Chatham Lodging Trust (CLDT) stock intrinsic value fair value estimate & owner earnings analysis

Chatham Lodging Trust is a real estate investment trust that owns premium-branded, select-service and extended-stay hotels in the United States, mostly Homewood Suites, Hampton Inn, Residence Inn, Courtyard and similar Hilton and Marriott flags. Island Hospitality Management, which is owned by the company's chairman and chief executive, manages the hotels day to day, so revenue is room revenue that rises and falls with occupancy and nightly rates. Same-property revenue per available room (RevPAR) was $142.39 in 2025, down 0.1% from 2024 (occupancy up 0.5%, average rate down 0.7%). How we measure earnings. We start from operating cash flow, remove the swings from working capital, subtract stock compensation as a real cost, and subtract the money spent to keep the hotels in shape. For a hotel owner that last item is large: room renovations and furniture, fixtures and equipment cost $24.5M to $30.6M a year in 2023 to 2025, about 8 to 9 percent of revenue. Depreciation and impairments are non-cash and are not deducted again. Per share, this owner-earnings figure was $0.86 in 2023, $0.71 in 2024 and $0.76 in 2025, after $1.24 in the 2022 recovery year and a loss in 2020 (COVID-19). We use 2023 to 2025 as the normal level, a median of about $0.76 per share. We leave out 2020 to 2022 because pandemic closures and the catch-up demand afterwards do not describe the hotel business as it operates now. We also did not use pre-2020 years of $1.0 to $1.5 per share, because interest costs are higher today and the company has sold hotels since. Growth. Owner earnings rose about 7% in 2025 (from $0.71 to $0.76), helped by lower renovation spending and lower debt. We assume no growth in any case. The company's recent activity is selling hotels (six sold from January 2024 to December 2025 for $13.8M to $23.5M each, using proceeds to cut debt from $409M to $343M), not acquiring them. Rate increases, demand growth and acquisitions are not secured, so they are not credited. What persists is a portfolio of owned hotels whose upkeep is already charged against earnings, so we let the base level continue rather than fade. Base case, about $12.30 per share. Owner earnings of about $0.76 per share continue indefinitely, with one ordinary downturn assumed within the decade, in which earnings run about 30% lower for two years. Lodging has had two significant downturns in the past two decades, including 2020, so we count a mild one in the median path. Bear case, about $9.00 per share. Earnings settle near $0.65, reflecting the weaker 2024 level, higher renovation spending and about $224M of debt maturing in 2029 that would likely refinance at a higher rate than today's roughly 6.2% average. We also include a downturn as severe as 2020, when owner earnings fell to about negative $0.73 per share and took a further year to recover. Total debt of $343M is modest relative to hotel cost (leverage about 20%), so equity is not wiped out. Bull case, about $15.00 per share. Owner earnings return to about $0.90, close to the 2023 level, as renovation spending stays near 2025's lower level and debt paydown from hotel sales keeps cutting interest, with no downturn in the decade. Checks on the case. If renovation spending goes back to 2024's $30.6M, owner earnings fall roughly $0.12 per share, to about $0.64, which is close to our bear level. The shares' value rests on the hotels holding cash flow at roughly today's rate; a prolonged fall in room rates, or a refinancing at much higher interest in 2029, would make these estimates too high. Our reconstruction of 2025 cash flow from net income and non-cash items matched reported operating cash flow within 1%. Margin-of-safety price. Because the business is cyclical, leveraged and cash flow is small relative to renovation spending, the margin-of-safety price is set roughly 40% below the base case and well below the bear case, at about $7 per share, an owner-earnings yield of roughly 11%.