Published Wed, 10 Jul 2019 17:39:07 -0400 on Seeking Alpha
Apple Hospitality REIT, Inc. (APLE) is vulnerable to a cyclical downturn in the hotel industry, which is why I am going to scale back my exposure to the hotel real estate investment trust this week. I added the lodging REIT to my investment portfolio only a couple of months ago but believe downside risks have grown considerably since then. Investors still seem to be largely in denial of growing risks to the economy, which is another red flag for me. Time to tread carefully.
Who Is Apple Hospitality REIT?
Apple Hospitality REIT is a U.S. select-service lodging real estate investment trust with an equity value of ~a$3.5 billion. The hotel REIT owns 234 hotels with 30,046 hotel rooms in 34 U.S. states. Apple Hospitality REIT's hotels are located mainly in suburban markets, which represent 56 percent of the REIT's adjusted hotel EBITDA.
Source: Apple Hospitality REIT Investor Presentation
Apple Hospitality REIT focuses on a small group of top hotel brands with high name recognition. Hilton (NYSE: HLT) and Marriott (Nasdaq: MAR) branded hotels make up the majority of the REIT's hotel portfolio.
Source: Apple Hospitality REIT
Apple Hospitality is one of the most efficient hotel REITs in the sector, measured on EBITDA margins. The REIT's 2018 hotel EBITDA margin was 37 percent, which compares favorably against a group of U.S. hotel REITs. Only Chatham Lodging Trust (CLDT) beat Apple Hospitality REIT in terms of operating efficiency in 2018 with an EBITDA... Read more