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Supertel Hospitality, Inc. (SPPR) Message Board

  • peristentone peristentone Jan 18, 2012 4:48 PM Flag

    How Safe Are Preferreds

    How safe are the preferred dividends after this vulture investment by IRSA?

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    • So you're saying banks aren't lending? Low interest rate are good for cash cows or low debt co.'s. There are ways to solve these problems. I've owned 2 small businesses but never of this size or complexity. So, yes my knowledge is limited.

    • My idea of trading several motels to another group for some of theirs stems from the fact perhaps SPPR could start to form cluster groups that way. SPPR could also offer perhaps some of the motels not currently up for sale. The other group may have a superior management group over their holdings then SPPR. The company has and is downsizing. All motels have value its just relative to the market and demand. Perhaps SPPR's price will have to come down further on those, as someone said other REIT's are forming and this may be their way in. I have noticed the jump in stock price but we are still deep in the woods. Tourist season may tell more of the situation.Also if my $120 was too high then bump it down to $100 mill. Thanks

    • 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.

      • 1 Reply to kydrby15
      • I understand your price action concerns, but I am in for the long haul. I've been here 6 yrs. I do know that there are tax advantages in trading properties. I am optimistic concerning IRSA and the money they bring to the table and possibly more in the future. Post boards are to express ideas supposedly to shareholders or potential new ones. A few posts ago the room usage %was listed by someone in 50%+ range. Does anyone know what the industry average rate is for our class motels?Thanks

    • 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.

    • So your take is they have potential $120 mill. to seek new deals?Bernake has stated interest will remain like present until 2014. If The afore mentioned mid-class motel/hotels could be purchase-ie. HolidayInn,Hyatt is it possible SPPR could buy a cluster in a smaller geographic area? I notice on their property map they are in numerous states, would it be more advantageous to become more regionalized? Say the Northeast and Southeast? Would that help on management costs? What is the possibility of SPPR trading part of their portifolio to obtain this? Impractical? Thoughts and thanks.

    • 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?

    • a much higher interest rate? Are you kidding me? wowowowwowo

    • 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 kinds of acqusitions do you see them making? Also several yrs. back they had maybe 113 motels and now 90+? What changed in the last 5 years to cause their prior motel portfolio to sour? I guess I am wondering why they were building on Super8,Days Inn, MastersInn,etc. why those no longer have a good fit and are not profitable enough. I realize the economy has dampened some what but you'll have those ups and downs. Did the traveling customers preference change that much? The 9 they have for sale at tops would bring in $20 million, add the IRSA infusion and you still are not left with much. More upscale motels don't sell for $1-2 mill. Thoughts?

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