CHATHAM LODGING TRUST Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

Covid-19 pandemic

The lodging industry has been significantly impacted by the COVID-19 pandemic.
Steps have been taken to restrict
inbound international travel and there has been a significant decline in
domestic travel. The full impact of the COVID-19
pandemic on the lodging industry continues to evolve and will depend on future
developments including the continuing severity and duration of the pandemic, and
the possibility of additional subsequent widespread outbreaks and variant
strains and the impact of actions taken in response, people's willingness to
travel and the strength and timing of an economic recovery. All of these factors
are uncertain, and the full impact of the COVID-19 pandemic on the lodging
industry and the Company cannot be predicted at this time. The full magnitude of
the impact of the COVID-19 pandemic on the Company's financial condition,
liquidity and future results of operations will depend on future developments
which are highly uncertain. The Company has taken actions to mitigate the
operating and financial impact of the COVID-19 pandemic including suspending
common share dividends, reducing capital expenditures, obtaining credit facility
covenant waivers and temporarily reducing executive compensation.

Overview

Chatham Lodging Trust ("we," "us" or the "Company") was formed as a Maryland
real estate investment trust on October 26, 2009. The Company is internally
managed and invests primarily in upscale extended-stay and premium-branded
select-service hotels in geographically diverse markets with high barriers to
entry near strong demand generators. The Company has elected to be taxed as a
real estate investment trust for federal income tax purposes ("REIT").

The Company had no operations prior to the consummation of its IPO. The net
proceeds from our share offerings are contributed to Chatham Lodging, L.P., our
operating partnership (the "Operating Partnership"), in exchange for partnership
interests. Substantially all of the Company's assets are held by, and all
operations are conducted through, the Operating Partnership. The Company is the
sole general partner of the Operating Partnership and owns 100% of the common
units of limited partnership interest in the Operating Partnership ("common
units"). Certain of the Company's employees hold vested and unvested long-term
incentive plan units in the Operating Partnership ("LTIP units"), which are
presented as non-controlling interests on our consolidated balance sheets.

As of December 31, 2021, the Company owned 41 hotels with an aggregate of 6,169
rooms located in 16 states and the District of Columbia. Prior to September 23,
2021, the Company held a 10.0% noncontrolling interest in a joint venture (the
"Inland JV") with affiliates of Colony Capital, Inc. ("CLNY"), which owned 48
hotels acquired from Inland American Real Estate Trust, Inc. ("Inland"),
comprising an aggregate of 6,402 rooms. Chatham sold its interest in the Inland
JV in September 2021. Prior to March 18, 2021, the Company also held a 10.3%
noncontrolling interest in a joint venture (the "NewINK JV") with affiliates of
CLNY, which owned 46 hotels acquired from a joint venture (the "Innkeepers JV")
between the Company and Cerberus Capital Management ("Cerberus"), comprising an
aggregate of 5,948 rooms. Chatham sold its interest in the NewINK JV in March
2021 for $2.8 million.

To qualify as a REIT, the Company cannot operate its hotels. Therefore, the
Operating Partnership and its subsidiaries lease the Company's hotels to taxable
REIT subsidiary lessees ("TRS Lessees"), which are wholly owned by the Company's
taxable REIT subsidiary ("TRS") holding company. Each hotel is leased to a TRS
Lessee under a percentage lease that provides for rental payments equal to the
greater of (i) a fixed base rent amount or (ii) a percentage rent based on hotel
revenue. The initial term of each of the TRS leases is 5 years. Lease revenue
from each TRS Lessee is eliminated in consolidation.

The TRS Lessees have entered into management agreements with third-party
management companies that provide day-to-day management for the hotels. As of
December 31, 2021, Island Hospitality Management Inc. ("IHM"), which is 100%
owned by Mr. Fisher, managed all 41 of the Company's hotels.
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Key operational performance and financial condition indicators

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


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

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

See “Non-GAAP Financial Measures” for details on FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA.

Results of Operations

Industry outlook


The lodging industry has been severely impacted by the COVID-19 pandemic and
there has been a significant decline in travel relative to 2019, but trends are
improving and we expect continued strong growth in 2022 relative to 2021. Smith
Travel Research reported that U.S. lodging industry RevPAR increased 58.2% for
the year ended December 31, 2021, with RevPAR down 27.7% in the first quarter of
2021, up 160.4% in the second quarter of 2021, up 83.8% in the third quarter of
2021 and up 96.4% in the fourth quarter of 2021. We expect that in 2022, RevPAR
will continue to increase significantly versus 2021 and 2020, but remain below
the RevPAR levels achieved in 2019.

Comparison of the year ended December 31, 2021 to the year ended December 31, 2020


The section below provides a comparative discussion of our consolidated results
of operations between fiscal year 2021 and 2020. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for
comparative a discussion of our consolidated results of operations between
fiscal 2020 and fiscal 2019.

Results of operations for the year ended December 31, 2021 include the operating
activities of our 41 wholly owned hotels that were owned for the entire period
and two hotels located in Austin, TX which were acquired on August 3, 2021. We
sold our investment in the NewINK JV on March 18, 2021, sold our investment in
the Inland JV on September 23, 2021, and sold one hotel in San Diego, CA on
November 24, 2020. The comparisons below are influenced by the COVID-19
pandemic, the acquisition of two hotels, the sale of our investments in the
NewINK JV and the Inland JV, and the disposition of one hotel.

