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Posts Tagged ‘real estate investment trust’

This Lodging Stock is a Stable Growth and Income Play

RLJ Lodging Trust (RLJ) is a self-advised, publicly traded real estate investment trust focused on acquiring premium-branded, focused-service and compact full-service hotels.  The Company’s portfolio consists of 145 hotels in 21 states and theDistrict of Columbia, with a total of more than 21,600 rooms.  RLJ is a great growth and income stock as it is projected to increase EPS by 19% in 2013 while paying a steady 3.6% dividend yield.

The Company recently announced that it acquired the historicHumble Oil Buildingcomplex in downtownHouston, for a purchase price of$79.5 million, or approximately$151,000per key based on a combined forward room count of 528 keys.

The Humble Oil Buildingis a three-tower complex that occupies an entire city block in downtownHouston. The complex consists of an 82-unit apartment tower that will be converted to a 166-room SpringHill Suites and two existing hotels, the existing 191-roomCourtyard Houston Downtown Convention Center(“the Courtyard”) and the 171-roomResidence Inn Houston Downtown Convention Center(“the Residence Inn”). The purchase price represents a forward capitalization rate of approximately 10.1% for the Courtyard and 9.5% for theResidence Innbased on each hotel’s projected 2013 net operating income and applicable purchase price allocation. The Company purchased this portfolio of assets with its revolving credit facility.

“Our ability to execute this off-market transaction required the expertise, experience, and relationships that are unique to RLJ,” commentedThomas J. Baltimore, Jr., President and Chief Executive Officer. “Acquiring theHumble Oil Buildingcomplex represents a value-add opportunity. Both existing hotels have notable upside potential and our extensive experience managing complex renovations will enable us to deliver another conversion property that will help drive economies of scale.”

Adjusted FFO for the three months ended December 31, 2012, increased $13.4 million to $50.7 million, representing a 35.9% increase over the comparable period in 2011. For the twelve months ended December 31, 2012, Adjusted FFO increased $43.5 million to $185.6 million, representing a 30.6% increase over the comparable period in 2011. Adjusted FFO per diluted share and unit for the three and twelve months ended December 31, 2012, was $0.48 and $1.74, respectively, based on the Company’s diluted weighted-average shares and units outstanding of 106.8 million and 106.6 million for each period, respectively.

Net income attributable to common shareholders for the three months ended December 31, 2012, was $13.7 million, compared to a loss of $1.3 million in the comparable period in 2011. For the twelve months ended December 31, 2012, net income attributable to common shareholders was$41.3 million, compared to$11.3 million for the comparable period in 2011.

First Call consensus has the company producing $2.08 in EPS in 2013 which is a 19% increase from the prior year.  EPS are projected to be $2.34 in 2014 which is a nice 12% increase from 2013.  First Call Analyst currently have a buy rating with a 2.0 rating.  RLJ has an equity summary score of 7.2 out of 10 for a Bullish outlook.  The stock is currently trading near $22.50, 10.8 times 2013 EPS and 9.6 times 2014 EPS.

Lodging Around for Growth and Income

Chesapeake Lodging Trust (NYSE: CHSP) is a self-advised lodging real estate investment trust (REIT) focused on investments primarily in upper-upscale hotels in major business and convention markets and, on a selective basis, premium select-service hotels in urban settings or unique locations in the United States. The Trust owns 15 hotels with an aggregate of 4,722 rooms in seven states and the District of Columbia.

Chesapeake Lodging Trust reported its financial results for the quarter ended September 30, 2012 with a 8.9% increase in RevPAR for comparable 10-hotel portfolio over the same period in 2011.  For the quarter, the Trust produced EPS of $0.21 compared to $0.18 a year ago.  For the 9 months, the Trust produced EPS of $0.47 compared to $0.21 a year ago, an increase of 124%.

On August 21, 2012, the Trust acquired the 520-room W Chicago – Lakeshore located inChicago, Illinois for approximately $124.9 million, including acquired working capital. The Trust funded the acquisition with available cash on hand and a borrowing under its revolving credit facility. The Trust entered into a long-term management agreement with Starwood Hotels & Resorts Worldwide, Inc. to continue operating the hotel under the W flag.

On September 7, 2012, the Trust acquired the 429-room Hyatt Regency Mission Bay Spa andMarina located in San Diego, California for approximately $59.8 million, including acquired working capital. The Trust funded the acquisition with available cash on hand and a borrowing under its revolving credit facility. The Trust assumed the existing management agreement with Hyatt Hotels Corporation.

