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Starwood Hotels & Resorts Worldwide Inc. Message Board

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  • netstockman netstockman Dec 5, 1997 2:46 PM Flag

    future stock price

    Starwood (HOT) has run up so much recently it may be low on gas. It might be refuled, but the Sheraton deal is not fait accompli. If that deal falls out, it may impact Starwood.
    There is another paired share hotel REIT, Patriot Am. that might be worth looking into. If your strong on hotels, Felcor Suites is another that is well run, but doesn't have the paired share advantage.
    Also, when you talk about earnings and PE's for REITs, remember that FFO's (funds from operations) is more relevant. The depreciation taken with real estate makes the earnings appear less than they actually are.

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    • The info you have given sounds valid and validates what I was thinking. The sheraton deal worries me and isn't complete yet and their acquiition rate has been agressive. I just saw an article on Patriot american in the LA Times this week. My friend bought Felcor suites and I'm not sure how she did. I don't think her gains were too substantial.
      Thanks also for the tip about pe ratios. I'll try and remember FFO's instead. What should I look for in an FFO?
      Ellen

      • 1 Reply to retting
      • I'm becoming more knowledgable about REITs, but it appears the key element with FFO is growth. What has the past 2 or 3 years been like?, What is expected for the next couple of years? A 10 to 15% per annum increase in FFO, or more, is desirable. Traditionally,
        real estate growth is lucky to be about 5 to 7%. Many metro areas have had "rent spikes" of over 15%, but this doesn't last for more than a couple years, usually. So, the company acquisitions or development must fuel this strong growth in REITs. The later can be full of risk, the former has been the key to success for most high flying REITs, who claim better efficiencies through size. This is true, to a point. Most REITs now trade at 20 to 40% premium above their real estate values. Forget book
        value, it doesn't reflect the value of the assets. Many analysts contend this premium is justified because of the expertise of management who will continually be able to grow their company at strong Growth rates of FFO. Personally, I still believe that the underlying value of REITs have significance. Therefore, I'd try to find REITs with properties in tight markets that experience strong rental growth rates, successfull non-dilutive acquistions, strong growth rates, and a reasonable premium over
        asset value. This ain't easy to find, but if anyone reading this knows such REITs, or has some other opinions, please respond.

        Netstockman

 
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