local laws exist that also may requiremodifications to our investments,or restrict certain further renovations thereof,with respect to access there
315、to bydisabled persons.Additional legislation may impose further burdens or restrictions on owners with respect toaccess by disabled persons.If we were required to make substantial modifications at our properties to complywith the ADA or other changes in governmental rules and regulations,our ability
316、 to make expected distributionsto our shareholders could be adversely affected.In March 2012,a substantial number of changes to the Accessibility Guidelines under the ADA took effect.The new guidelines caused some of our hotel properties to incur costs to become fully compliant.If we are required to
317、 make substantial modifications to our hotel properties,whether to comply with theADA or other changes in governmental rules and regulations,our financial condition,results of operations,themarket price of our common shares and our ability to make distributions to our shareholders could be adversely
318、affected.The obligation to make readily achievable accommodations is an ongoing one,and we will continue toassess our properties and to make alterations as appropriate.24General Risks Related to Real Estate IndustryIlliquidity of real estate investments could significantly impede our ability to resp
319、ond to adverse changes in theperformance of our hotel properties and adversely affect our financial condition.Because real estate investments are relatively illiquid,our ability to promptly sell one or more hotelproperties in our portfolio in response to changing economic,financial and investment co
320、nditions may be limited.The real estate market is affected by many factors that are beyond our control,including:adverse changes in international,national,regional and local economic and market conditions;changes in interest rates and in the availability,cost and terms of debt financing;changes in g
321、overnmental laws and regulations,fiscal policies and zoning ordinances and the relatedcosts of compliance with laws and regulations,fiscal policies and ordinances;the ongoing need for capital improvements,particularly in older structures;changes in operating expenses;andcivil unrest,acts of God,incl
322、uding earthquakes,floods and other natural disasters,which may result inuninsured losses,and acts of war or terrorism.We may seek to sell hotel properties owned by us or any of the JVs in the future.There can be no assurancethat we will be able to sell any hotel property on acceptable terms.If finan
323、cing for hotel properties is not available or is not available on attractive terms,it will adverselyimpact the ability of third parties to buy our hotels.As a result,we or our JVs may hold hotel properties for alonger period than we would otherwise desire and may sell hotels at a loss.We may be requ
324、ired to expend funds to correct defects or to make improvements before a hotel property canbe sold.We cannot assure you that we will have funds available to correct those defects or to make thoseimprovements.In acquiring a hotel property,we may agree to lock-out provisions that materially restrict u
325、s fromselling that property for a period of time or impose other restrictions,such as a limitation on the amount of debtthat can be placed or repaid on that property.These factors and any others that would impede our ability torespond to adverse changes in the performance of our properties could hav
326、e a material adverse effect on ouroperating results and financial condition,as well as our ability to pay distributions to shareholders.Increases in our property taxes would adversely affect our ability to make distributions to our shareholders.Hotel properties are subject to real and personal prope
327、rty taxes.These taxes may increase as tax rateschange and as the properties are assessed or reassessed by taxing authorities.In particular,our property taxescould increase following our hotel purchases as the acquired hotels are reassessed.If property taxes increase,ourfinancial condition,results of
328、 operations and our ability to make distributions to our shareholders could bematerially and adversely affected and the market price of our common shares could decline.Our hotel properties may contain or develop harmful mold,which could lead to liability for adverse healtheffects and costs of remedi
329、ating the problem.When excessive moisture accumulates in buildings or on building materials,mold growth may occur,particularly if the moisture problem remains undiscovered or is not addressed over a period of time.Some moldsmay produce airborne toxins or irritants.Concern about indoor exposure to mo
330、ld has been increasing,asexposure to mold may cause a variety of adverse health effects and symptoms,including allergic or otherreactions.As a result,the presence of mold to which hotel guests or employees could be exposed at any of theproperties in which we own an interest could require us to under
331、take a costly remediation program to contain orremove the mold from the affected property,which could be costly.In addition,exposure to mold by guests oremployees,management company employees or others could expose us to liability if property damage or healthconcerns arise.25Risks Related to Our Org
332、anization and StructureOur rights and the rights of our shareholders to take action against our trustees and officers are limited,which could limit your recourse in the event of actions not in your best interests.Under Maryland law generally,a trustee is required to perform his or her duties in good
333、 faith,in a mannerhe or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in alike position would use under similar circumstances.Under Maryland law,trustees are presumed to have actedwith this standard of care.In addition,our declaration of trust limits the liability of our trustees and officers to usand our shareholders for money damages,exce
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