How Is Bernanke Helping the Economy?
After all the talk about the Federal Reserve, QE2 and Ben Bernanke’s plans to stimulate the economy, sometimes the central bank chief’s efforts go misunderstood. So to bring it down to street level, Cramer wanted to show how Bernanke’s policies could positively affect a company.
Take Hersha Hospitality , for instance. The real estate investment trust owns interests in 76 hotels largely up and down the Northeast corridor between D.C. and Boston. And they’re all branded hotels—Marriott , Hilton, Hyatt —too. This stock fell 91 percent to $1.13 on March 10, 2009 from its $12.77 peak in July 2007 thanks to the Great Recession, but look at it now.
Despite being the type of highly leveraged business that should have—and historically has—gone under during those tough times, Hersha managed to stay afloat, thanks in a big way to Bernanke and his low interest rates. First, it raised $167 million through an equity offering on Oct. 19 and this week refinanced its debt, nearly doubling the size of its credit facility to $250 million from $135 million at the same interest rate.
Hersha is starting to grow again, too. The trust’s average daily rate is up 8.9 percent, its occupancy saw a 346-basis-point increase, and that resulted in a 13.9-percent rise in revenue per available room.
What Cramer wants to know now is whether Hersha will revisit the level it hit in 2007. And will it get that dividend back to 72 cents a share, where it was pre-recession, bringing the yield to 12 percent from its present 3.3 percent. For an insider’s outlook, he invited CEO Jay Shah to the show. Watch the video for the full interview.
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