Hotel REITs Sink The REIT Ship

What happened? Just when you though it was safe to venture out, the REIT sector got hammered again, with many shares down 10% or more on Monday. Much of the reason for that related to the latest round of dividend cuts, this time from the Hotel REIT sector. Ashford Hospitality Trust Inc. (AHT), a hotel operator, became the latest hotelier to suspend its dividend to preserve cash.

After the close of trading on Friday, Ashford said it was laying off employees, cutting benefits for those who remain, renegotiating vendor contracts and suspending its common stock dividend to preserve cash. Ashford shares dropped over 10 percent, to $1.12.

AHT is now is danger of being delisted, but the stock has never been for the faint of heart. The Company provided no information on the number of job cuts, and said it expects to distribute the absolute minimum dividend required to maintain its REIT status in 2009, but no more. Expect that REIT dividend to be paid in stock.

Like other Hotel REITS, Ashford sits squarely in the bullseye of reduced consumer and business spending, which leads inevitably to a decline in the value of its real estate. Ashford is just one of many REITs that have suspended or reduced dividends to preserve cash. Newcastle Investment Corp., a Mortgage REIT, even skipped its preferred stock dividend.

Earlier this month, DiamondRock Hospitality Co. (DRH) said it does not plan to issue another dividend until the end of 2009 to free up more liquidity for next year and help pay down about $70 million in debt.

Also, FelCor Lodging Trust Inc. (FCH) suspended its common dividend and Host Hotels & Resorts Inc. (HST) slashed its regular quarterly dividend by 75 percent to 5 cents.

FelCor shares took a 10% dive to $1.55, while Host Hotels’ stock dropped to $6.73.

<
Disclosures: None at the time of publication