Updated at 2:56 p.m. EST to include JLLH transaction figures.
I haven’t seen these numbers reported yet, so it’s exciting when new data comes across my desk (perhaps STR is getting into my bloodstream).
Real Capital Analytics, which tracks commercial real-estate transactions, recently began to track distressed assets. Their distressed assets information is updated in real time, which gives this data even more credence.
As of 30 June, there were a total of 1,060 troubled hotel assets worth US$15.7 billion in the U.S.
The Extended Stay Hotels portfolio of 447 hotels makes up the largest part of this figure, according to Jessica Ruderman, senior analyst with Real Capital. ESH's parent company Lightstone has 665 hotels total in bankruptcy. Other assets included in this alarming tally are Homestead Studio Suites and Red Roof Inn.
“All of those went troubled this quarter,” Ruderman said.
When comparing just the first two quarters of 2009, the volume of distressed hotel assets has increased 142 percent from the fourth quarter of 2008. The number of assets has increased 755 percent during the same time frame. Seriously. No typos there.
RCA began tracking distressed assets in November 2008 and used historical information to get a tally for year-end, Ruderman said. By the time we rang in the new year, 124 hotel assets were under distress. There were 98 hotels added in Q1, and the current figure for Q2 is 838 hotels.
Distressed hotels are concentrated in the western region of the U.S. (read "California likely to see record number of hotel foreclosures") and are more likely limited-service properties. According to Ruderman, 792 troubled hotels worth US$6.6 billion are in that limited-service category.
Hotel sales slow down
Of equal importance is the transaction data collected by RCA. It should come as no surprise, but sales statistics through May indicate only 59 properties comprising 9,753 guestrooms have changed hands this year with a volume of US$999.6 million. A total of 519 properties transacted in 2008.
I also asked Jones Lang Lasalle Hotels for their most recent transaction data to get a better picture of the market. As of 30 June 2009, JLLH reports 19 transactions (assets of US$10 million+) with volume of US$868.7 million. Average price per key is US$171,101. THe vast majority of volume has been in single asset transactions, according to JLLH. About US$800 million is single-asset driven.
And despite the word on the street that only smaller, limited-service properties are selling, the breakdown of full service vs. limited service is virtually equal—with 31 properties in the full-service category and 28 properties in the limited-service category, according to RCA. The average price per room as of May was US$104,683 (US$132,895 in 2008). The average cap rate was 9.1 percent (compared to 8.9 percent in 2008).
