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Pebblebrook (PEB) Witnesses Robust October Operating Trends
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Per Pebblebrook Hotel Trust’s (PEB - Free Report) recently released operating update, its operating results for October were at the high end of expectations, with the urban portfolio performing strongly.
The company witnessed same-property revenue per available room (RevPAR) and total revenue year-over-year growth of 2.8% and 3.6%, respectively, for the entire portfolio. The uptick was mainly driven by an increase in occupancy and average daily rate (ADR).
The same-property Hotel EBITDA during October was at the high end of PEB’s expectations. Non-room revenues increased 4.9% year over year. The overall operating expenses were well controlled.
Speaking of the lodging real estate investment trust’s (REIT) urban portfolio, robust business transient and group business travel demand, which boosted room rates and ancillary spending, drove an almost 6% year-over-year increase in same-property revenues. Notably, there was a sequential improvement in demand during weekdays and weekends, indicating a continued rebound in urban travel for business and leisure purposes.
The urban portfolio’s same-property RevPAR climbed 4.8%, fueled by the strength seen in Boston, Washington DC, San Francisco and Los Angeles.
The company noted that the performance of its same-property resort portfolio in October improved sequentially, as ADR and EBITDA for the portfolio declined just 0.6% and 1.8%, respectively, from the prior-year period.
However, with resort demand and average rates beginning to normalize, Pebblebrook’s resort same-property REVPAR declined 3.6% year over year, although the metric improved significantly from prior months.
The company also continues to make meaningful progress on the $12.5 million redevelopment of Southernmost Beach Resort’s four guest houses and targets to complete it by the fourth quarter of 2023.
PEB has also started the transformation of Newport Harbor Island Resort for $48 million and anticipates completing it by the second quarter of 2024, along with the second and final phase of the repositioning of Estancia La Jolla Hotel & Spa for $25 million.
Further, as part of its capital-recycling efforts, PEB closed the disposition of Hotel Zoe Fisherman’s Wharf in San Francisco, CA, on Nov 14 to a third party for $68.5 million.
The sales price of the property denotes an EBITDA multiple of 25X and a net operating income (NOI) capitalization rate of 3.2%. The NOI capitalization rate is calculated after an assumed capital reserve of 4% of total hotel revenues.
From the beginning of 2023 through Nov 28, PEB disposed of six properties for $300.8 million.
Pebblebrook forecasts year-over-year growth rates for November and December to be higher than October, consistent with its fourth-quarter outlook.
For the fourth quarter of 2023, the lodging REIT expects adjusted funds from operations (AFFO) per share in the range of 9-14 cents. The Zacks Consensus Estimate is pegged at 12 cents, within expectations.
Same-property RevPAR is projected between $183 million and $188 million, indicating year-over-year growth of 1-4%. Same-property Hotel EBITDA is estimated between $57 million and $63 million.
However, persistent macroeconomic uncertainty is likely to affect the company’s ability to maintain rates in its resort markets. A high interest rate environment adds to the company’s concerns.
PEB currently carries a Zacks Rank #5 (Strong Sell).
Shares of the company have lost 5.2% in the quarter-to-date period against the industry’s upside of 7.3%.
The Zacks Consensus Estimate for EastGroup Properties’ 2023 FFO per share has moved marginally upward in the past month to $7.69.
The Zacks Consensus Estimate for Stag Industrial’s ongoing year’s FFO per share has been raised 1.3% over the past month to $2.28.
The Zacks Consensus Estimate for Park Hotels & Resorts’ current-year FFO per share has moved 3.1% northward over the past month to $1.98.
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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Pebblebrook (PEB) Witnesses Robust October Operating Trends
Per Pebblebrook Hotel Trust’s (PEB - Free Report) recently released operating update, its operating results for October were at the high end of expectations, with the urban portfolio performing strongly.
The company witnessed same-property revenue per available room (RevPAR) and total revenue year-over-year growth of 2.8% and 3.6%, respectively, for the entire portfolio. The uptick was mainly driven by an increase in occupancy and average daily rate (ADR).
The same-property Hotel EBITDA during October was at the high end of PEB’s expectations. Non-room revenues increased 4.9% year over year. The overall operating expenses were well controlled.
Speaking of the lodging real estate investment trust’s (REIT) urban portfolio, robust business transient and group business travel demand, which boosted room rates and ancillary spending, drove an almost 6% year-over-year increase in same-property revenues. Notably, there was a sequential improvement in demand during weekdays and weekends, indicating a continued rebound in urban travel for business and leisure purposes.
The urban portfolio’s same-property RevPAR climbed 4.8%, fueled by the strength seen in Boston, Washington DC, San Francisco and Los Angeles.
The company noted that the performance of its same-property resort portfolio in October improved sequentially, as ADR and EBITDA for the portfolio declined just 0.6% and 1.8%, respectively, from the prior-year period.
However, with resort demand and average rates beginning to normalize, Pebblebrook’s resort same-property REVPAR declined 3.6% year over year, although the metric improved significantly from prior months.
The company also continues to make meaningful progress on the $12.5 million redevelopment of Southernmost Beach Resort’s four guest houses and targets to complete it by the fourth quarter of 2023.
PEB has also started the transformation of Newport Harbor Island Resort for $48 million and anticipates completing it by the second quarter of 2024, along with the second and final phase of the repositioning of Estancia La Jolla Hotel & Spa for $25 million.
Further, as part of its capital-recycling efforts, PEB closed the disposition of Hotel Zoe Fisherman’s Wharf in San Francisco, CA, on Nov 14 to a third party for $68.5 million.
The sales price of the property denotes an EBITDA multiple of 25X and a net operating income (NOI) capitalization rate of 3.2%. The NOI capitalization rate is calculated after an assumed capital reserve of 4% of total hotel revenues.
From the beginning of 2023 through Nov 28, PEB disposed of six properties for $300.8 million.
Pebblebrook forecasts year-over-year growth rates for November and December to be higher than October, consistent with its fourth-quarter outlook.
For the fourth quarter of 2023, the lodging REIT expects adjusted funds from operations (AFFO) per share in the range of 9-14 cents. The Zacks Consensus Estimate is pegged at 12 cents, within expectations.
Same-property RevPAR is projected between $183 million and $188 million, indicating year-over-year growth of 1-4%. Same-property Hotel EBITDA is estimated between $57 million and $63 million.
However, persistent macroeconomic uncertainty is likely to affect the company’s ability to maintain rates in its resort markets. A high interest rate environment adds to the company’s concerns.
PEB currently carries a Zacks Rank #5 (Strong Sell).
Shares of the company have lost 5.2% in the quarter-to-date period against the industry’s upside of 7.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are EastGroup Properties (EGP - Free Report) , Stag Industrial (STAG - Free Report) and Park Hotels & Resorts (PK - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for EastGroup Properties’ 2023 FFO per share has moved marginally upward in the past month to $7.69.
The Zacks Consensus Estimate for Stag Industrial’s ongoing year’s FFO per share has been raised 1.3% over the past month to $2.28.
The Zacks Consensus Estimate for Park Hotels & Resorts’ current-year FFO per share has moved 3.1% northward over the past month to $1.98.
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.