American Hotel Income (HOT.UN.TO)

Has US exposure and foreign exchange is helping. The hotel industry has outperformed over the last three quarters, which is not only coming from economic growth in Canada and the US, but also from foreign exchange exposure. There is some pricing power we are seeing in the hotel sector. Probably not a bad investment at this point.

This is a name he likes to go to for yield. All of their hotels are in the US. They own 2 different classes of real estate. A large portion is railway hotels, and the rails sign contracts with them so their workers have a place to sleep. They also have a branded portfolio and are growing that over time through acquisitions. This is one he would recommend for yield. Yield of 8.4% is sustainable.

US limited service hotels. This is his income selection. He currently holds a half position and waiting for a few more quarters to get full confidence, but it is so attractive from a valuation standpoint. There is such a boom in US hotels and this one hasn’t received that benefit. Dividend yield of 8.43%.

This is a Canadian REIT buying US assets. Interesting because about one third of those assets are anchored by long-term leases to railway companies, so they are in small towns along railway lines. The people have to have mandatory rest breaks every certain amount of hours, so this is a very stable, core business. With the other two thirds, they are buying hotels across America around airports or near major transportation hubs. Has a very attractive yield and he has used this as a yield pick in the past. You have to be a little bit patient with this, but you are earning about an 8% yield as you wait.

Limited service hotel industry in the US. A large part is crew-oriented occupancy – contracts with rail companies. They are trying to diversify outside of that. This is a volatile market. He is not a huge fan. Their leverage and payout ratio are sound. It is okay to hold it for the distribution.

Were railway type hotels so most of the occupancy was known. Over the last year they purchased limited service hotels and now only 50% are rail crew hotels. It should expose you more to the US economy. He chooses higher quality US lodging REITs.

(A Top Pick June 17/13. Down 1.27%.) Had disappointing quarters in Q4 and Q1. He has a “wait and see” attitude to make sure they can turn this next quarter around. Yielding about 8.9%.

(Top Pick Jun 17/13, Up 3.57%) He called it right as it ran right up, but then they released earnings that missed consensus. The fundamentals have been true and he has been picking up more recently. Lots of contracts anchored by rail contracts. It is lumpy because it is lodging. Low payout ratio so they can work through those earnings.

(Top Pick Jun 17/13, Up 11.06%) A great company. You get exposure to the US. The nice feature is that they have a lot of hotels contracted to the railways and are always 100% full. It gives them stability that is rare in the hotel industry. Generous yield.

(A Top Pick June 17/13. Up 1.65%.) Kind of flat in the price, but an 8.25% yield. Hotel sector in the US has been very strong. This has lagged on a price basis, so it is still a good opportunity. Have long-term contracts with a railroad so it has cash flow security.

(Market Call Minute) US hotel market is on fire.

Has an aversion to this because he doesn’t like the underlying properties. These are hotels that are purchased and they enter into long-term leases with rail properties. He worries about these kinds of properties and something called hot bedding, which is putting a lot of different crews through a hotel, which generally results in higher maintenance CapX.

This is a great opportunity for Canadian investors to invest in the US hotel sector. Has done very well in the US and will continue to do so over the next couple of years. This one is unique in that it has a good percentage of its hotels on contract to the rail industry. This gives you great stability for this high-yield. Have recently expanded outside of the direct rail business into limited service hotels, which he feels is a great market.

(A top pick June 17/13. Up 0.1%.) Still likes this company. US hotels along rail lines with long-term contracts with rail companies. Doesn’t feel that the 8.1% yield is at risk.

(Market Call Minute.) Recent IPO that has done very well. Thinks the assets are overvalued and too much tenant concentration. Growth by acquisition mandate. Doesn’t like it.