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Income

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

                                                           For the year ended
                                                    December 31,         December 31,
                                                        2021                 2020                 % Change
Room                                               $   187,369          $   130,564                     43.5  %
Food and beverage                                        3,525                2,718                     29.7  %
Other                                                   11,350                7,589                     49.6  %
Cost reimbursements from unconsolidated entities         1,731                4,045                    (57.2) %
Total revenue                                      $   203,975          $   144,916                     40.8  %



Total revenue increased $59.1 million to $204.0 million for the year ended
December 31, 2021 compared to total revenue of $144.9 million for the 2020
period. The increase in total revenue primarily was related to the recovery from
the COVID-19 pandemic and the two hotels acquired in 2021. The two hotels
acquired in 2021 contributed $4.1 million in total revenue. This was partially
offset by a decrease in total revenue related to the hotel sold in 2020 of $6.3
million. Since all of our hotels are primarily select service or limited service
hotels, room revenue is the primary revenue source as these hotels do not have
significant food and beverage revenue or large group conference facilities. Room
revenue comprised 91.9% and 90.1%, respectively, of total revenue for the years
ended December 31, 2021 and 2020. Room revenue was $187.4 million and $130.6
million for the years ended December 31, 2021 and 2020, respectively, and the
increase in room revenue primarily was related to the recovery from the COVID-19
pandemic and the two hotels acquired in 2021. This was partially offset by a
decrease in room revenue related to the hotel sold in 2020 was $5.8 million.

Food and beverage revenue was $3.5 million and $2.7 million for the years ended
December 31, 2021 and 2020, respectively. The increase in food and beverage
revenue primarily was related to an increase in occupancies at our hotels due to
the recovery from the COVID-19 pandemic.

Other revenue comprised of parking, meeting room, gift shop, in-room movie and
other ancillary amenities revenue, was up $3.8 million for the year ended
December 31, 2021. The increase in other operating revenue primarily was related
to an increase in occupancies at our hotels due to the recovery from the
COVID-19 pandemic.

Reimbursed costs from unconsolidated entities were $1.7 million and $4.0 million
for the years ended December 31, 2021 and 2020, respectively. The cost
reimbursements were offset by the reimbursed costs from unconsolidated entities
included in operating expenses. The decrease in cost reimbursements primarily
was related to the sale of the NewINK JV.

As reported by Smith Travel Research, U.S. lodging industry RevPAR for the years
ended December 31, 2021 and 2020 increased 58.2% and decreased 47.5%,
respectively, as compared to the years ended December 31, 2020 and 2019. Smith
Travel Research reported that U.S. lodging industry RevPAR decreased 27.7% in
the first quarter, increased 160.4% in the second quarter, increased 83.8% in
the third quarter and increased 96.4% in the fourth quarter of 2021. We expect
that in 2022, RevPAR will continue to increase significantly versus 2021 and
2020, but remain below the RevPAR levels achieved in 2019.
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In the table below, we present both actual and same property room revenue
metrics. Actual Occupancy, ADR and RevPAR metrics reflect the performance of the
hotels for the actual days such hotels were owned by the Company during the
periods presented. Same property Occupancy, ADR, and RevPAR results for the 40
hotels wholly owned by the Company as of December 31, 2021 and that have been in
operation for a full year regardless of our ownership during the period
presented, which is a non-GAAP financial measure. Results for the hotels for the
periods prior to our ownership were provided to us by prior owners and have not
been adjusted by us.

                                                       For the year ended
                                   December 31, 2021                         December 31, 2020                                % Change
                           Same Property         Actual (41          Same Property         Actual (40         Same Property (40        Actual (41/40
                            (40 hotels)            hotels)            (40 hotels)            hotels)               hotels)                hotels)
Occupancy                       64.6    %            64.6   %             48.1    %            48.6   %                 34.3  %                32.9  %
ADR                       $   132.68            $  132.42           $   119.39            $  120.84                     11.1  %                 9.6  %
RevPAR                    $    85.71            $   85.54           $    57.45            $   58.76                     49.2  %                45.6  %

Same property RevPAR increased by 49.2% due to an increase in occupancy of 34.3% and an increase in ADR of 11.1%.

Hotel running costs

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

                                                 For the year ended
                                     December 31, 2021       December 31, 2020       % Change
   Hotel operating expenses:
   Room                             $           40,396      $           31,883         26.7  %
   Food and beverage expense                     2,404                   2,456         (2.1) %
   Telephone expense                             1,502                   1,451          3.5  %
   Other expense                                 2,299                   1,629         41.1  %
   General and administrative                   20,424                  16,733         22.1  %
   Franchise and marketing fees                 16,560                  11,608         42.7  %
   Advertising and promotions                    3,721                   3,983         (6.6) %
   Utilities                                    10,255                   9,229         11.1  %
   Repairs and maintenance                      11,784                   9,799         20.3  %
   Management fees                               7,156                   5,289         35.3  %
   Insurance                                     2,792                   1,438         94.2  %

Total hotel operating expenses $119,293 $95,498 24.9%



Hotel operating expenses increased $23.8 million, or 24.9%, to $119.3 million
for the year ended December 31, 2021 from $95.5 million for the year ended
December 31, 2020. The primary cause of the increase in hotel operating expenses
was related to the increase in revenues and occupancy caused by the recovery
from the COVID-19 pandemic and the two hotels acquired in 2021. The two hotels
acquired in 2021 contributed $1.9 million in hotel operating expenses. The
decrease in hotel operating expenses related to the hotel sold in 2020 was $3.5
million.

