In this case you are NOT buying properties, per se, but you are buying a company. It makes a huge difference for AHT because their management was savvy enough to put on a great funding hedge which gives them a total company weighted average debt cost of around 3%. Thus you are getting the cash flow benefit of that while the properties are under water and by the time the properties recover their value (see below, last sentence) which they should in the 2011-2015 time frame, they will have also reduced their common and preferred shares outstanding to the point where they not only will have offset any residual property value declines that may still exist, but will have actually increase shareholders' property value/share. As Hotelater says, it is Cash Flow that counts. See below and espeically last sentence: SAN FRANCISCO (AP) — Shares of Pebblebrook Hotel Trust rose Tuesday after analysts said the real estate investment trust is in good position to buy distressed properties that may recover their value over the next several years. Pebblebrook was formed to invest in hotel properties in large American cities. The REIT went public last month with an initial public offering of 17.5 million common shares priced at $20 each, for proceeds of about $375 million.Its shares rose 82 cents, or 3.9 percent, to $21.64 in afternoon trading Tuesday.
"Acquiring assets in 2010 and 2011 should position Pebblebrook to tally robust earnings growth in the 2011-2015 timeframe when we believe the hotel industry will experience a very robust recoveries/expanion," Crow said.
Pebblebrook is a good example of history repeating itself. I was fully aware of the prospectus they put out prior to their IPO and it was chock full of your typical REIT BS.
The guy running Pebblebrook was actually selling his reputation at LHO which from my vantage point exhibited no skill whatsoever in massively overpaying for hotel properties in markets such as San Diego where Hilton was launching their 1200 room Bayfront Hilton along with the A-Holes at Tarsadia the Hard Rock and their cheesy hotel condos that are now lining up for foreclosure along with a whole host of others because investors were bidding up REIT shares.
So now these guys are going to get a do over and go out and try to outbid other vulture investors for product. But I guarantee you it's not going to be at those "distressed" prices everyone's talking about such as the pathetic chicken little trolls that infect this board.
There is not enough quality product on the market to satisfy these guys so you'll see some transaction annoucements and they will be talking about good buying opportunities, long term cycles and discounts to peak values which they largely created themselves by overspending.
But for now I'll be holding back my "Feeblebrook" label for these guys until I see what they are actually able to pull off.
Let's look at this from the Warren Buffett way. Show me the value. When I have to pay $1.00 to get $.75 worth of value, Warren would say that's will break you over time. Even with AHT going up recently, so has everything. It is just running with the market. Everyone on this board keeps saying that the shorts are in a crunch and having to cover, where is the volume of the short. Volume is actually down, not up. By the way, short is currently at 19% to total shares. A lot of smart is betting on AHT to fall off a cliff in the not so distant future. I think the company has got way over valued at this time. WAY TO MUCH RISK WITH NOT ENOUGH REWARD. I think it may be time to short AHT.