FelCor’s CFO Sees Sunny Days Ahead For Hotel REITs

IRVING, TX— Despite last fall’s terrorist attacks and the ensuing travel drop-off, investor confidence has returned to the world of hotel-oriented real estate investment trusts in a big way…and with good reason, according to FelCor Lodging Trust’s Rick O’Brien. As the EVP/CFO for the Texas-based lodging REIT told HOTEL BUSINESS®, today’s investment environment “is similar to that of the early 1990s in that the public equity market for hotels is clearly looking at the future and anticipating an economic recovery. As such,” he added, “stock prices [for hotel companies across the board]have increased and/or rebounded accordingly.” On a general note, O’Brien said investors today are expecting continued improvement in lodging-demand levels along with the aforementioned anticipated economic recovery. Narrowing his focus to speak strictly about his organization’s recent stock-price performance “on the street” as a valid case in point, he pointed out FelCor’s stock price has climbed some 25% since Dec. 31, 2001. Moreover, the tragic events of six months ago and the “challenging” business conditions they helped spawn may actually have helped polish the image of hotel REITs in the eyes of retail investors. “Our capital structures were obviously tested [by the tragedies of Sept. 11 as well as the accompanying recession]…and found appropriate,” O’Brien contended. Along these lines, O’Brien suggested: “FelCor’s conservative balance sheet is one reason why our stock pricing didn’t decline as much as that of some other [hotel]companies.” Additionally, in terms of a rebound, he said his firm’s stock prices have come back some 67% since their low on the days immediately following Sept. 11. By way of further explanation of investor interest and what it historically portends, the EVP/CFO said such an upsurge in stock valuation usually manifests itself anywhere between eight and 10 months ahead of an actual lodging industry recovery. Finally, as if FelCor needed any other indication of investor confidence, O’Brien also reported the Texas-based REIT recently completed a “successful senior-note offering,” raising $100 million in the process. Going forward, the FelCor executive shared nothing but positive feelings about the future health and well-being of hotel REITs…especially given his contention that there is definite evidence of a leisure travel recovery already underway. As such, his conviction is that hotel REITs— as a vehicle for real-estate investment— are absolutely back “and are here to stay.”