Chatham Lodging Trust Commitments Disclosure
| 13. | Commitments and Contingencies |
Litigation
The Company is subject to various claims, lawsuits and legal proceedings, including routine litigation arising in the ordinary course of business, regarding the operation of its hotels, its managers and other Company matters. While it is not possible to ascertain the ultimate outcome of such matters, the Company believes that the aggregate identifiable amount of such liabilities, if any, will not have a material adverse impact on its financial condition or results of operations.
Management Agreements
The management agreements with IHM have an initial term of years and automatically renew for -year periods unless IHM provides written notice to us no later than 90 days prior to the then current term's expiration date of their intent not to renew. The IHM management agreements provide for early termination at the Company’s option upon sale of any IHM-managed hotel for no termination fee, with six months advance notice. The IHM management agreements may be terminated for cause, including the failure of the managed hotel to meet specified performance levels. Base management fees are calculated as a percentage of the hotel's gross room revenue. If certain financial thresholds are met or exceeded, an incentive management fee is calculated as 10% of the hotel's net operating income less fixed costs, base management fees and a specified return threshold. The incentive management fee is capped at 1% of gross hotel revenues for the applicable calculation.
Management fees totaled approximately $9.9 million, $10.7 million and $10.6 million for the years ended December 31, 2025, 2024 and 2023, respectively. Incentive management fees paid to IHM for the years ended years ended December 31, 2025, 2024 and 2023 were $0.1 million, $0.2 million and $0.2 million, respectively.
As of December 31, 2025, certain key terms of the Company's management agreements are (dollars are not in thousands):
| Monthly | ||||||||||||||||||
| Base | Monthly | Revenue | Incentive | |||||||||||||||
| Management | Management | Accounting | Management | Management | ||||||||||||||
| Property | Company | Fee | Fee | Fee | Fee Cap | |||||||||||||
| Homewood Suites by Hilton Hartford-Farmington | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Long Island Holtsville | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn White Plains | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn New Rochelle | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Garden Grove | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Homewood Suites by Hilton San Antonio River Walk | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Washington DC | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Tysons Corner | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Hampton Inn Portland Downtown | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Hyatt Place Pittsburgh North Shore | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Hampton Inn Exeter | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Bellevue | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| SpringHill Suites Savannah | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Silicon Valley I | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Silicon Valley II | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn San Mateo | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Mountain View | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Hyatt Place Cherry Creek | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Courtyard Addison | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn San Diego Gaslamp | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Hilton Garden Inn Marina del Rey | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Dedham | IHM | 3.0 | % | $ | 1,200 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Il Lugano | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Hilton Garden Inn Portsmouth | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Courtyard Summerville | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Embassy Suites Springfield | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Summerville | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Courtyard Dallas | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Residence Inn Austin Northwest/The Domain Area | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| TownePlace Suites Austin Northwest/The Domain Area | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Home2 Suites Woodland Hills | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Hilton Garden Inn Destin Miramar Beach | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
| Home2 Suites Phoenix Downtown | IHM | 3.0 | % | $ | 1,500 | $ | 1,000 | 1.0 | % | |||||||||
Franchise Agreements
The fees associated with the franchise agreements are calculated as a specified percentage of the hotel's gross room revenue. Franchise and marketing/program fees totaled approximately $23.6 million, $25.4 million and $24.9 million for the years ended December 31, 2025, 2024 and 2023, respectively. The initial terms of the agreements range from 10 to 30 years with the weighted-average expiration being September 2036.
As of December 31, 2025, certain key terms of the Company's franchise agreements are:
| Franchise/ | Marketing/ | |||||||||||
| Property | Royalty Fee | Program Fee | Expiration | |||||||||
| Homewood Suites by Hilton Hartford-Farmington | 4.0 | % | 4.0 | % | 2039 | |||||||
| Residence Inn Long Island Holtsville | 6.0 | % | 2.5 | % | 2026 | |||||||
| Residence Inn White Plains | 5.5 | % | 2.5 | % | 2030 | |||||||
| Residence Inn New Rochelle | 5.5 | % | 2.5 | % | 2030 | |||||||
| Residence Inn Garden Grove | 5.0 | % | 2.5 | % | 2031 | |||||||
| Homewood Suites by Hilton San Antonio River Walk | 4.0 | % | 3.5 | % | 2041 | |||||||
| Residence Inn Washington DC | 5.5 | % | 2.5 | % | 2033 | |||||||
| Residence Inn Tysons Corner | 5.0 | % | 2.5 | % | 2031 | |||||||
| Hampton Inn Portland Downtown | 6.0 | % | 4.0 | % | 2032 | |||||||
| Hyatt Place Pittsburgh North Shore | 5.0 | % | 3.5 | % | 2030 | |||||||
| Hampton Inn Exeter | 6.0 | % | 4.0 | % | 2031 | |||||||
| Residence Inn Bellevue | 5.5 | % | 2.5 | % | 2033 | |||||||
| SpringHill Suites Savannah | 5.0 | % | 2.5 | % | 2033 | |||||||
| Residence Inn Silicon Valley I | 5.5 | % | 2.5 | % | 2029 | |||||||
| Residence Inn Silicon Valley II | 5.5 | % | 2.5 | % | 2029 | |||||||
| Residence Inn San Mateo | 5.5 | % | 2.5 | % | 2029 | |||||||
| Residence Inn Mountain View | 5.5 | % | 2.5 | % | 2029 | |||||||
| Hyatt Place Cherry Creek | 5.0 | % | 3.5 | % | 2034 | |||||||
| Courtyard Addison | 5.5 | % | 2.0 | % | 2029 | |||||||
| Residence Inn San Diego Gaslamp | 6.0 | % | 2.5 | % | 2035 | |||||||
| Hilton Garden Inn Marina del Rey | 5.5 | % | 4.3 | % | 2030 | |||||||
| Residence Inn Dedham | 6.0 | % | 2.5 | % | 2030 | |||||||
| Residence Inn Il Lugano | 6.0 | % | 2.5 | % | 2045 | |||||||
| Hilton Garden Inn Portsmouth | 5.5 | % | 4.0 | % | 2037 | |||||||
| Courtyard Summerville | 6.0 | % | 2.5 | % | 2037 | |||||||
| Embassy Suites Springfield | 5.5 | % | 4.0 | % | 2037 | |||||||
| Residence Inn Summerville | 6.0 | % | 2.5 | % | 2038 | |||||||
| Courtyard Dallas | 6.0 | % | 2.0 | % | 2038 | |||||||
| Residence Inn Austin Northwest/The Domain Area | 6.0 | % | 2.5 | % | 2036 | |||||||
| TownePlace Suites Austin Northwest/The Domain Area | 5.5 | % | 2.0 | % | 2041 | |||||||
| Home2 Suites Woodland Hills | 5.0 | % | 3.0 | % | 2040 | |||||||
| Hilton Garden Inn Destin Miramar Beach | 5.5 | % | 4.0 | % | 2042 | |||||||
| Home2 Suites Phoenix Downtown | 4.0 | % | 3.5 | % | 2044 | |||||||
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.