Moody’s Investors Service Bullish On Hotel REITs

NEW YORK— Moody’s Investors Service’s ratings actions for lodging REITs have become more positive as of late as a result of the continued recovery in the hospitality sector. This evaluation was published in Moody’s recently released first half of 2005 earnings commentary on lodging REITs. Strong guest demand, stable supply and healthy economic growth have driven the improving performance and related financial measures of Moody’s rated lodging REITs. As a result, Moody’s has taken several positive ratings actions with respect to hotel REITs and expects the group’s improvement to continue. For the 21 lodging REITs reviewed by Moody’s, RevPAR grew by 24% in the first six months of 2005 mostly as a result of a 12.2% rise in ADR. Within that group of 21, hotel REITs focused on full-service properties outperformed REITs with mostly limited-service hotel holdings. Moody’s two positive ratings actions within the lodging REIT segment during the first half of 2005 involved Equity Inns and Host Marriott. Moody’s upgraded Equity Inns’ preferred stock to B2 from B3 and assigned a Ba3 issuer rating with a stable outlook. This action was based on Equity’s resilient performance during the industry downturn and ability to capture the benefits of the industry recovery. Meanwhile, Moody’s also upgraded the rating on the preferred stock of Host Marriott from B3 to B2 and revised its rating outlook to positive. This positive action was a result of Host Marriott’s operating performance improvement, which increased the REIT’s cushion with respect to its bond covenants.