Here We Go–Another Week–Worried??


Off and on all weekend I have been pulling up 10K’s and 10Q’s to look at balance sheets–I always look a the balance sheet 1st–then I review the income statements.

Honestly when the company has massive debt relative to equity I don’t even have to look at the income statement.

After fishing around I think it is fair to say I will do no buying this week. I have looked at many, many REITs and by their very nature they have total crap balance sheets for the most part–that’s what happens when you have little of no GAAP net income, but you continue to pay out 75% or 100% of your funds from operations (FFO)–never building up a stash of cash for emergencies.

A couple notes from my research. Lodging REITs where I will do some buying (someday) have drawn down their revolvers where they can–of course some are likely maxed out already and no one is going to extend credit. For the more solid issues they have built giant ‘war chests’.

Pebble Brook Hotels (PEB) has drawn down their revolver and now they have a giant war chest–now at $740 million after drawing down $643 million on their revolver.

RLJ Lodging (RLJ) drew down part of their revolver and now has a massive $1.2 billion in the till.

Sunstone Hotels (SHO) drew down $300 million of their revolver–they have a very solid balance sheet.

Summit Hotels (INN) drew down $125 million on their revolver.

RLJ and PEB have reduced common payouts to 1 cent/shares INN will suspend their common dividend.

Little word out of Ashford Hotels (AHT) and Braemar (BHR) except they both declared their preferred dividend payments with payment on 4/15. Fools–these 2 companies have cash for a quarter or two—I think these 2 will end up being bankruptcy candidates before this is over. At least they both suspended their common payments.

We have some strong lodging companies and a number of them that will not be with us next year at this time–the key is to separate the wheat from the chaff and use extreme patience.

5 thoughts on “Here We Go–Another Week–Worried??”

  1. Looks like coronavirus is peaking outside US…futures roaring higher. It keeps looking like the bottom was DOW 18,000. Only the mreit preferreds seem to still be getting carpet bombed…the sales have ended elsewhere. I’d say running out of time to buy.

  2. Tim,
    Glad to see your working at keeping busy and looking to the future at some potential investments. You pretty much have expressed what I said earlier today.
    I haven’t looked yet to see if there any comments to what I posted earlier. Almost afraid to look. My wife tells me if I had a Avatar it would be Eeyore in Winnie the Poo

  3. Not worried, but my appetite for anything below IG subordinated is nil right now. If I buy any equity, it’s likely to be common equity after the scope of the economic damage is clearer. At a portfolio level, I run ~75% fixed income (including some preferred). Of that, ~70% is IG, at least temporarily…:))

  4. Thanks Tim, appreciate all the research. I added to my RLJ-A recently. I have HT-E as well but not comfortable adding to it just yet.

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