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NYC deals will continue in 2012
January 12 2012

The strong operating performance of hotels in New York is one factor leading to an expanding deal market in the city, transaction experts said.

Highlights
  • In 2011, 15 deals transacted in New York, representing a total deal volume of US$2.4 billion, or an average price of US$434,000 per room, according to STR Analytics.
  • “There’s no shortage of capital, and some of that is what I would call ‘ego capital,’” said Daniel Lesser, president and CEO of LW Hospitality Advisors LLC.
  • Year-to-date through November 2011, New York’s occupancy showed a slight 0.2% increase to 81.2%; ADR grew by 6% to US$240.79; and RevPAR increased by 6.2% to US$195.63, according to data from STR.

 

NEW YORK—The New York hotel transactions market gained strength in 2011 and will continue to percolate in 2012, deal experts report.

There were 15 transactions completed in the market during 2011, representing a total deal volume of US$2.4 billion, which equates to an average price per room of US$434,000, according to data from STR Analytics, sister company of HotelNewsNow.com. By comparison, there were 10 deals struck during 2010 in New York, representing a total deal volume of US$1.3 billion and US$349,000 per room.

And the market isn’t showing signs of slowing as the calendar flips to 2012. LaSalle Hotel Properties recently closed on its buy of the 934-room Park Central hotel for US$396.2 million, or approximately US$424,000 per room.

Also, at the end of 2011, fellow real-estate investment trust Chesapeake Lodging Trust acquired the 122-room Holiday Inn New York City Midtown – 31st Street for US$52.2 million, or US$428,000 per room.

Daniel Lesser, president and CEO of LW Hospitality Advisors LLC, expects to see transactions continue at a brisk pace during 2012. In addition to domestic buyers, an influx of overseas capital also is helping push the deal market forward, he said.

“It is the most valuable market” for capital looking for deals, Lesser said. The ability of hotels to hedge against inflation by re-pricing rooms on a nightly basis, he said, is particularly attractive.

That said, other factors also are likely at play, Lesser added.

“There’s no shortage of capital, and some of that is what I would call ‘ego capital,’” he said. “The ability to say, ‘I own a hotel here.’”

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A buyer’s viewpoint
Michael Barnello, LaSalle’s
president and CEO, said the strong performance of the New York market enticed LaSalle to pull the trigger on the Park Central deal.

Year-to-date through November 2011, New York’s occupancy showed a slight 0.2% increase to 81.2%; average daily rate grew by 6% to US$240.79; and revenue per available room increased by 6.2% to US$195.63, according to data from STR, parent company of HotelNewsNow.com.

“We view it as one of the best markets in the country,” Barnello said.

Likely sellers
The most likely sellers of hotel assets in New York are those who own properties encumbered by debt originated during the frothy days of 2007, Lesser said.

“Folks that have maturities coming due this year that were financed five or six years ago on a different valuation basis,” he said. “An exit strategy (via sale) is sometimes going to be the only alternative.”

Speaking of valuation, Lesser said that factors can vary wildly from hotel to hotel depending on how each property is performing in its own submarket.

Barnello said LaSalle will continue to kick the tires in New York. “If there are deals for sale in New York City, we’ll take a look at them.”

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