The stock market wasn’t kind to U.S. public real-estate investment trusts in 2011.
REITs saw across-the-board declines in their stock prices, with most of the drops spurred by capital market upheaval that began in early August.
Some examples (using historical stock prices):
• Pebblebrook Hotel Trust: down 8.5% between 3 January 2011 and 30 December 2011.
• LaSalle Hotel Properties: down 12.1% between 3 January 2011 and 30 December 2011.
• Host Hotels & Resorts: down 19.5% between 3 January 2011 and 30 December 2011.
• FelCor Lodging Trust: down 58.8% between 3 January 2011 and 30 December 2011.
• DiamondRock Hospitality Company: down 21.9% between 3 January 2011 and 30 December 2011.
The erosion the REITs saw in their capital bases took away one of the things REITs do best: acquiring properties. With no equity to inject into deals, REITs backed away from deals as the year came to a close.
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During a panel at the Barclays REIT Conference in New York last month that was broadcast online, top REIT executives were asked by panel moderator Arthur Adler, managing director and CEO of the Americas at Jones Lang LaSalle Hotels, whether the companies felt “bullied” over the direction of their respective stock prices.
Ken Cruse, president and CEO of Sunstone Hotel Investors, responded by saying he did not feel Sunstone, which saw its stock drop by 23.2% between 3 January 2011 and 30 December 2011, was bullied during the year. He said the fluctuations REITs see in stock prices is part of the natural market cycle.
“There is fundamental selling when you see signs of weakness,” he said.
He added that Europe’s uncertain debt situation and macroeconomic jitters in the United States haven’t affected the quality of Sunstone’s portfolio of 32 hotels comprising 13,206 rooms.
As soon as some clarity returns to the market, “stocks will rocket back up,” Cruse said.
Will that turn out to be a prophetic statement? We here at HotelNewsNow.com will track the ups and downs of the REIT sector—and the rest of their hotel industry brethren—to find out.
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