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Credit Suisse mulls cheap lodging REITs

  • Relative to private-market valuations, hotel REIT prices look cheap (an average 27% discount to NAV), but during commercial real-estate downturns, you can through NAV out the window, says the team, with prices driven more by cash flow multiples than the intrinsic value of the real estate.
  • Under such a scenario. trough multiples of 8.5-9.5x EBITDA would imply another 30-40% downside in the already roughed-up names.
  • Credit Suisse cuts price targets across the sector by 20%, and FFO estimates this year by 5% (3% below consensus) and 12% in 2017 (12% below consensus).
  • Top picks: Sunstone Hotel (SHO +2.6%), RLJ Lodging (RLJ +2.3%), Diamondrock Hospitality (DRH +3.1%). They have just a Neutral rating on Host Hotels (HST +2%), but says the stock could surprise to the upside this year.
  • Previously: Host Hotels guides for about 8% FFO growth this year (Feb. 17)

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