Preferred Stock Offerings from Lodging REITs Just Keep Coming

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Summit Hotel Properties Inc. (NYSE:INN) is the latest lodging REIT to tap the equity markets via a new preferred stock offering. Unfortunately, like almost all the other recent offerings, the coupon offered doesn’t reflect the long term risk/reward one undertakes when owning preferred stocks from lodging REIT issues.  The coupon on the new issue is a skimpy 6.45%.

Currently INN has 3 other preferred stock issues outstanding with coupons ranging from 7.125% to 9.25% (remember the days of receiving a fair return?) which you can compare to this new issue on our “swaps” page here.  

Summit intends to use the proceeds from this 3 million share offering to pay down debt from their revolver and for potentially redeeming their 9.25% INN-A preferred issue which becomes redeemable in September.  Summit had $55 million outstanding on their revolver as of 3/31/2016 and with the new issue netting Summit approximately $72 million after issuing expenses they will be able to redeem part of the INN-A, but not all of it.  The “A” issue is a 2 million share issue so $50 million will be required for redemption.

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This issue has the normal preferred stock terms, being perpetual in duration, redeemable after approximately 5 years and being a REIT the dividends are cumulative.

Details of this issue can be found here.

Shares are now trading on the OTC Grey market under the temporary ticker symbol of SMTTP.  For those interested in purchasing shares now our primer on the OTC Grey market can be found here.  Shares last traded at $24.90.

 

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