Standard and Poors has published an interesting read on Lodging, Retail and Residential REITs–many of which have preferred shares outstanding.
I have positions in RLJ Lodging (RLJ) and Pebblebrook (PEB) and they are in the report – in the case of PEB not necessarily in a good light. One of the metrics used is Net Debt/EBITDA–the relatively high leverage shown in the report seems higher than I would have expected so I will need to review that closer.
The article can be found here.
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Perhaps CLDT-A has a leverage of 1.32 vs PEB pref leverage of over 2.42
Interesting. I wonder where the NAV estimates come from; hopefully it’s not just book value, because I can imagine the book value of (for instance) a Miami hotel purchased in 2004 is wildly off from its “true” value at this point.
I wouldn’t trust the NAV on any REIT right now…
the REIT’s play too many games with them.
Great report and thanks for posting. Notable that the entire hotel sector trades 20% or more below NAV. I would have to question the S&P NAV estimates in that sector. Guess that public hotel REIT implied cap rates are closer to market valuations than the S&P NAV numbers. The R^2 factor at .38 in residential makes me want to look for other explanatory variables as well.
Asset quality and business model could be those additional explanatory variables.
If you look at SPG vs O for example in the retail sector, SPG has lower leverage ratio than O and they both have comparable market caps. O trades at a 5% premium and SPG at a 18% discount. I think they both have safe distributions: SPG 6.5% & O 5.4%. Big differences in the business models and big differences in their assets. There is probably a more liquid market for O’s assets than SPG, so S&P’s NAV is likely better as well.
FWIW