This analysis organizes the interest-bearing debt and LTV of 7 major hotel REITs side by side as disclosure items and estimates the impact on distributions over 5 years if interest rates move up by +1%. It clarifies how the timing of the impact varies significantly depending on the combination of the fixed-rate debt ratio and average remaining term.
This analysis compares the disclosed debt figures of 7 companies side by side, organizing interest-bearing debt outstanding, LTV, fixed-rate debt ratio, average remaining term, maturity staggering and credit ratings, and estimates the five-year impact of uniform +0.5% and +1.0% increases in borrowing rates. The key finding is that differences in the timing of the impact are more pronounced than differences in its magnitude across the 7 companies.
Fixed-rate debt ratios range widely from 0.0% to 88.9%, while average remaining terms range from 2.1 to 3.4 years. As a result, the transmission of the same interest-rate shock differs significantly. The first-year outcome ranges from 1.9% to 19.1%, a difference of approximately 10 times, while the five-year outcome falls within a range of 7.3% to 19.1%.
Viewed on a per-room basis, interest-bearing debt ranges from ¥8.6 million to ¥21.8 million per room. Although it is correlated with metrics such as RevPAR, the absolute debt burden alone is not sufficient for comparison. The channels through which an interest-rate shock affects distributions can be viewed along two axes: the immediate impact on the floating-rate portion and the phased application of higher rates as refinancing dates arrive.
The analysis indicates that REITs should not be compared solely on the basis of LTV levels. Instead, the combination of the fixed-rate ratio and duration, together with the amount of refinancing coming due each year, should be considered. For REITs with a delayed impact profile, the current environment may offer scope for their debt profile to become more fixed-rate and longer-dated.