BOSTON Less than two weeks ago, Jeff Donnelly of First Union Securities here painted a generally glowing picture of lodging REIT performance when he noted they had outpaced broader indicies in the first quarter. However, a continuing fall in earnings projections now has the market-watching vice president re-evaluating his earlier observations for the industry.
During a NAREIT Lodging Sector Conference Call, Donnelly had previously noted that lodging REITs appreciated 5.4% year-to-date versus a 1.6% increase for REITs overall and a drop of 10.6% in the S&P 500. Additionally, he maintained lodging REITs even outpaced small-cap companies, pointing to a corresponding 5.2% decline in the Russell 2000.
But in the wake of indications that hotel guest mixes and booking patterns could be changing (due to the slowing economy), Donnelly said his firm is lowering 2001 and 2002 earnings estimates, causing him to be not quite so bullish on some of the leading REITs and REOCs. In just one example, he aired concern for Host Marriott, based on the fact the company is “heavy into development, financed largely off its own balance sheet.” (3/26/01) Michael Billig