GLOBAL REPORT—The U.S. hotel sector is receiving a lot of interest these days from foreign shores.
Investors based in such regions as Asia/Pacific and the Middle East are looking at the U.S. as a safe place to put their money, sources report.
Enrique Torres, an analyst with Newport Beach, California-based Green Street Advisors, said global investors are looking for cash-flowing assets. “That’s where the financing is,” he added.
Asia/Pacific investors are particularly active, sources report.
Alan X. Reay, president of Atlas Hospitality Group, said investor groups from mainland China, Malaysia and Hong Kong are looking at U.S. hotel investments.
These investors, he said, are seeking full-service properties in large gateway markets such as Los Angeles and San Francisco.
“These are cities that are well known in China, and it’s much easier to get investors interested in these kinds of hotels,” he said. As is the case in the Middle East, sovereign wealth funds comprise a significant number of the investors.
Reay said China’s interest in U.S. hotels is on the upswing. “It definitely seems like over the last three or four years, the economy (in China) has slowed and a lot of (investors) are concerned about diversifying away from there because of fears about a real-estate bubble there,” he said.
As an example, he noted the 2010 purchase of the Los Angeles Marriott Downtown by China-based Shenzhen New World Group Company Limited, and Shenzhen’s acquisition in January of the Sheraton Universal in LA.
Officials at Shenzhen could not be reached for comment by deadline.
Torres said EB-5 financing is a big factor in the foreign capital uptick. The EB-5 program was created by the U.S. Congress in 1990 as a way to stimulate the U.S. economy via foreign capital investment.
“Asian capital is flowing in” as a result of the program, he said.
The influx of money, however, is not necessarily boosting hotel values, Reay said. Instead, it is the continued improvement seen in revenue per available room and hotel profitability that is pushing hotel values higher.
Middle East investment
Jalil Mekouar, managing director, Middle East, Africa and Dubai for Jones Lang LaSalle, said sovereign wealth funds and high-net-worth
Jalil Mekouar, managing director, Middle East, Africa and Dubai for Jones Lang LaSalle
individuals and families are the predominant U.S. hotel investors from the Middle East region.
He said they are coming to the U.S. because they see stability in large markets such as New York and LA where the risk of oversupply is low because there is not much land available. Also, there is a low currency risk for these groups, Mekouar added.
“They will accept lower yields in exchange for stability,” he said.
Reay expects the global investment to continue to pick up speed.
“No doubt about it, just based on the number of calls I’m taking; the number of calls I get from people representing (investors) from China (and other regions),” he said.