Room charges, the largest component of hotel operating expenses, increased $8.5 million from $31.9 million in 2020 for $40.4 million in 2021. The increase in room charges is primarily related to an increase in occupancy and revenue from our hotels due to the recovery from the COVID-19 pandemic and the two hotels acquired in 2021. room costs related to the hotel sold in 2020 was $1.2 million.

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The remaining hotel operating expenses increased $15.3 million, or 24.0%, from
$63.6 million in 2020 to $78.9 million in 2021. The increase in other remaining
expenses primarily was related to an increase in occupancies and revenues at our
hotels due to the recovery from the COVID-19 pandemic and the two hotels
acquired in 2021. The decrease in other remaining expenses related to the hotel
sold in 2020 was $2.4 million.

Depreciation and amortization

Depreciation and amortization expense increased $0.3 million from $53.9 million
for the year ended December 31, 2020 to $54.2 million for the year ended
December 31, 2021. The increase was primarily due to the two hotels acquired in
2021 partially offset by the sale of one hotel. Depreciation is generally
recorded on our assets over 40 years for buildings, 20 years for land
improvements, 15 years for building improvements and one to ten years for hotel
furniture, fixtures and equipment from the date of acquisition on a
straight-line basis. Depreciable lives of hotel furniture, fixtures and
equipment are generally assumed to be the difference between the date of
acquisition and the date that the furniture, fixtures and equipment will be
replaced. Amortization of franchise fees is recorded on a straight-line basis
over the term of the respective franchise agreement.

Loss of value

Impairment loss was $5.6 million for the year ended December 31, 2021. There was
no impairment loss in 2020. The loss in 2021 is due to the impairment recorded
at a hotel that is under contract to be sold. The hotel is not presented as held
for sale at this point given uncertainties around whether the sale will
ultimately close.

Impairment loss on investment in unconsolidated real estate entities

Impairment loss on investment in unconsolidated real estate entities decreased
$15.3 million for the year ended December 31, 2021. The Company recorded an
impairment of the entire carrying value of $15.3 million on our investment in
the Inland JV during the year ended December 31, 2020 related to a decline in
operating performance caused by the COVID-19 pandemic.

Property taxes, ground rent and insurance

Total property taxes, ground rent and insurance expenses increased $0.8 million
from $23.0 million for the year ended December 31, 2020 to $23.8 million for the
year ended December 31, 2021. The increase attributable to the two hotels
acquired in 2021 was $0.3 million offset by $0.7 million related to the one
hotel sold in 2020. The remaining increase was primarily related to increased
property insurance premiums across the portfolio of hotels.

General and administrative

General and administrative expenses principally consist of employee-related
costs, including base payroll, bonuses and amortization of restricted stock and
awards of LTIP units. These expenses also include corporate operating costs,
professional fees and trustees' fees. Total general and administrative expenses
(excluding amortization of stock based compensation of $4.8 million and $4.6
million for the years ended December 31, 2021 and 2020, respectively) increased
$3.9 million to $10.9 million in 2021 from $7.0 million in 2020, with the
increase primarily due to the Company's decision to temporarily reduce
compensation in the year ended December 31, 2020 due to the COVID-19 pandemic
and the sales of the NewINK JV and the Inland JV in 2021 which reimbursed the
Company for some of its general and administrative expenses prior to their
sales.

Other expenses

Other charges decreased from $4.4 million for the year ended December 31, 2020
to $0.7 million for the year ended December 31, 2021. Other charges primarily
includes severance costs related to the departure of our former Chief Investment
Officer during the year ended December 31, 2020 and deductibles for insurance
claims.

Reimbursable costs of non-consolidated entities

Reimbursable costs from unconsolidated entities, comprised of corporate payroll
and rent costs were $1.7 million and $4.0 million for the years ended December
31, 2021 and 2020, respectively. The cost reimbursements were offset by the
cost reimbursements from unconsolidated entities included in revenues. The
decrease in cost reimbursements primarily was
related to the sale of the NewINK JV.


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(Loss) gain on sale of Hotel property

(Loss) gain on the sale of hotel property increased $21.1 million for the year
ended December 31, 2021 compared to the year ended December 31, 2020 due to the
sale of the Residence Inn Mission Valley on November 24, 2020, which resulted in
a gain of $21.1 million.

Interest and Other Income

Interest on cash and cash equivalents and other income was $0.2 million for the year ended December 31, 2020 compared to $0.2 million for the year ended
December 31, 2021.

