The industrial sector and its index, the Dow Jones U.S. Hotel & Lodging REITs Index (DJUSHL), have been off and running over the last 52 weeks. The Index closed on Friday, April 9, 2010, at 90.62 — UP 18.3 percent from 74.06, its close on Dec. 31, 2009 — and UP 132.6 percent from 38.96, its close a year ago on April 10, 2009.
In comparison, the Nasdaq Composite Index closed on Friday at 2,454.05, UP 8.15 percent for the year, and UP 48.5 percent from 1,652.54, its close on April 9, 2009.
There’s a reason for the Hotel & Lodging REITs Index’s strength: It’s a dividend play for investors seeking income, according to Wall Street professionals. To qualify as a REIT or real estate investment trust, a company must distribute 90 percent of its taxable income to its shareholders.
This week’s only deal is a recently formed hotel and lodging REIT.
Chatham Lodging Trust (CLDT – proposed) is a Palm Beach, Florida-based hotel investment company formed in October 2009 to invest in premium-branded upscale extended-stay lodging such as Residence Inn by Marriott or Homewood Suites by Hilton, as well as upscale select-service hotels and full-service hotels.
Chatham has no operating history and does not own any hotel properties. The company has entered into an agreement to buy six “initial acquisition” hotels following the closing of this offering, but there is no assurance that it will complete such a purchase.
The company plans to offer 7.5 million shares at $20 each to raise $150 million. The deal is expected to be priced on Thursday evening, April 15, which incidentally is the tax-filing deadline day, to trade on Friday morning, April 16.
A Few Reservations
Taking note of the opening-day results for REITs from 2008 to the present, bankers have priced 14 deals, according to the U.S. Securities and Exchange Commission filings.
Only four of the 14 REITS closed their opening days as winners. Nine were losers. One was unchanged.
The average loss for the 14 was 1.68 percent.
This is the reason the IPO handicappers are not looking for an opening-day moonshot.
Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations or opinions.