Any real estate experts here?

[Guest Bronco]

I am a shareholder of Loews, and have always struggled to value their hotel subsidiary.

 

Essentially, they own 18 hotels (16 in the US and 2 in that other country to the north).

 

How would one value such properties, even on a +/- 20%? 

 

Just curious if anyone has some good (even if back of the envelope) insight?

[PlanMaestro]

I am a shareholder of Loews, and have always struggled to value their hotel subsidiary.

 

Essentially, they own 18 hotels (16 in the US and 2 in that other country to the north).

 

How would one value such properties, even on a +/- 20%? 

 

Just curious if anyone has some good (even if back of the envelope) insight?

 

You can use $/room for hotels on the same price category. For example, Las Vegas Hilton is probably worth more than $150K per room but a Super 8 with luck would fetch $50K. The use of rooms instead of sqf tend to isolate the effects of location, given that a similarly priced hotel in a good location would probably have smaller rooms. You may try to use comparables with similar properties publicly traded and do a back of the envelope.

 

Another metric widely followed is RevPAR, that gives you an idea of the capacity utilization overtime including discounts.

 

http://en.wikipedia.org/wiki/RevPAR

[rogermunibond]

Take a look at comparable standalone REITS - BEE, SHO, LHO, AHT.  Compare $/room after netting out holdco debt, preferreds, etc.

 

Or go to Globest or costar website and look at comparable recent hotel sales and look at REVPAR/room and $/room for those sales.

 

IIRC, Loews hotels are mostly luxury/5-star properties,, so BEE and SHO might be the best comparators.

[Guest Bronco]

Thanks guys.

 

I've always thought the hotels were worth $1b - but maybe value is lower.  Some properties are owned, some have land leases, some are jv's, and some are management contracts.

 

I would imagine that certain properties are worth more based on location - i.e. Regency in NYC.

 

Regardless, or in north Jersey, irregardless - thanks for the input.

[Myth465]

I just take them at book value in terms of assets. I dont think its that significant in terms of the value of Loews. I prefer the BWP holding which will receive IDRs. They really should grow the platform or sell it. I dont like hotels and much prefer REITs.

[Guest Bronco]

Myth - no doubt the hotels are a small piece but I am a bit of a Loews geek.  Going thru the 10k piece by piece.

 

I am not a buyer here but the company is still undervalued. 

 

Myth - your SD is on fire.  I sold my out of the money calls way to early.

 

CHK and SWN and I am sure others also doing well.

 

When will the US take advantage of its nat gas?

 

 

 

[Myth465]

Im kinda shocked with SD. I cant wait to sit down with the 10k.

 

I dont know when we take care of Nat Gas but when it happens Loews will mint money with BWP. They have unlimited growth with BWP and those IDRs will become quite valuable once they past the split mark.

 

I agree with you that its slightly overvalued but Loews will make a killing on it with year over year growth in volumes and income. With that said I dont want them to buy more energy holdings and would prefer for them not to do a deal which involves wet gas or oil. We are too leveraged to oil and gas as it is.

 

[zarley]

I just started looking at Loews and it does seem undervalued.  Both the insurance sub or the nat gas pieces look a little cheap, and a sum of parts using current market prices for the traded pieces probably puts you in the mid $50's.

 

Haven't looked closely at CNA, but it's trading around .7 x BV.  Good or bad Impressions of their operation overall?

 

Is there a thread in the ideas forum for L?

[Myth465]

http://cornerofberkshireandfairfax.ca/forum/index.php?topic=3172.0

[zarley]

Thanks Myth. 

[Myth465]

Also 1 last thing. Loews always and will likely always trade at a discount to IV. I think you want to hold or sell most of the time, and really want to buy when there is a double discount.

 

When the subs trade at a huge discount, and you get the 30% holding company discount + deep / constant buybacks Loews is a big winner.

 

Right now I agree with Bronco - BWP is overvalued slightly, DO is undervalued and should be worth at least $100 if not more, Highmount is in the tank but should be as well as the hotels, and CNA is underbook value and is being turned around.

[Packer16]

Another way top value hotels is on pre-tax NOI (similar to FFO) cap rates.  There are surveys out there Korpasz and Realty Rates which can provide some current cap rates.  It is also a good idea to examine comps in terms of cap rates and per room metrics.  Depending on location the cap and per room rates can vary greatly but they are typically groups by type of hotel (luxury, economy, etc.).  HVS also has a good bit of free market info on hotel cap rates and valuation.

 

Packer