Sector Snap: Lodging REITs
21.06.2007 15:36
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- Source: Forbes
Shares of hotel real estate investment trusts traded higher Thursday as Equity Inns Inc. agreed to a $1.26 billion buyout. Including debt assumption, the buyer, an affiliate of Whitehall Street Global Real Estate LP, is paying about $2.2 billion. In a note to clients, Smedes Rose of Calyon Securities Inc. raised Equity Inns' price target by $6 to $23 on the news. "The (Whitehall) transaction underscores continued private equity interest in lodging REITs, particularly those that are relatively underleveraged," the analyst wrote. Analyst Robert P. Whittemore of BB&T Capital Markets views Whitehall's bid as a "reasonable offer" but downgraded Equity Inns to "Hold" from "Buy" on the unlikelihood a higher bid will materialize. "In the current private equity environment, we believe it would be imprudent to rule out the possibility of another offer. However, with the recent uptick in interest rates, the likelihood of a topping bid is limited," he said in a note. Equity Inns' acquisition is one of a flurry of takeovers announced in the sector since April. That month Highland Hospitality Corp. said it was being purchased by affiliates of JER Partners Acquisition IV LLC for about $1.7 billion in cash. Winston Hotels Inc. also agreed in April to be bought by Inland American Real Estate Trust Inc., and Apollo Investment Corp. agreed to buy Innkeepers USA Trust. In addition, Eagle Hospitality Properties Trust Inc. said it would be purchased for approximately $237.6 million by a venture of Apollo Real Estate Investment Fund V LP, Aimbridge Hospitality LP and JF Capital Advisors LLC. J.P. Morgan Securities Inc. analyst Harry C. Curtis said in a client note the Equity Inns deal shows there is still a desire for hotel REIT buyouts and pointed toward FelCor Lodging Trust Inc. as the next possible target. "FelCor Lodging Trust's portfolio is of higher quality than Equity Inns as most of its hotels are upper upscale and in better markets and will be completely renovated by the beginning of the year," he said. Shares of Equity Inns added $3.39, or 17.5 percent, to $22.75 in midday trading. The stock hit a new 52-week high of $24.13 earlier in the session. It previously traded in a range of $14.46 to $21.19. Highland Hospitality's stock gained 3 cents to $19.24, while Winston Hotels added a penny to $14.93. Shares of Eagle Hospitality Properties Trust gained 4 cents to $13.37. Elsewhere in the sector, Innkeepers USA Trust was flat at $17.64. Shares of FelCor Lodging Trust added $1.67, or 6.9 percent, to $25.72. The stock has been trading between $18.73 and $27.30 over the past 52 weeks. Diamondrock Hospitality Co.'s stock also saw a significant jump, climbing $1.12, or 6.2 percent, to $19.26. The stock has traded in a 52-week range of $13.83 to $21.42. Earlier this month a report surfaced that Diamondrock received an unsolicited takeover bid of $22 per share. _________ Questions or comments about this story should be directed to AP Financial News at 212-621-7190. Copyright 2007 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
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