REIT investors should turn their attention to investing in hotel stocks. Hotels offer the best buy opportunities for investors who are searching for undervalued REITs. Most hotels are now trading between eight and twelve times the projected 2016 AFFO (in some cases, down from last year’s 20 times). It is now time for investors to commit themselves to finding a true gem.
The Pebblebrook Hotel Trust is one investing opportunity that one should not ignore. Pebblebrook Hotel had one of the best hotel metrics in the industry last year. Unfortunately, their shares dropped in value at the same time. They dropped from a peak of $50 in February 2015. At this time, they are now trading close to $28 a share at a multiple shy of ten times projected 2016 AFFO.
Pebblebrook Hotel’s multiple lies within the hotel’s sector average, and the sector presently does not have strong catalysts. Consequently, it is difficult to tell if the entire sector of REITs will improve in the short, mid-term. However, it is imperative to point out that Pebblebrook has demonstrated to be a worthwhile investment.
What’s Attractive About Pebblebrook?
-Jon Bortz is the founder, CEO, and Chairman. Bortz is a restless industry leader who has years of experience with REITs. Bortz led another hotel REIT (LaSalle Hotel Properties) from its IPO in 1998 until 2009. After he left LaSalle, he founded Pebblebrook and worked hard at turning it into a midcap REIT of two billion. Pebblebrook and LaSalle are not very different in market capitalization.
-The portfolio is exposed to bright locations in terms of industry projections. Their exposure to the West Coast (62% of the hotel EBITDA) is larger than the East Coast (35%). Pebblebrook has strong presence in San Diego, San Francisco, and Los Angeles. Please keep in mind that Pebblebrook is exposed to supply inflicted locations such as New York City, but its stake is limited.
-The management’s ability to secure exceptional same store growth rates. Last year, they demonstrated one of the highest same-property EBITDA growth opportunities of any public lodging REIT. This year, it has been reported that in Q1, they were able to increase same-property EBITDA by 15%.
-Pebblebrook has big plans for this year and 2017. The company is expected to renovate and reposition several of its properties. This should help improve their performance in the near future.
Source: Pebblebrook Hotel Trust (NYSE: PEB)
Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.
Disclosure: The author is long FHC.