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2nd Nibble On a Lodging REIT Preferred

So today I went ahead and bought a starter position in the 2nd lodging REIT preferred shares–to accompany the Pebblebrook (PEB) position from yesterday.

I bought the RLJ-A 7.90% convertible preferred issue from RLJ lodging. While this is convertible there is virtually no chance that a conversion will ever occur. Shares are now at $23.58 with a current yield of 8.38%. Once again I chose this issue because of relative performance of the company AND importantly one of the best balance sheets in the sector–debt to equity ratio of around 1.

So for now this is all I want in the sector—I may put in some GTC orders in for additions at much lower levels in case of a ‘dump’, but like the smaller banks I want relatively small positions to begin to lock in some high current yields–am I way too early? I may be too early, but no one can buy the exact bottom nor sell at the exact top so the small position sizes protect me from massive losses.

A Quiet Economic News Day

Well it looks to be a quiet economic day with no real consequential economic news being released.  Obviously this doesn’t mean that markets will be quiet–plenty of stuff going on with banks and the debt ceiling to keep things interesting.

Equity futures are off today to the tune of ⅓% while interest rates are off a few basis points with the 10 year treasury yield at 3.48%–off of the close yesterday of 3.52%. Plus and minus 5 basis  points is a meaningless move.

As mentioned yesterday I nibbled on the Pebblebrook Hotels 6.37% perpetual (PEB-G)–current yield of 8.48%.  I had mentioned many times I was looking for a buy in the lodging REIT sector and this is just a small starter position.  Today it is likely I will buy another lodging REIT preferred – I will let everyone know when I do that.  I have a giant sized position in CDs and treasuries and these buys will help to start to balance the approximately 5% average on the conservative part of the portfolio.  

Watching the community bankers a bit I see the prices still a bit wild—some up a buck–others down a buck.  I want bunches but not until this ‘crisis’ settles down–how long can I be patient?  We’ll see.

Headlines of Interest

Below are press releases from companys with preferred stock or baby bonds outstanding–or just of general news of interest.

View Press Release
View Press Release

KKR & Co. Inc. Reports First Quarter 2023 Results

View Press Release

American Equity Reports Strong Earnings Driven by Ramping Private Asset Allocation to 24% while Growing Total Sales to $1.4 Billion

View Press Release
View Press Release

Diversified Healthcare Trust Announces First Quarter 2023 Results

View Press Release

Kemper Reports First Quarter 2023 Operating Results

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Armada Hoffler Announces 3% Increase in Quarterly Cash Dividend on Common Shares

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Sachem Capital Provides Preliminary First Quarter 2023 Financial Results

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TEN Ltd. Declares Dividend on its Series D and Series E Cumulative Perpetual Preferred Shares

Dipping In for a Lodging REIT Preferred Nibble.

I won’t start adding to the community bank preferred issues I already own yet–but in a bid to raise my current yield on the portfolio I am going to nibble a few of the more solid (in my opinion) preferreds from a couple lodging REITs.

Today I bought the Pebblebrook Hotels 6.375% perpetual preferred (PEB-G) which has a current yield of around 8.40%. This is a starter position only–we will see where it goes from here.

The company has shown steadily improving results–but has a ways to go, but I purchased PEB because of the balance sheet–they are not as levered as many REITs are in the lodging sector.

Latest earnings are here.

Likely I will be buying another tomorrow.

Monday Morning Kickoff

The S&P500 bounced back nicely on Friday, although the week ended up with a lower close than the previous Friday by 7/10%–closing at 4136.  The index traded in a range of 4048 to 4187 as we had an interest rate hike on Wednesday and employment numbers on Friday.

The 10 year treasury yield close was almost dead flat with the close the previous Friday–closing at 3.446% versus 3.452% the previous Friday.  The yield had traded down to as low as 3.29% on Thursday.

This week we have economic news that will move the markets–we have the consumer price index (CPI) on Wednesday and producer price index (PPI) on Thursday.  We are now accumulating data for the next FOMC meeting in June and I don’t want to see numbers above forecast.  We just had a strong employment number last week so we are already under the gun for the June meeting.

Here is the economic calendar for the week.

The Fed balance sheet fell by $59 billion last week.  Quite surprising (at least to me) is that the balance sheet has moved sharply lower after the March banking crisis–a combination of the Fed continuing quantitative tightening (QT) and banks reducing their usage of the available facility for borrowings.

The average $25/share preferred stock and baby bond was annihilated last week—losing almost a full 4% to the lowest close since 3/24/23.  The average share fell by 91 cents, with investment grade issues falling 88 cents, banks falling $1.71, mREITs falling 67 cents. CEF preferreds were off just 15 cents as safety was on top of mind by investors. 

Last week we had no new issues price–as usual.