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Hey Fools:

My pod-mate here at Fool HQ and good friend Alex Pape came out with his first buy rec this afternoon.

I have to say, this is a compelling idea -- great analysis and it fits his investing style perfectly. I highly recommend checking out the article and following his Rising Star portfolio.

http://www.fool.com/investing/value/2010/11/18/rising-star-b...

I may do some additional work on Pebblebrook and consider it for the Un Port -- Alex does a pretty good job identifying the "un" of the debt-laden hotel business.

I think Pebblebrook's transition to a REIT once it is fully invested could be a major catalyst too.

Bryan
TMF42
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No. of Recommendations: 2
Hey Bryan,

Thanks for the shout-out.

Bryan and I sit next to each other, so we're constantly shooting ideas back and forth. Bryan has been giving me feedback and thoughts as I developed my thesis around Pebblebrook, so he is already well in the loop on the company.

Attaining REIT status will definitely be a catalyst for Pebblebrook. To get REIT status, PEB will have to be at least 75% invested and pay out more than 90% of its earnings to shareholders, among other things. I estimate that PEB can qualify within 12-18 months. The reason this is a good thing, and a catalyst, is that REITs are exempt from federal income tax--so the day they get REIT status, tax expenses go away.

Another, related catalyst is yield. As Pebblebrook starts paying out a dividend to qualify for REIT status, the stock's yield will rise, and a new group of investors will pick up on the stock. These yield investors invest primarily on (surprise) yield, and since, by my calculations, Pebblebrook will be capable of paying out 2-3x the going yield for similar companies, these investors should bid the stock price up.

If you have any questions about Pebblebrook, I am confident that Bryan can help you out--and I'll be here as well. You can also check out my boards for further PEB discussion: http://boards.fool.com/rs-alex-pape-119865.aspx?source=irnsi...

Cheers,
Alex
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