Sorry hotels brokers, you must now return from the golf course and get back to the business of selling hotels.
If you weren’t sold on the fact that the United States hotel transactions market is back, the Americas Lodging Investment Summit 2011 has been confirmation. The conference is back to its 2007 heyday, when more people were huddled in the hallway shaking hands than in educational sessions cursing the banks.
The debt market is opening up … with an emphasis on careful underwriting. (And that is a good thing, unless we want to end up back in the same over-leveraged/distressed/foreclosure mess five years from now.)
Owners and asset managers are confident they can buy properties at discounted prices and reposition and/or rebrand them to turn significant profits.
“We’re willing to take a higher risk and a higher level of volatility,” said Mit Shah, CEO of Noble Investment Group. “With some of the private debt markets opening up a little bit, you can in fact think about two-times multiples and 20 IRRs again.”
In case you still aren’t sold, more evidence of increased investment can be witnessed in recent headlines from around the industry:
• Just yesterday, we learned Choice Hotels International will open two Cambria Suites properties in New York City. These openings are significant because 1) They’re new-build properties in New York and 2) Choice is kicking in some sliver equity to get them out of the ground. A Times Square Cambria will be developed by Extell Development Company and a Chelsea property will be developed by Robert Chun of We Care Trading Company.
• Host Hotels and Resorts bought the famed 773-room New York Helmsley from Leona Helmsley Estate for US$310 million and plans to spend US$50 million in renovations, according to a report in The Wall Street Journal.
• And finally, Jones Lang LaSalle Hotels reported Monday there were five times more deals in 2010 than 2009 and deal volume is expected to increase 15% to 25% globally in 2011. More than US$11 billion in assets traded hands in the U.S. in 2010, JLLH said. At ALIS on Tuesday, Shah predicted US$20 billion in deals will take place in 2011.
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