Interest expense, including amortization of deferred charges

Interest expense decreased $3.7 million, or 13.0%, from $28.1 million for the
year ended December 31, 2020 to $24.5 million for the year ended December 31,
2021. Interest expense is comprised of the following (dollars in thousands):

                                                            For the year ended
                                               December 31, 2021           December 31, 2020              % Change
Mortgage debt interest                       $           21,081          $           23,227                      (9.2) %
Credit facility interest and unused fees                  3,441                       5,001                     (31.2) %
Interest rate cap                                           (52)                         25                    (308.0) %
Construction loan interest                                2,117                         202                     948.0  %
Capitalized interest                                     (3,551)                     (1,473)                    141.1  %
Amortization of deferred financing costs                  1,424                       1,140                      24.9  %
Total                                        $           24,460          $           28,122                     (13.0) %



The decrease in interest expense for the year ended December 31, 2021 as
compared to the year ended December 31, 2020 is primarily due to a decrease in
mortgage debt interest from the sale of the Residence Inn Mission Valley in
November 2020 and the repayment of the mortgage loan on that property, the
repayment of the mortgage loan on the Residence Inn New Rochelle in April 2021,
and a reduction of the outstanding balance on the revolving credit facility.

Loss of unconsolidated real estate entities

Loss from unconsolidated real estate entities decreased $6.2 million from a loss
of $7.4 million for the year ended December 31, 2020 to a loss of $1.2 million
for the year ended December 31, 2021. The decrease is primarily due to the sale
of the NewINK JV.

Gain on sale of investment in unconsolidated real estate entities

The gain on the sale of an investment in unconsolidated real estate entities was $23.8 million for the year ended December 31, 2021. There was no gain on the sale of investments in unconsolidated real estate entities in 2020. The gain in 2021 is due to the sale of the NewINK joint venture.

income tax expense

Income tax expense remained unchanged at zero for the year ended December 31,
2020 and 2021. We are subject to income taxes based on the taxable income of our
TRS Lessees at a combined federal and state tax rate of approximately 25%. The
Company's TRS is expecting taxable losses in 2022 and recognizes a full
valuation allowance equal to 100% of the net deferred tax assets due to the
uncertainty of the TRS's ability to utilize these net deferred tax assets.

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Net loss

Net loss was $18.8 million for the year ended December 31, 2021, compared to net
loss of $77.0 million for the year ended December 31, 2020. The change in net
loss was primarily due to an increase in occupancy and revenues at our hotels
due to the recovery from the COVID-19 pandemic, the sale of the NewINK JV which
resulted in a large gain on sale of investment in unconsolidated real estate
entities, and the other factors discussed above.

Material trends or uncertainties

We are not aware of any material trends or uncertainties, favorable or
unfavorable, that may be reasonably anticipated to have a material impact on
either the capital resources or the revenues or income to be derived from the
acquisition and operation of properties, loans and other permitted investments,
other than those referred to in this section and the risk factors identified in
the "Risk Factors" section of this Annual Report on this Form 10-K.

Non-GAAP Financial Measures

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

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

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

We calculate Adjusted FFO by further adjusting FFO for certain additional items
that are not addressed in Nareit's definition of FFO, including other charges,
costs associated with the departure of our former Chief Investment Officer,
losses on the early extinguishment of debt and similar items related to our
unconsolidated real estate entities that we believe do not represent costs
related to hotel operations. We believe that Adjusted FFO provides investors
with another financial measure that may facilitate comparisons of operating
performance between periods and between REITs that make similar adjustments to
FFO.
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The following is a reconciliation of net (loss) income to FFO and Adjusted FFO
for the years ended December 31, 2021, 2020 and 2019 (in thousands, except share
data):



                                                                                                For the year ended
                                                                                                   December 31,
                                                                                 2021                  2020                  2019
Funds From Operations ("FFO"):
Net (loss) income                                                           

($18,845) ($77,020) $18,880
Preferred dividends

                                                               (3,975)                    -                     -

Net income (loss) attributable to common shares and common units

                                                                            (22,820)              (77,020)               18,880
Loss (gain) on sale of hotel property                                                 21               (21,116)                3,282

Capital loss on disposal of assets within non-consolidated real estate entities

                                                                               -                     2                   219
Gain on sale of investment in unconsolidated real estate
entities                                                                         (23,817)                    -                     -
Depreciation                                                                      53,967                53,627                51,258
Impairment loss                                                                    5,640                     -                     -

Impairment loss on investment in unconsolidated real estate entities

                                                                               -                15,282                     -

Impairment within non-consolidated real estate entities

                                                                               -                 1,388                 4,197
Adjustments for unconsolidated real estate entity items                              568                 4,434                 7,493
FFO attributed to common share and unit holders                                   13,559               (23,403)               85,329
Other charges                                                                        711                 4,385                 1,441

Adjustments for unconsolidated real estate entity items                               46                     9                 1,028
Adjusted FFO attributed to common share and unit holders                    $     14,316          $    (19,009)               87,798
Weighted average number of common shares and units
Basic                                                                         49,281,763            47,635,600            47,238,309
Diluted                                                                       49,490,938            47,635,600            47,472,805



