Key Highlights

● RLJ Lodging Trust (RLJ) closed at $11.07 on Monday, down 1.16% from $11.20, after a Raymond James downgrade.

● Raymond James cut the hotel REIT to Market Perform from Outperform, reportedly citing valuation, with a price target of $11.

● The same firm upgraded Park Hotels & Resorts to Strong Buy from Market Perform with a $19 target, reports said.

● The 10-year Treasury Yield reached its highest level since 2007, a headwind for rate-sensitive real estate Investment trusts.

RLJ Lodging Trust (NYSE:RLJ) closed at $11.07 on Monday, September 28, down 1.16% from $11.20 on Friday, after Raymond James (NYSE:RJF) downgraded the hotel real estate investment trust to Market Perform from Outperform. A REIT is a company that owns income-producing property and pays out much of its income to shareholders. Major indexes closed in the red. The S&P 500 declined 59.72 points to 7,683.69, the Dow Jones Industrial Average slid 347.11 points to 51,481.51, and the Nasdaq Composite retreated 248.34 points to 26,820.38.

What Raymond James Did

Market Perform is a neutral rating, roughly the equivalent of hold at other brokerages, and it sits below Outperform and Strong Buy on the firm's scale. Reports said the cut was based on valuation and carried a price target of $11, just below Monday's close. A valuation downgrade is a judgment about price relative to prospects, and it is the analyst's view rather than a forecast. Reports described the move as a call on price, not a warning about operations, though some investors treat a step back from a positive rating as a cue to take profits.

A Split Call on Two Hotel REITs

On the same day, Raymond James analyst RJ Milligan upgraded Park Hotels & Resorts (NYSE:PK) to Strong Buy from Market Perform with a $19 price target, according to reports that pointed to strength in Revenue per available room, or RevPAR, a standard hotel measure of room revenue, and to the outlook for 2027. The two calls show how analysts separate companies within a sector, since portfolios, locations and valuations differ. RLJ owns mainly focused-service and compact full-service hotels in major US markets. Market data showed a consensus hold rating on RLJ with an average price target near $11.68, which puts Raymond James's new rating in line with that consensus.

Rates Weigh on REITs

REITs borrow to buy properties, so their financing costs rise with interest rates, and when yields climb their dividends look less attractive next to safe bonds. Bond yields were the main pressure point. The 10-year Treasury yield rose to its highest level since 2007 and the 30-year yield to its highest since 2004, a move that raises borrowing costs and squeezes valuations across the market. The Federal Reserve raised its policy rate to 3.75% to 4.00% on September 16, and futures now price a majority chance of another increase in October.

What to Watch for RLJ Lodging Trust

RLJ's next Quarterly Report will show occupancy, room rates and costs, and will test the valuation view behind Monday's downgrade, and the way consumers respond to higher fuel prices and borrowing costs will matter for travel demand. Park Hotels' results will offer a useful comparison given the firm's contrasting calls, and any further rating changes from other brokerages could also move the shares.

The data docket runs Tuesday with JOLTS and consumer confidence, Wednesday with PCE inflation, Thursday with ISM Manufacturing and Friday with the September jobs report.