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REIT Replay: Hotel hopes


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REIT Replay: Hotel hopes

REITscontinued climbing upward, while the broader markets slid further Monday, Sept.26, as Morgans Hotel Group moved ahead with a stockholders vote despiteuncertainty surrounding the financing of its proposed takeover by SBEEntertainment.

TheMSCI US REIT Index (RMZ) edged up 0.24% to 1,225.30, and the SNL US REIT EquityIndex rose 0.17% to finish at 327.06. The Dow Jones Industrial Average,meanwhile, dropped 0.91% to close at 18,094.83, while the S&P 500 fell0.86% to end the day at 2,146.10.

Despiteunresolved questions about the financing behind a to , the companydecided to proceedwith its stockholders meeting. At the meeting, scheduled for Monday, investorswere set to vote on an acquisition of the company by SBE Entertainment GroupLLC.

However,mortgage lenders supporting the SBE bid recently said they were uncertainwhether they would strike a deal to assume debt in connection with the merger.Additionally, two potential acquirers, known in filings as "Bidder V"and "Bidder Q" respectively, have apparently not secured financingfor their offers.

Oncethe transaction gains a nod from Morgans shareholders, the company will not bepermitted to terminate the transaction in favor of a superior proposal, even ifSBE is not in a position to wrap up the deal, the company said in a filing.

Sharesof Morgans Hotel tumbled 9.17% to close at $1.98.

Pursuantto the terms of MarriottInternational Inc.'s recently completed of , now known as Starwood Hotels & Resorts Worldwide LLC,Marriott is offering to buyback two series of senior notes issued by Starwood.

Marriottsaid in a Friday release that it will fully or partially repurchase Starwood's7.150% senior notes due 2019 and 3.125% senior notes due 2023 on Oct. 25. Therepurchase price will be a cash amount equal to 101% of the repurchased notes'aggregate principal amount, plus any accrued and unpaid interest up to therepurchase date.

Marriottshares fell 1.88% to close at $67.15.

saidMonday that the 45-day go-shop period for its takeover of Sept. 22 at 11:59 p.m.ET, with the target company not receiving any alternative acquisitionproposals. The companies expect the merger to be completed in the fourth quarter,subject to approvals from their respective stockholders. The deal will create aREIT with a pro forma enterprise value of $3.3 billion.

Sharesof Global Net Lease dropped 0.60% to close at $8.26.

MorganStanley & Co. LLC analyst Thomas Allen said in a Monday note that heupgraded Marriott to "overweight" as he prefers C corporations thathave "strong" unit growth, which translates to EBITDA growth despitelower RevPAR assumptions.

Meanwhile,the analyst added that his risk-reward generally skews negative for lodgingREITs, reflecting their greater negative operating leverage, lower RevPARbecause of gateway city headwinds and no unit growth to offset them.Accordingly, the analyst downgraded DiamondRock Hospitality Co. and to"underweight."

Theanalyst also downgraded HyattHotels Corp. to "underweight" due to its ownership-heavymodel and "significant" exposure to gateway cities, which offsets the"strong" unit growth on its smaller fee-based business.

Allenupgraded Choice HotelsInternational Inc. to "equal-weight" followingunderperformance that suggests it now has a much more even risk-reward profile.

DiamondRockshares shed 4.05% to close at $9.01; Hyatt Hotels shares decreased 3.04% toclose at $48.82; Sunstone shares fell 3.37% to close at $12.60; and ChoiceHotels shares dropped 2.15% to close at $45.58.

Onthe macro front, the U.S. Census Bureau and the Department of Housing and UrbanDevelopment said new single-family home sales in August were at a seasonallyadjusted rate of 609,000, down 7.6% from the revised July rate of 659,000, but up20.6% from the August 2015 estimate of 505,000.

Now featured on S&PGlobal Market Intelligence

: TheSept. 26 edition of the North American property news roundup also featuresPhillips Edison Grocery Center REIT II's Michigan property acquisition and aSterling Real Estate unit's purchase of a North Dakota apartment asset.

Market prices and indexvalues are current as of the time of publication and are subject to change.