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

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

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

We also present Adjusted EBITDA which includes additional adjustments for items
such as other charges, gains or losses on extinguishment of indebtedness, costs
associated with the departure of our former Chief Investment Officer,
amortization of share-based compensation and certain other expenses that we
consider outside the normal course of operations. We believe that Adjusted
EBITDA provides useful supplemental information to investors regarding our
ongoing operating performance that, when considered with net income, EBITDA and
EBITDAre, is beneficial to an investor's understanding of our performance.
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The following is a reconciliation of net (loss) income to EBITDA, EBITDAre and
Adjusted EBITDA for the years ended December 31, 2021, 2020 and 2019 (in
thousands):


                                                                                               For the year ended
                                                                                                  December 31,
                                                                                   2021               2020               2019
Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA"):
Net (loss) income                                                              $ (18,845)         $ (77,020)         $  18,880
Interest expense                                                                  24,460             28,122             28,247

Depreciation and amortization                                                     54,215             53,871             51,505
Adjustments for unconsolidated real estate entity items                            1,184              8,965             18,214
EBITDA                                                                            61,014             13,938            116,846
Impairment loss                                                                    5,640                  -                  -

Impairment loss on investment in unconsolidated real estate entities

                                                                               -             15,282                  -
Impairment loss within the unconsolidated real estate entities                         -              1,388              4,197
Loss (gain) on sale of hotel property                                                 21            (21,116)             3,282

Capital loss on disposal of assets within non-consolidated real estate entities

                                                                               -                  2                219
Gain on sale of investment in unconsolidated real estate
entities                                                                         (23,817)                 -                  -
EBITDAre                                                                          42,858              9,494            124,544
Other charges                                                                        711              4,385              1,441

Adjustments for unconsolidated real estate entity items                               46                  9                293
Share based compensation                                                           4,823              4,597              4,719
Adjusted EBITDA                                                                $  48,438          $  18,485          $ 130,997


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

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The following is an overview of Adjusted Hotel EBITDA for the years ended
December 31, 20212020 and 2019 (in thousands):


                                                                                          For the year ended
                                                                                             December 31,
                                                                              2021               2020               2019
Net (loss) income                                                         $ (18,845)         $ (77,020)         $  18,880
Add:              Interest expense                                           24,460             28,122             28,247

                  Depreciation and amortization                              54,215             53,871             51,505
                  Corporate general and administrative                       15,752             11,564             14,077
                  Other charges                                                 711              4,385              1,441
                  Impairment loss                                             5,640                  -                  -
                  Loss from unconsolidated real estate entities               1,231              7,424              6,448
                  Impairment loss on investment in unconsolidated
                  real estate entities                                            -             15,282                  -
                  Loss on sale of hotel property                                 21                  -              3,282

Less:             Interest and other income                                    (243)              (179)              (190)

                  Gain on sale of hotel property                                  -            (21,116)                 -
                  Gain on sale of investment in unconsolidated real
                  estate entities                                           (23,817)                 -                  -
Adjusted Hotel EBITDA                                                     $  59,125          $  22,333          $ 123,690



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


• FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA
do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

• FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA
do not reflect changes in or cash requirements for our working capital requirements;

• FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA
do not reflect the funds available to make cash distributions;

• EBITDA, EBITDAre, adjusted EBITDA and Adjusted Hotel EBITDA do not reflect the significant interest charges, or cash requirements to service interest or principal payments, on our indebtedness;

•Although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized may need to be replaced in the future, and FFO,
Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA do not
reflect any cash requirements for such replacements;

•Non-cash compensation is and will remain a key component of our long-term incentive compensation package, although we exclude it as an expense when assessing our ongoing operating performance for a given period using EBITDA adjusted;

•Adjusted FFO, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect the
impact of certain cash charges (including acquisition transaction costs) that
result from matters we consider not to be indicative of the underlying
performance of our hotel properties; and

• Other companies in our industry can calculate FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA differently than us, which limits their usefulness as a comparative measure.

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

Cash and capital resources

We plan to maintain a prudent capital structure and intend to maintain our
leverage over the long term at a ratio of net debt to investment in hotels (at
cost) (defined as our initial acquisition price plus the gross amount of any
subsequent capital investment and excluding any impairment charges) at a level
that will be similar to the levels at which we have operated in the past. A
subsequent decrease in hotel property values will not necessarily cause us to
repay debt to comply with this limitation. At December 31, 2021, our leverage
ratio was approximately 30.6%, which decreased from 35.8% at December 31, 2020
based on the ratio of our net debt (total debt outstanding before deferred
financing costs less unrestricted cash and cash equivalents) to hotel
investments at cost. At December 31, 2021, we had total debt of $544.9 million
at an average rate of approximately 4.7%. We intend to continue to fund our
investments with a prudent balance of debt and equity. Our debt may include
mortgage debt collateralized by our hotel properties and unsecured debt.

At December 31, 2021 and 2020, we had $70.0 million and $135.3 million,
respectively, in outstanding borrowings under our revolving credit facility. We
had $35.0 million and $13.3 million in outstanding borrowings under our
construction loan for the Warner Center hotel development at December 31, 2021
and 2020, respectively. At December 31, 2021, the maximum borrowing availability
under our revolving credit facility was $250.0 million. We also had mortgage
debt on individual hotels aggregating $439.9 million and $461.1 million at
December 31, 2021 and 2020, respectively.

