Lodging Grows the Fastest Among REITs: A Wall Street Transcript Interview with Rod Petrik, Experienced Real Estate Research Analyst at Stifel Nicolaus & Co., Inc.

Wall Street Transcript

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...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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