Transaction Action in Hotel REIT Sector

Lukas Hartwich

In the latest episode of the NAREIT Podcast, Lukas Hartwich, a senior analyst with Green Street Advisors, discussed the recent transaction activity in the hotel sector.

Since the middle of August, Strategic Hotels & Resorts, Inc. (NYSE: BEE) announced a sale agreement with private equity firm Blackstone and Ashford Hospitality Prime Inc. (NYSE: AHP) said it is exploring strategic alternatives. Hartwich attributed the interest in lodging sector to discounted asset values in the public markets. The hotel sector is currently trading at a rate of roughly 20 percent below net asset value (NAV), according to Hartwich, which he described as a “pretty wide gap” relative to historical data.

“You’ve got a bunch of hotel companies now where the value of their underlying real estate trades for a higher price in the private market than it does in the public market, so I think that disconnect is the main reason why you’re seeing some activity in terms of take-outs and rumors around other corporate events,” he said.

Hartwich noted that interest in hotel REIT assets is zeroed in on the luxury and limited-service segments. Looking ahead, Hartwich said the driver in lodging M&A will continue to be assets trading at discounts.

Hartwich speculated that more deals in the hotel sector are on the way. “I think we’re just getting started,” he said.

(Subscribe to the NAREIT Podcast via iTunes.)