67 WALL STREET, New York - November 1, 2013 - The Wall Street Transcript has just published its REITs Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Pricing Power Outlook - Acquisition and Financing Costs - Apartment, Lodging, Self-Storage and Office REITs - Consolidation Activity - REIT Access to Capital
Companies include: Marriott International, Inc. (MAR), Starwood Hotels & Resorts Worl (HOT), Choice Hotels International In (CHH), Wyndham Worldwide Corporation (WYN), Strategic Hotels & Resorts, In (BEE), The Blackstone Group (BX) and many others.
In the following excerpt from the REITs Report, a highly experienced real estate financial professional discusses the outlook for the sector for investors:
TWST: Please start with a snapshot of your coverage universe.
Mr. Petrik: Our hotel coverage is a mixture of REITs and some of the C-Corp operators. We cover about 10 of the lodging REITs; we cover the two main operators in Marriott (MAR) and Starwood (HOT), and we have recently picked up coverage of Choice (CHH), Wyndham (WYN), Hyatt (H) and Marriott Vacations (VAC).
TWST: Overall, how have the lodging stocks been performing, and particularly the REITs? What's driving that performance?
Mr. Petrik: The lodging REITs are the best performing sector year to date, along with storage. Through the end of August they are up 11%, while REITs were in essence flat. Obviously there has been a big shift in the REIT market after Fed comments in late May. You've seen the 10-year Treasury spike 100 basis points. And if we just look at third quarter to-date, REITs are down 6.1% and lodging REITs were up slightly.
So they have been an outperformer, and I think primarily because you have the highest growth in the arena. On a topline basis, you're seeing RevPAR growth in a 4% to 7% range for most of the companies, and you have improving margins, so you have EBITDA growth, which for some companies will be double digit, and you're seeing 15% to 20% earnings growth with FFO. So right now, you have the highest growth in the sector.
I think that fewer investors buy lodging REITs for their dividend, so you haven't been hit as hard as the health care REITs or the triple-net REITs, which are primarily bought for their income and have some bond-like quality and certainly have reacted more negatively to higher interest rates. I think as investors look at the landscape with the potential for higher interest rates, there could also be potential for...
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