listen, the only thing that matters is price action. And its up 100% since the .60 cent low. Whats even more bullish, is what you are spouting, is obviously no secret, and already discounted by a lot smarter people than you. Ill stick with price action and a huge profit over discounted concerns.
they won't have $120 million because of refinancing issues and loan to value ratios that they meet by a razor thin margin already. Some of that $30 million will have to be escrowed, i imagine, to meet marginal equity requirements upon refinancing. Concerning value, do you know, or anyone, the average capitalization rate for an economy scale hotel? I don't, but these brands have their own metrics that buyers benchmark off of, which I have no access to. So, frankly, how can anyone really know their book value? It's also important to note that the people that do these hotel appraisals can and continue to give BS values very regularly for their clients and banks. It's because of that reason that I wouldn't even focus on their aging portfolio for now other than acknowledging that they have to refinance a mountain of debt this year. In my opinion IRSA is getting basically an in the money call option on that side of the business and the chance to see this company redeploy their cash with a target NOI of 8.5% relatively speaking.
I've seen clusters before, and they can work out well, or fail miserably due to the concentration of investment in one area for investors. If they were to buy a cluster, that's when having a strong management team matters. However, unless SPPR knows a lot about the target market, I would consider that as a somewhat risky investment. Being more regional means little, in my opinion. There are lots of ownership groups that are successful which own across the US. Trading their portfolio....out of the question. No one is going trade a profitable hotel for three properties are treading water.
Well, if it isn't Mr. Cash Flow Analysis. maybe you should refresh yourself with the company's variable interest rates and tell me if banks are going to refinance at roughly a 4.08% rate for this company for $16 mln this year at the same rate. Since Bernanke has killed interest rate hikes for the next two years, do you really believe banks will make these sorts of deals going forward?
Concerning their portfolio's lack of a recovery, think of what type of client would typically stay in those hotels: price sensitive, discretionary leisure oriented individuals. That portion of the market has not recovered over the past few years except in some destination locations with much higher barriers to entry. The mid scale/upper mid scale is where the corporate element resides, which is not price sensitive, very predictable, and brand loyal to Hilton, Marriott, Starwood, Hyatt, Holiday Inn etc. It's anyone's guess as to what they'll acquire, but use the fact that the same owners of Hersha are buying in and take a look at the brands in their portfolio.
Also, concerning your math, that $30 mln can turn into a lot more once it's leveraged. Consider that loan to value ratios require only 25% in equity when purchasing a hotel, so they could go on quite the buying spree with that sort of cash. However, in my opinion, their LTV is currently questionable, which could mean they'll need to post more equity to refinance. Also, they have a lot variable rate debt, which in today's environment is a free pass to pocket equity. When they refinance in 2012 I would expect a much higher interest rate and subsequent lower consolidated free cash flow of their portfolio, which has implications for other loan covenants. Whatever rate they get will be a good window in their cost of capital for the future.
From what I have read many of the hotels for sale were in areas that depended on long term stays due to construction projects. With construction in a funk, occupancy rates fell and overhead made the hotels unprofitable.
Most pre recession hospitality REIT's are selling over leveraged hotels and newly formed REIT's are forming and gobbling up hotels at bargain basement prices. Older REIT's like SPPR have been in a survival mode. The cash infusion of the new investors and change of direction puts SPPR on a more offensive mode than defensive.
Many do not like the share dilution, but the dilution adds equity and opportunity.
what efficiencies? literally, i would love to hear how bringing in regional operators has so far changed this company's hotel performance. The fact is that these companies don't bring in completely new ways of managing a hotel, but instead follow the brand guidelines. I worked for White Hospitality and can assure you that these companies do not provide a new way of operating hotels, but instead work within the hotel brands' guidelines for staffing and quality assurance. you may have some cost cutting, but don't be surprised to see very similar gross profit results to comparable quarters.
Also, more debt is inevitable for this company. this company will refinance and put cash into these hotels in the form of equity to raise loan to value ratios. If they didn't need to raise that metric then refinancing would be easy and they would not need so much additional cash. Per what they've said, they'll redeploy a significant amount of their additional capital for acquisitions.
McKnifes articles provided clarity and an opinion to a stock that is out of the mainstream. His positive opinion did not sway the downward plunge and did not spark the resurgence but gave investors an accurate portrayal of the company based on the facts.
Good for him to take the time to provide clarity and direction to investors that are flailing in the dark.
McKnifes main point was that the break up value of the company was far greater than the share value and the future of the company depended on the ability to renew loans outstanding. SPPR was a gamble but the new investors
have provided a stepping stone to solid ground.
The fact is......... That we are above a dollar and it appears will avoid delisting from NASDAQ. Delisting and going into the jungle of Pink Sheets would have been difficult to overcome.
I gambled, took a swing and bought more when we were down. My average is now below a buck and the weight has been lifted giving breathing room.
The new investors wouldn't have locked in the $1.20 share price to buy in if they did not believe it would go above that price. We are riding on their shoulders and I for one am glad for the lift.
A new board of directors, cash and a new focus on profitability may be what was needed to turn this wayward child around.
we don't want FACTS, we want opinions that we can use. I for one love Mcknife. Without him, I wouldn't be up 25% and 32% not including dividends. If you follow a stock, and believe you know about the company, use them (the bad articles) to your advantage. Don't try and fight it (unless you want to sell soon after the article). ESPECIALLY with a lower volume stock.