Patriot Prediction Is Grim

<B> Patriot Prediction Is Grim</B>

By Maria P. Vallejo

Patriot American's unsteady financial situation has analysts predicting a rocky road that could result in asset sales and changes in corporate structure.

While the whole hospitality industry is watching stock prices fall, Patriot's problems became more evident when it announced last month that its third-quarter dividends would not be distributed.

Patriot's equity forward contracts, used to acquire earlier companies and properties, will mature this quarter and first quarter next year. Stock prices continue to remain low, making it more difficult for the company to pay back these contracts, analysts said.

Some analysts attribute Patriot's predicament to the company's focus on sudden growth. Patriot American and Starwood Hotels & Resorts, which are both paired-share REITs, grew at rapid paces last year, butStarwood had a stronger base management line, analysts said.

"Starwood had a larger cash reserve and with the operating companies that it acquired earlier, Starwood had a broader, stable base for acquisition," said hospitality analyst Ted Mandigo, president of T.R. Mandigo in Chicago. "Patriot American came on board starting from scratch, and moved very quickly from zero to 60."

Although the company plans to sell some of its properties, analysts believe the hotels may sit on the market as long as a year before anyone shows significant interest.

"I think there's going to be a longer exposure than you would have expected six months ago," Mandigo said. "Six months ago you would put a property on the market and have six people look at it. You put a property up today and it's going to languish a little. There might be a hold of up to a year.