Hersha hospitality has continued to perform well fundamentally, but the industry is threatened by slowing growth and oversupply in some markets. NYC is particularly oversupplied and this is a big MSA for HT. These troubles are compounded by Zika threat in Miami which is another big MSA for HT. While we continue to like the way the company is run and think Hersha will perform well in the long run, we feel it is prudent to exit the position for the near term headwinds.

We replaced the Hersha with Independence Realty which is freshly cheap off the back of an equity offering. While the internalization of management is dilutive in the near term, it may open up the multiple for material expansion with the removal of the external management stigma.

Triple nets have suffered from the rising interest rates, but we believe this is overdone. A 20 basis point rise in interest rates that remain under 2% still does not make treasuries a viable alternative to the 6% to 8% yields in 2CHYP. There may be further damage to market price if interest rates continue to rise, but the lack of fundamental risk related to rates suggests the slump would be short lived.

Commentary may contain forward-looking statements which are by definition uncertain. We retain no obligation to update or correct forward-looking statements should the available information change. Actual results may differ materially from our forecasts or estimations.

2CHYP Portfolio Snapshot

10/14/2016 2CHYP Performance since inception

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2CHYP Weekly Trade Confirmation Report