Fundamental strength

Hersha Hospitality (HT) has among the best aligned management teams.  There are all sorts of metrics that measure alignment such as board structure or insider ownership, but in my experience, most of these measures are meaningless. Ashford Hospitality has the highest insider ownership of any hotel REIT and quite possibly the worst alignment.

Hersha, however, demonstrates its alignment with shareholders through consistent action.  It has now bought back over 21% of outstanding shares which sets it up for amplified growth as hurricane affected markets return to operation.  Portfolio recycling may have caused lumpiness in the numbers but it was accretive to NAV and is likely to be accretive to FFO in the long run.

Windstream closed up over 20% today following earnings yesterday.  While there is still some churn, the pace is manageable, and WIN’s new business endeavors appear to be fruitful.  Stabilized OIBDAR at roughly $2B annually is easily enough to cover capex of roughly $600mm-800mm and UNIT’s lease which is somewhere between $600mm and $700mm.  This enhanced stability is excellent news for UNIT.

Washington Prime (WPG) is arguably one of our riskier positions given what happened at CBL.  However, this week’s report differentiated WPG from CBL with far stronger property level performance and a management team that is clearly committed to maximizing shareholder value.  WPG also declared its dividend flat and gave encouraging commentary about its sustainability.

A majority of the companies held in 2CHYP have now reported with a couple more coming in next week.  We have been encouraged by the fundamental strength.  REIT prices remain low, but fundamentals show growth that outsizes what one would expect given the trading multiples.  2CHYP’s portfolio consists mostly of GARP stocks that happen to be trading at deep value multiples.

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 Snap Shot

2/22/18 2CHYP Performance since inception

2CHYP Weekly Trade Confirmation Report