Our revolving credit facility contains representations, warranties, covenants,
terms and conditions customary for credit facilities of this type, including a
maximum leverage ratio, a minimum fixed charge coverage ratio and minimum net
worth financial covenants, limitations on (i) liens, (ii) incurrence of debt,
(iii) investments, (iv) distributions, and (v) mergers and asset dispositions,
covenants to preserve corporate existence and comply with laws, covenants on the
use of proceeds of the revolving credit facility and default provisions,
including defaults for non-payment, breach of representations and warranties,
insolvency, non-performance of covenants, cross-defaults and guarantor defaults.
We were in compliance with all financial covenants at December 31, 2021.

On October 26, 2021, Chatham executed an amendment to its credit facility which
extended a waiver of financial covenants until June 30, 2022, provided for the
immediate exercise of an option to extend the maturity of the entire $250
million facility through March 8, 2023, and added two six-month options to
further extend the maturity of the facility through March 8, 2024 from lenders
representing $227.5 million of commitments. In conjunction with the amendment,
Chatham provided credit facility lenders with equity pledges on three
unencumbered hotels. The spread on the facility did not change as a result of
the amendment. The amendment places limits on the Company's ability to incur
debt, pay dividends, and make capital expenditures during the covenant waiver
period. During the covenant waiver period interest will be calculated as LIBOR
(subject to a 0.5% floor) plus a spread of 2.50% if borrowings remain at or
below $200 million and a spread of 3.0% if borrowings exceed $200 million. As of
December 31, 2021, the Company was in compliance with all of its modified
financial covenants.

Our mortgage debt agreements contain "cash trap" provisions that are triggered
when the hotel's operating results fall below a certain debt service coverage
ratio or debt yield. When these provisions are triggered, all of the excess cash
flow generated by the hotel is deposited directly into cash management accounts
for the benefit of our lenders until a specified debt service coverage ratio or
debt yield is reached. Such provisions do not allow the lender the right to
accelerate repayment of the underlying debt. As of December 31, 2021, the debt
service coverage ratios or debt yields for eight of our mortgage loans were
below the minimum thresholds such that the cash trap provision of each
respective loan could be enforced. As of December 31, 2021, none of our mortgage
debt lenders has enforced cash trap provisions. We do not expect that such cash
traps will affect our ability to satisfy our short-term liquidity requirements.

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In December 2017, we established a $50 million dividend reinvestment and stock
purchase plan (the "Prior DRSPP"). We filed a new $50 million shelf registration
statement for the dividend reinvestment and stock purchase plan (the "Current
DRSPP" and together with the Prior DRSPP, the "DRSPP") on December 22, 2020 to
replace the Prior DRSPP. Under the DRSPPs, shareholders may purchase additional
common shares by reinvesting some or all of the cash dividends received on the
Company's common shares. Shareholders may also make optional cash purchases of
the Company's common shares subject to certain limitations detailed in the
prospectuses for the DRSPP. During the year ended December 31, 2021, we issued
149,686 shares under the Current DRSPP at a weighted average price of $13.77,
which generated $2.1 million of proceeds. As of December 31, 2021, there were
common shares having a maximum aggregate sales price of approximately $47.9
million available for issuance under the Current DRSPP.

In December 2017, we established an "at-the-market" offering program (the "Prior
ATM Plan") whereby, from time to time, we may publicly offer and sell our common
shares having an aggregate maximum offering price up to $100 million by means of
ordinary brokers transactions on the New York Stock Exchange (the "NYSE"), in
negotiated transactions or in transactions that are deemed to be "at-the-market"
offerings as defined in Rule 415 under the Securities Act of 1933, as amended.
We filed a $100 million registration statement for a new ATM program (the "ATM
Plan") on January 5, 2021 to replace the prior program. At the same time, the
Company entered into a sales agreement with Cantor Fitzgerald & Co., Barclays
Capital Inc., BMO Capital Markets Corp., BofA Securities, Inc., BTIG, LLC,
Citigroup Global Markets Inc., Regions Securities LLC, Stifel, Nicolaus &
Company, Incorporated and Wells Fargo Securities as sales agents. During the
year ended December 31, 2021, we issued 1,595,528 shares under the ATM Plan at a
weighted average price of $14.13 per share, which generated $22.5 million of
proceeds. As of December 31, 2021, there were common shares having a maximum
aggregate sales price of approximately $77.5 million available for issuance
under the ATM Plan.

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

The COVID-19 pandemic has caused, and is continuing to cause, significant
disruption in the financial markets both globally and in the United States, and
will continue to impact, possibly materially, our business, financial condition
and results of operations. We cannot predict the degree, or duration, to which
our operations will be affected by the COVID-19 outbreak, and the effects could
be material. While we believe the liquidity provided by our unrestricted cash
and credit facility availability, and aggressive cost reduction initiatives will
enable us to fund our current obligations for the foreseeable future, COVID-19
has resulted in significant disruption of global financial markets, which could
have a negative impact on our ability to access capital in the future. Because
the situation is ongoing, and because the duration and severity remain unclear,
it is difficult to forecast any impacts on our future results.