Chesapeake Lodging Trust announced that its board of trustees has declared a dividend payment of $.22 per common share. The dividend will be paid on January 15, 2013 to shareholders of record at the close of business on December 31, 2012. The dividend represents a 5% annualized yield based on the closing price of the Trust’s common shares on December 12, 2012.  Chesapeake Lodging has a current dividend yield of 4.08% which was increased 10% in the past year.

Chesapeake Lodging is projected to grow EPS by 19.8% in 2013.  First Call consensus has a BUY recommendation with a 1.7 rating.  Chesapeake Lodging has an equity summary score of 7.5 out of 10 for a Bullish outlook.

Chesapeake Lodging Trust (NYSE: CHSP) has a 12-month price target of $26.50.

Get Rent Checks from the Government

Government Properties Income Trust (NYSE: GOV) is a real estate investment trust (REIT).  The Company was formed to invest in properties that are leased to government tenants.  The Company owns 29 properties, 25 of which are leased primarily to the United States Government and four of which are leased to the states of California, Maryland, Minnesota and South Carolina, respectively.  The Company is a wholly owned subsidiary of HRPT Properties Trust (HRPT).

As measured by square footage, the IRS is GOV’s biggest tenant.  The next-biggest tenant is U.S. Customs & Immigration. These two make up over 20% of GOV’s rental income. The next biggest in terms of rental income is the Department of Justice.

Government Properties announced that it priced a public offering of 7,500,000 common shares at a price to the public of $23.25 per share. GOV expects to use the net proceeds of this offering to repay amounts outstanding under its revolving credit facility and for general business purposes, including funding potential acquisitions.  Government Properties is currently trading at $22.25 or 4.5% below the share offering price.

Government Properties recently announced it has raised its regular quarterly common share distribution by $0.01 to $0.43per common share ($1.72 per share per year).  Government Properties has a current dividend yield of 7.73%.

Normalized FFO for the six months ended June 30, 2012 were $49.5 million, or $1.05 per share, compared to Normalized FFO for the six months ended June 30, 2011 of $40.5 million, or $1.00 per share.

Net income was $25.0 million, or $0.53 per share, for the six months ended June 30, 2012compared to $21.2 million, or $0.52 per share, for the same period last year.

Since its initial public offering in 2009, GOV has acquired nearly $1 billion of property, at an average cap rate of 8.7%.  Since April 1, 2012, GOV has acquired seven properties for an aggregate purchase price of$125.2 million.

Government Properties has an equity summary score of 8.3 out of 10 for a BULLISH outlook.  It has a 12-month price target of $26.50.

Get In Early On This New REIT

Iron Mountain (IRM), the New Jersey-based document-storage firm, said that its board approved a plan for the company to convert to a real estate investment trust, or REIT.  Iron Mountain also boosted its dividend 8% for an annual payout of $1.08 a share. A quarterly dividend of 27 cents will be paid July 13 to stockholders of record June 22. Iron Mountain, one of several companies that have been weighing the decision to switch to REIT status, said the conversion would happen after Jan.1, 2014, pending U.S. government approvals. “The REIT structure provides stockholders with dividends from U.S. tax savings and other increases in distributable income that will enhance stockholder returns,” CEO Richard Reese said in a statement. Iron Mountain leases 64 million square feet of storage space around the world.

In accordance with tax rules applicable to REIT conversions, Iron Mountain expects to distribute accumulated earnings and profits (E&P) of approximately $1.0 billion to $1.5 billion to stockholders, to be paid out in a combination of at least 20% in cash and up to 80% in Iron Mountain common stock. The company expects it will distribute a significant portion of this E&P distribution in the fourth quarter of 2012. The company expects to distribute the balance over several years beginning in 2013 based, in part, on U.S. Internal Revenue Service (IRS) rules and the timing of the conversions of additional international operations into the REIT structure.

IRM is currently trading at $31.94, up from $28.40 prior to the REIT announcement this week.  The current target price for IRM is in the range of $36-40 following regulatory approval of the REIT conversion.

Barclays estimates Iron Mountain’s (IRM) planned conversion to a REIT could boost the records management and storage company’s value by $10/share.

William Blair Analyst Nate Brochmann believes benefits of conversion, include lower tax rate, more efficient financing, opportunity to shift capital structure toward equity, greatly outweigh costs, will enable IRM to increase returns to shareholders.  Based on simple dividend discount model, thinks there could be 40% upside to the stock due to conversion.  Given value he believes REIT conversion unlocks for shareholders, recommends investors purchase shares.

Iron Mountain (IRM) was initiated with an Overweight at Piper Jaffray with a price target at $35.

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