NATIONAL REPORT— A number of industry analysts and market watchers have been upgrading their assessments of the present and future fortunes of hotel REITs. As recently as early December, several of those with Wall Street’s ear were still talking down pricing as well as returns of hotel REITs, maintaining they have been hit harder by the recession and the aftermath of the Sept. 11 attacks than hotel-owning non-REITs. And while that contention may or may not be open to debate, the overall hotel REIT picture has reportedly brightened, as have investment specialists’ opinions of them. “Obviously, REITs in general have felt the economic repercussions of the struggling economy, and the hotel sector in particular was hard hit by the tragic events of Sept. 11 and their aftermath,” said Michael Grupe, senior vp/research and investor outreach, National Association of Real Estate Investment Trusts (NAREIT). “But compared to the last recession, our business is in far better shape than it was a decade ago, and I think that’s reflected in how well our stock prices have held up.” That they’ve held up at all might be considered by some as akin to a holiday season miracle, given the disparaging outlookvoiced by market watchers just a few short months ago. However, while unequivocal praise for all hotel REITs is still not a mainstay of the marketplace, several of the larger firms have elicited positive observations. For example, Keith Mills, lodging analyst, UBS Warburg, ranked equity REITs FelCor Lodging Trust and Host Marriott Corp. among the “best in [his firm’s]supply/demand mix analysis” as of early December. FelCor President/CEO Tom Corcoran shares this optimistic outlook, as evidenced by that firm’s recent announcement of a dividend of 5 cents per share on its common stock, bringing the total 2001 common dividends to $1.70 per share. FelCor will also pay a dividend in the amount of $0.4875 per share on its $1.95 Series A cumulative convertible preferred stock and $0.5625 per depository share evidencing its 9% Series B cumulative redeemable preferred stock, representing an annualized dividend of $1.95 and $2.25, respectively. Importance Of Dividends “We recognize the importance of the dividend to our shareholders as part of their total return,” Corcoran said. “With FelCor’s moderate leverage, it is able to pay higher common dividends than some of its peers, [and]we currently anticipate that FelCor should be able to pay an aggregate of $1 in dividends per common share during 2002, based on the low end of our current FFO guidance. “As we have stated previously, the weakness in the economy, the events of Sept. 11 and the decline in lodging demand required us to re-evaluate our common dividend,” Corcoran added. “FelCor’s common dividend declared is based on anticipated fourth-quarter financial results, which historically has been our weakest quarter of the year. However, we remain positive about the future and are confident that operations will continue to improve.” Going forward, Mills estimated properties owned by Host Marriott will have below-average exposure to new competitive lodging openings between July 2001 and June 2003, while Equity Inns, Hospitality Properties Trust and RFS Hotel Investors would face above-average exposure to new supply during this same period. Overall, Mills predicted FelCor and Host Marriott would feature the best mix of supply exposure and market-demand growth between July 2001 and June 2003, while Mike Happel, lodging and gaming analyst, Morgan Stanley, added MeriStar Hospitality Corp. to the “winner’s circle” when he upgraded its rating to “strong buy” status. But not everyone brightened their outlooks. To this end, as recently as Dec. 3, market watchers at Moody’s lowered their ratings on Host Marriott and MeriStar while confirming its negative assessment of Equity Inns. Facing up to this selectively daunting prognosis was Equity Inns President/COO Howard Silver. He noted that, “In general, a
