LaSalle Hotel Looks For New Properties


LaSalle Hotel Properties ( LHO ) is a real estate investment trust that started off in 1998 owning just 10 hotels. Today, it has 45 and is looking for more.

It specializes in upscale, full-service hotels in urban, resort and convention markets. LaSalle seeks to lower risk through geographic diversification, market type diversification and by working with multiple hotel operators and owning both branded and independent hotels.

LaSalle buys hotels and in some cases renovates or expands them. But it doesn't operate them. It contracts with operators, including well-known brands, like Hyatt and Sheraton.

In the past three years, it's added 17 hotels to its portfolio, most recently two in San Francisco and one in Key West, Fla., all completed in August 2013.

LaSalle has been growing its funds from operation, or FFO, the REIT equivalent of earnings, since late 2010. But it's not a steady grower over the long run. The hotel business is cyclical, blown this way and that by economic winds.

That means its FFO and ultimately its dividend are vulnerable if the economy heads south. FFO dropped sharply in the 2001-03 period and again in 2008-10. Although it's been rising since then, it hasn't regained its peak earnings of 2007.

The stock got walloped in the financial crisis, losing 92% of its value. It's come the majority of the way back, but, again, hasn't reached its peak price.

The quarterly dividend fell to a penny a share at the bottom in 2009, but is now 28 cents. The $1.12 annual dividend works out to a 3.5% yield. The three- to five-year dividend growth rate is a robust 25%, thanks to recovery of the past few years.

FFO for the most recent quarter rose 12% from a year ago. The stock has been moving generally sideways the past three years and appears to be forming a flat base.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: LHO

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