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.
Likely I will be buying another tomorrow.
16 thoughts on “Dipping In for a Lodging REIT Preferred Nibble.”
Has anyone looked at Southerly Hotels? They need to catch up on a couple of years worth of delayed dividend payments. I am wondering if they are worth an investment of time and energy.
I’ve been in SOHO preferreds since last year when they were below $20.
On the last earnings call they teased doubling up on the preferred dividends to catch up; very curious if they say anything further on that when they report Q1 earnings on Thursday.
Thanks O. You got in at a great price. As always, I am arriving late to the dance.
Wouldn’t worse case be that they don’t call it and LIBOR goes back to 2020ish spread?
Fly in the ointment: a large shares of their properties are on the West Coast and many are in SFO, Seattle, Portland and Chicago. How is crime and the homeless crisis affecting occupancy rates? I used to love SFO but I have no interest in visiting now. A couple of years ago the AMA announced that it would hold no more conventions there.
Hi Potter—I considered that, but their management seems fairly savvy. Like you I love SFO, but haven’t been back there in 20 years.
We live in the silicon valley. I have meetings in SF at least once a week. Decades ago, I loved going to SF. not anymore.
Downtown SF really has become “calcutta by the bay”. Much worse than NYC in the 80s.
Lots of empty office space (even in the newest towers). Just not an attractive (or affordable) place to work.
Unchecked open air drug sales/use, homeless camps on the sidewalks, human waste, crime (people literally having their airpods snatched from their heads and their phones from their hands), businesses closing because of rampant theft (not really shoplifting – people brazenly walk out with merchandise in full view). I even had a stupid kid try to rob me with a box cutter last year at 2 in the afternoon on Market Street.
Private, this article may be of interest to you https://wolfstreet.com/2023/05/09/what-are-older-office-towers-worth-heres-the-first-sale-in-san-franciscos-new-era-of-office-cre/
I came to the same conclusion and doubled my normal position a few weeks ago.
PEB-G looks like it could drop further. I would be more interested in the $16-17 range.
legend.vs – thus a smallish position for now.
I don’t get WFC/PRQ selling at 23.53. If I figure this, hopefully right, on 9-15 2023 it goes from F to F. 3 month Libor currently 5.34 + 3.09 = 8.43 times $25 =$2.1075. At 23.53 the yld is 8.95. Worst case is they call it at $25 and you make $1.47 or about 6.25% in a few months. Someone please correct me where I’m wrong. Thanks………bg
I thought the same as you and bought 400 shares at $24.19, but if really that good it can’t be that easy. However, I don’t think at worst one can lose that much (famous last words).
If/when SOFR goes to 2%, the coupon will only be 5%. So you are essentially making a play on front end rates staying high for a while.
Pulled this from the prospectus – “If the banks so selected by the calculation agent are not quoting as set forth above, three-month LIBOR for that LIBOR determination date will remain three-month LIBOR for the immediately preceding dividend period or, in the case of the dividend period beginning September 15, 2023, 5.85%. “
@Bob that’s not worst case. Worse would be a required suspension of dividends for unknown time period. It’s a possible outcome i.e. a negotiated part of banning short sales. There is no limit to Calvinball.