RLJ
RLJ Lodging Trust
$10.88
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 65.2% below fair value
You pay
$10.88
Bear
$25.74
Fair
$31.25
Bull
$36.77
Bear
$25.74
+136.6%
$1.41 FFO × 18x
Fair
$31.25
+187.3%
$1.41 FFO × 22x
Bull
$36.77
+238.0%
$1.41 FFO × 26x
Adjust Assumptions
22.1x
$
Key Value Driver
FFO/share ($1.41) × default P/FFO multiple
Implied Market Multiple
7.7x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (18 analysts)
$11.50
Divergence from AlphaVal
172%
Summary
At $1.41 FFO/share with a 22x default REIT multiple, the base-case value is $31.25 per share. Dividend yield: 5.5%.
Warnings
Standard profit figures are misleading for real estate companies — large non-cash accounting charges make profits look artificially low. Dividend yield and funds from operations are better measures.
Dividend yield of 5.5% is unusually high — make sure the company generates enough cash to keep paying it.
Wall Street's average price target is $11.50 (from 18 analysts). Our estimate is 172% above the consensus -- consider that gap carefully.
Key Risks
- P/E and EV/EBITDA are structurally wrong for REITs — use P/FFO and NAV
- Interest rate sensitivity: REIT multiples compress when rates rise
- FFO approximation (NI + D&A) may include gains on property sales — verify