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Pebblebrook (PEB) Buys Gurney's Newport Resort & Marina

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Pebblebrook Hotel Trust (PEB - Free Report) has announced the acquisition of the AAA Four Diamond 257-room Gurney’s Newport Resort & Marina in Newport, RI, for $174.0 million. This resort buyout strengthens the company’s portfolio with an attractive asset within the vibrant, high-barrier-to-entry Newport market.

Gurney’s Newport has 257 guestrooms, which include 18 spacious suites and 80,000 square feet of flexible indoor and outdoor event space. Surrounded by expansive lawns, extensive water views, a marina and a historic lighthouse, this irreplaceable 10-acre waterside resort situated on the Goat Island in Newport is poised to lure strong demand. The resort also contains a 22-slip full-service marina with direct access to Gurney’s Newport.

According to Jon E. Bortz, the chairman, president and chief executive officer of Pebblebrook Hotel Trust, “Gurney’s Newport is the only resort-style property in Newport, and it is one of the very few true waterside resorts on the Northeastern Seaboard, drawing strong demand from New York, Boston and Providence.”

Newport is a vibrant tourist destination and is located just a 1.5-hour drive from Boston, MA, and a 3.5-hour drive from New York City. Newport is also known as “America’s First Resort” and the “Sailing Capital of the World” and remains one of the highest barrier-to-entry markets in the country, with very limited potential for new supply.

Pebblebrook has the right to purchase the marina (which includes 22 slips, accommodating boats up to 240 feet) in 2027. The resort will become part of Curator Hotel & Resort Collection. To drive increased cash flows, PEB has plans to reposition the property to a higher level.

Markedly, with the relaxation of regulations, an acceleration in vaccine distribution and favorable holiday travel trends, the lodging industry is likely to continue recovering. Amid this, with a superior location and premium features, this resort in Newport is anticipated to attract both leisure and corporate group customers.

The acquisition seems beneficial as the resort is expected to augment the company’s top line. Based on the estimated May 2022 trailing-twelve-month performance, the hotel generated total revenues per available room of $401, hotel EBITDA of $13.6 million and hotel net operating income, after a 4% capital reserve, of $12.1 million.

Funded with cash on hand and proceeds from its senior unsecured revolving credit facility, the acquisition brings Pebblebrook’s total number of properties in the portfolio to 55, which includes 13 unique drive-to, independent lifestyle resorts.

Shares of this Zacks Rank #1 (Strong Buy) company have declined 20.4% compared with the industry’s fall of 17.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Other Stocks to Consider

Some other key picks from the REIT sector include Extra Space Storage Inc. (EXR - Free Report) and OUTFRONT Media (OUT - Free Report) .

The Zacks Consensus Estimate for Extra Space Storage’s 2022 funds from operations (FFO) per share has moved marginally upward in the past month to $8.25. EXR presently carries a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 7.7% over the past two months to $2.09. OUT sports a Zacks Rank #1 currently.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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