Similar to LaSalle, Pebblebrook Hotel Trust (NYSE:PEB) issued $97 million of 6.5% preferred shares earlier in 2013. Also, in January, it acquired the 337-suite Embassy Suites San Diego Bay for $112.5 million or about $334,000 per suite. The hotel is ranked 44th out of 269 hotels in San Diego, and 87% of visitors give it a thumbs up on tripadvisor.com. This smaller acquisition and lack of any major renovations should contribute further to Pebblebrook’s position as a growing, but safer investment.
Finally, Chesapeake raised about $166 million earlier in 2013 by issuing 8.34 million common shares and made the following major acquisitions so far in the year for a total of $331 million:
* one 185-room hotel in New York City ($413,000 per room),
* two hotels in New Orleans (507 rooms at $181,000 per room), and
* two hotels in San Francisco (513 rooms at $320,000 per room).
These acquisitions, together with the share issuance and planned renovations for 2014, could be burdensome for the company in the near term. As a result, it may have to raise additional capital and/or reduce its dividend.
Conclusion
It seems like occupancy rates and RevPAR are in a solid recovery. For example, in 2009, the year of the financial crisis, RevPAR for LaSalle was $120.80 and its occupancy rate was 70%, significantly lower than those of today. Importantly, LaSalle, Pebblebrook, and Chesapeake operate in major urban centers, including New York City, that people like to visit.
In conclusion, LaSalle Hotel Properties (NYSE:LHO) seems like the riskiest investment, as it has the largest leverage in proportion to its equity, is undergoing a major renovation, and recently overpaid for a hotel. On the other hand, Chesapeake seems like the investment with the largest upside potential due to its valuation based on price-to-FFO and its concentrated portfolio of properties. On the negative side, it could have cash difficulties in the near term. Finally, Pebblebrook Hotel Trust (NYSE:PEB) has the highest occupancy rate, owns some of the most expensive properties and its New York City hotels are jointly owned, which could limit the upside. Overall, the three companies should benefit from a rebound in travel if the risks of a slowing economy and rising unemployment are kept in check.
Delian Naydenov has no position in any stocks mentioned. The Motley Fool recommends Pebblebrook Hotel Trust. The Motley Fool owns shares of Pebblebrook Hotel Trust. Delian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Three Hotel REITs That Pamper Their Guests and Investors originally appeared on Fool.com and is written by Delian Naydenov.
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