The Real Deal New York

Shareholders push hotel REITs to deliver returns

December 18, 2013 04:26PM

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Ron Burkle and an interior shot of the Hudson Hotel

Ron Burkle and an interior shot of the Hudson Hotel

Shareholders in publicly traded hotel companies are putting on the pressure to churn out higher returns as property values continue to rise.

For example, Strategic Hotels & Resorts, the owner of Manhattan’s JW Marriott Essex House, is being pressed to sell. And boutique operator Morgans Hotel Group is in billionaire Ron Burkle’s crosshairs after shareholders booted the firm’s board. The ultimate goal in an environment where property prices are hitting all-time highs are private market deals to spur lagging performers.

“Shareholders feel now is a good time to transact, to look for opportunities,” Nikhil Bhalla, an analyst with FBR & Company, told Bloomberg News. “Everything can change quickly if there’s a slowdown in the industry. So they are saying now is the time.”

Such shareholder activism in hotel companies is unusual, analyst Patrick Scholes told Bloomberg — until this year, the last notable shareholder kerfuffle was with Great Wolf Resorts’ Hovde Capital Advisors shareholder in 2008.

Hotel real estate investment trusts, lately trading at 20 percent to 30 percent below their net asset values, have been a favorite target of shareholder pressure as of late, Bloomberg reported. [Bloomberg]Julie Strickland

  • David Brown

    REITS are already required to disburse a minimum of 90% of the cash flow. Selling the property does not increase the cash flow. The reality is that much of the upside value is being capyured by the “asset light” management companies.

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