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

We had no significant off-balance sheet arrangements December 31, 2021.

Sources and uses of species

Our primary sources of cash include free cash flow from operations, availability under our revolving credit facility and proceeds from debt and equity issuances. Our primary uses of cash include acquisitions, capital expenditures, operating costs, business expenses, interest expense, debt repayments and distributions to shareholders.

Cash, cash equivalents, and restricted cash totaled $29.9 million as of
December 31, 2021, a decrease of $1.6 million from December 31, 2020, primarily
due to net cash provided by operating activities of $28.8 million, net cash used
in investing activities of $(101.9) million, and net cash provided by financing
activities $71.6 million.
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Operating cash

Net cash flows provided by operating activities increased $48.7 million to $28.8
million in 2021 compared to ($19.9) million in 2020. The increase in cash from
operating activities was primarily due to improving operating results from our
hotels which generated RevPAR growth of 45.6% in 2021 versus 2020.

Investing activities Cash flow

Net cash flows used in investing activities increased $128.7 million to $101.9
million in 2021 compared to ($26.8) million in 2020. For the year ended December
31, 2021, net cash flows used in investing activities of $101.9 million
consisted of $71.3 million related to the acquisitions of the RI Austin and TPS
Austin hotels, $9.5 million related to capital improvements on our 41 wholly
owned hotels and $23.9 million related to the development of the Home2 Suites
Warner Center, offset by $2.8 million of proceeds from the sale of an
unconsolidated real estate entity (the NewINK JV). For the year ended December
31, 2020, net cash flows provided by investing activities of $26.8 million
consisted of $14.4 million related to capital improvements on our 39 wholly
owned hotels and $23.2 million related to the development of the Home2 Suites
Warner Center, offset by proceeds from the sale of the San Diego, CA hotel of
$64.4 million.

We expect to invest approximately $23.7 million on renovations, discretionary
and emergency expenditures on our existing hotels in 2022, including
improvements required under any brand PIP, and expect to spend $2.4 million in
2022 on the Home2 Suites Warner Center development.

Financing activities Cash flow

Net cash flows provided by financing activities increased $67.2 million to $71.6
million in 2021 compared to $4.4 million in 2020. For the year ended December
31, 2021, net cash flows provided by financing activities of $71.6 million were
comprised of $115.9 million of net proceeds from our Series A Preferred Shares
offering, $24.6 million of common equity proceeds raised through sales under our
DRSPPs and ATM Plan, and net borrowings on our construction loan of $21.7
million, offset by net repayments of our senior unsecured revolving credit
facility of $65.3 million, amortization payments on mortgage debt of $8.7
million and the repayment of the $12.5 million mortgage loan on the Residence
Inn New Rochelle, payments of financing and offering costs of $1.6 million,
distributions to unit holders of $0.3 million and distributions on preferred
shares of $2.3 million. For the year ended December 31, 2020, net cash flows
provided by financing activities of $4.4 million were comprised of $0.2 million
of common equity proceeds raised through sales under our Prior DRSPP, net
borrowings on our credit facility of $45.3 million, and net borrowing on our
construction loan of $13.2 million, offset by principal payments on mortgage
debt of $35.7 million, payments of deferred financing and offering costs of $2.4
million, and distributions to shareholders and LTIP unit holders of $16.2
million.

We declared total dividends of $0 and $0 per common share and LTIP unit for the
year ended December 31, 2021 and $0.22 and $0.22 per common share and LTIP unit
for the year ended December 31, 2020, respectively. We declared total dividends
of $0.89713 and $0 per Series A preferred share for the years ended December 31,
2021 and 2020, respectively.

Material cash needs

Our significant cash requirements include the following contractual obligations:

•At December 31, 2021, we had total debt principal and interest obligations of
$582.7 million with $34.7 million of principal and interest payable within the
next 12 months from year-end 2021. See Note 7, "Debt" to our consolidated
financial statements for additional information relating to our property loans
and revolving credit facility.

• Lease payments due within the next 12 months from the 2021 year-end total $2.1 million. See Note 13 “Leases” to our consolidated financial statements for additional information regarding our head office and ground leases.

Related party transactions

We have entered into transactions and arrangements with related parties that
could result in potential conflicts of interest. See "Risks Related to Our
Business" and Note 15, "Related Party Transactions", to our consolidated
financial statements included in this Annual Report on Form 10-K. See also Item
13 of this Form 10-K.
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Inflation

Operators of hotels, in general, possess the ability to adjust room rates daily
to reflect the effects of inflation. However, competitive pressures may limit
the ability of our management companies to raise room rates.

Critical accounting estimates

We consider the following estimates critical because they require estimates
about matters that are inherently uncertain, involve various assumptions and
require management judgment. The preparation of the consolidated financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities at the
balance sheet date and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from these estimates and
assumptions.

