Jonathan Christopher

Hotel REITs: The Most Contrarian Idea I Have

If you want to invest in REITS at the present time, I suggest that you look at the cumulative preferred stocks of the REITS. These preferreds pay an amount based on the issue price, nominally 7% on a share issued at $25 . (Though the is a wide range of rates). With many preferreds depressed in price, the current rates are very nice. A specific example is AHT, mentioned earlier. AHT, in a director's meeting specifically voted to buy bck their AHT C and AHT D at market, a wise investment. Since the shares currently sell at about $12 per, and pay 8+ % based on a $25 share price, the annual return is about 18%, and it is cumulative. If the company does not pay it for a quarter, it accumulates and the accumulation pays interest at the same rate (18% based on current prices.).

At current low rates of interest, you can bet that AHT will eventually buy back all of them, and you can, if you hold on long enough, double your capital investment while earning 18% while you wait. Not a bad deal.

There are a lot of these Preferreds around, though you need to be sure the Company will be able to continue to fund the payments.

An example of one which has not is Impac Mortgage Properties. Though not in Bankruptcy (they came close and their shares sell for about $0.50 per share) their preferred shares have also collapsed in price, and do not pay a dividend. I mentioned this company specifically because they have good, tough managers, and may still survive. In which case this would end up being a 10 banger from the present price.