Investment in hotel properties

We allocate the purchase prices of hotel properties acquired as asset
acquisitions based on the fair value of the acquired real estate, furniture,
fixtures and equipment, identifiable intangible assets and assumed liabilities.
In making estimates of fair value for purposes of allocating the purchase price,
we utilize a number of sources of information that are obtained in connection
with the acquisition of a hotel property, including valuations performed by
independent third parties and information obtained about each hotel property
resulting from pre-acquisition due diligence.

Our hotel properties are carried at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets, generally 40
years for buildings, 20 years for land improvements, 5 to 20 years for building
improvements and one to ten years for furniture, fixtures and equipment.
Renovations and/or replacements at the hotel properties that improve or extend
the life of the assets are capitalized and depreciated over their useful lives,
while repairs and maintenance are expensed as incurred. Upon the sale or
retirement of property and equipment, the cost and related accumulated
depreciation are removed from the Company's accounts and any resulting gain or
loss is recognized in the consolidated statements of operations.

Our hotel properties are periodically reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value of the hotel
properties may not be recoverable over management's estimated holding
period.This estimated holding period incorporates management's intent and
ability to hold the hotel properties over the estimated holding period. Events
or circumstances that may cause a review include, but are not limited to,
adverse changes in the demand for lodging at the properties due to declining
national or local economic conditions and/or new hotel construction in markets
where the hotels are located. When such conditions exist, management will
perform an analysis to determine if the estimated undiscounted future cash
flows, without interest charges, from operations and the proceeds from the
ultimate disposition of a hotel property exceed its carrying value. If the
estimated undiscounted future cash flows are less than the carrying amount, an
adjustment to reduce the carrying amount to the related hotel property's
estimated fair market value is recorded and an impairment loss recognized. For
the year ended December 31, 2021, we recorded an impairment loss on a hotel that
is under contract for sale (See Note 5). For the year ended December 31, 2020,
there were no impairment losses.

For properties the Company considers held for sale, depreciation and
amortization are no longer recorded and the value the properties is recorded at
the lower of depreciated cost or fair value, less costs to sell. If
circumstances arise that were previously considered unlikely, and, as a result,
the Company decides not to sell a property previously classified as held for
sale, the Company will reclassify such property as held and used. Such property
is measured at the lower of its carrying amount (adjusted for any depreciation
and amortization expense that would have been recognized had the property been
continuously classified as held and used) or fair value at the date of the
subsequent decision not to sell. The Company classifies properties as held for
sale when all criteria within the Financial Accounting Standards Board's
("FASB") guidance on the impairment or disposal of long-lived assets are met. As
of December 31, 2021, we had no hotel properties held for sale.

Revenue recognition

Revenue from hotel operations is recognized when rooms are occupied and when
services are provided. Revenue consists of amounts derived from hotel
operations, including sales from room, meeting room, gift shop, in-room movie
and other ancillary amenities. Sales, use, occupancy, and similar taxes are
collected and presented on a net basis (excluded from revenues) in the
accompanying consolidated statements of operations.
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Share-based compensation

We measure compensation expense for the restricted share awards based upon the
fair market value of our common shares at the date of grant. The Company
measures compensation expense for the Time-Based and Performance-Based LTIP
units based upon the Monte Carlo approach using volatility, dividend yield and a
risk free interest rate in the valuation. Compensation expense is recognized on
a straight-line basis over the vesting period and is included in general and
administrative expense in the accompanying consolidated statements of
operations. We pay dividends on vested and non-vested restricted shares and
Time-Based LTIP units. The Company has also issued Performance-Based LTIP units
as part of its compensation plan. Under the terms of the Performance-Based LTIP
units, a holder of a Performance-Based LTIP unit will generally (i) be entitled
to receive 10% of the distributions made on a common unit of the Operating
Partnership during the period prior to vesting of such Performance-Based LTIP
unit (the "Pre-Vesting Distributions"), (ii) be entitled, upon the vesting of
such Performance-Based LTIP unit, to receive a special one-time "catch-up"
distribution equal to the aggregate amount of distributions that were paid on a
common unit during the period prior to vesting of such Performance-Based LTIP
unit minus the aggregate amount of Pre-Vesting Distributions paid on such
Performance-Based LTIP unit, and (iii) be entitled, following the vesting of
such Performance-Based LTIP unit, to receive the same amount of distributions
paid on a common unit of the Operating Partnership.

Income taxes


We elected to be taxed as a REIT for federal income tax purposes commencing with
our 2010 taxable year. In order to qualify as a REIT under the Code, we must
meet certain organizational and operational requirements, including a
requirement to distribute at least 90% of our annual REIT taxable income to our
shareholders (which is computed without regard to the dividends paid deduction
or net capital gain and which does not necessarily equal net income as
calculated in accordance with GAAP). As a REIT, we generally will not be subject
to federal income tax to the extent we currently distribute our taxable income
to our shareholders. If we fail to qualify as a REIT in any taxable year, we
will be subject to federal income tax on our taxable income at regular corporate
income tax rates and generally will not be permitted to qualify for treatment as
a REIT for federal income tax purposes for the four taxable years following the
year during which qualification is lost unless the IRS grants us relief under
certain statutory provisions. Such an event could materially adversely affect
our net income and net cash available for distribution to shareholders. However,
we believe we have been organized and that we operate in such a manner as to
qualify for treatment as a REIT.

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