Hotel Investment Outlook Remains Positive as Fundamentals Improve
•
0 likes•373 views
- Hotel fundamentals have improved in the US, with demand increasing and new supply stabilizing. However, ADR recovery is lagging behind occupancy gains. - US hotel transaction volume in 2010 YTD increased over 200% compared to the same period in 2009. REITs are the dominant buyers, while owner/operators and private equity are significant sellers. - Equity capital remains abundant from various investor types seeking high-yield returns. However, debt financing is gradually becoming more available due to improving underwriting standards and low interest rates, though still selective. Upcoming CMBS loan maturities will need to be addressed starting in 2011.
Recommended
More Related Content
Viewers also liked
Viewers also liked (20)
Similar to Hotel Investment Outlook Remains Positive as Fundamentals Improve
Similar to Hotel Investment Outlook Remains Positive as Fundamentals Improve (20)
More from Virtual ULI
More from Virtual ULI (20)
Recently uploaded
Recently uploaded (20)
Hotel Investment Outlook Remains Positive as Fundamentals Improve
- 2. 2 Where are we today? Fundamentals getting better; transactions market increasingly competitive Lodging fundamentals have turned the corner Demand is back; ADRs will take longer to return; abating new supply pipeline will strengthen recovery New York and Boston are best-performing major markets with double-digit RevPAR increases in YTD 2010 Demand in Washington, D.C. has increased 7.2%, though RevPAR is largely flat due to supply increases and pressure on rates YTD 2010 U.S. hotel transactions volume increased over 200% Substantial amount of equity waiting to be invested in hotel real estate Lack of quality hotel investment product on the market is resulting in competitive bidding Distress is increasing but does not appear to be in form of tidal wave Liquidity both for acquisitions and re-financings is slowly increasing; CMBS re-emergence on horizon?
- 3. 3 United States lodging performance 2000 - YTD August 2010 $0 $20 $40 $60 $80 $100 $120 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD Aug 2009 YTD Aug 2010 ADRandRevPAR 20% 30% 40% 50% 60% 70% 80% Occupancy ADR RevPAR Occupancy U.S. RevPAR is up 4% through YTD August 2010 Source: Smith Travel Research Through August 2010 Industry consensus for 4-5% RevPAR growth in 2010 and 5-7% in 2011
- 4. 4 United States hotel transaction volume 1990 - YTD 2010 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD2009 YTD2010 Transactionvolume($B) - 25,000 50,000 75,000 100,000 125,000 150,000 175,000 200,000 225,000 250,000 Priceperkey U.S. hotel transaction volume reaches $4.7B in YTD 2010 Source: Jones Lang LaSalle Hotels. Note: Transactions $10M and above. Excludes land site and casino deals 210% increase on prior-year period; revised 2010F: $6 to $6.5 billion
- 5. 5 Largest U.S. hotel transactions YTD 2010 Most large high-quality assets have been acquired by REITs Property name Location Closing date Price ($M) Rooms Price per key ($) Buyer Seller Cap rate W Union Square New York, NY Sep-10 185.3 270 686,111 Host Hotels & Resorts LEM Mezzanine Westin River North Chicago, IL Aug-10 165.0 424 389,151 Host Hotels & Resorts Tishman Realty 5.1% Hilton Minneapolis Minneapolis, MN Jun-10 155.5 821 189,403 DiamondRock Hospitality Starwood Capital Group & Haberhill LLC 7.0% Westin Philadelpia Philadelphia, PA Sep-10 145.0 294 493,197 LaSalle Hotel Properties HEI Hospitality, LLC 5.7% Hilton Walt Disney World Lake Buena Vista, FL Sep-10 127.2 814 156,258 Blackstone Group Tishman Hotel & Realty Royal Palm Miami, FL Aug-10 126.1 412 306,069 Sunstone Hotel Investors, L.L.C. Foreclosure sale n/a Wyndham Fashion 26 New York, NY Sep-10 126.0 280 450,000 RLJ Development, LLC Citi Property Investors Hyatt Regency Boston Boston, MA Mar-10 112.0 498 224,900 Chesapeake Lodging Trust Hyatt Hotels Corp 7.0% InterContinental Buckhead Atlanta, GA Jul-10 105.0 422 248,815 Pebblebrook Hotel Trust InterContinental Hotels Group 6.8% Fairmont Copley Boston, MA Aug-10 98.5 379 259,894 FelCor Lodging Trust Fairmont Hotels & Resorts, Inc Sofitel Lafayette Square Washington, DC Mar-10 95.0 237 400,844 LaSalle Hotel Properties GEM/Whitehall 6.0% U.S. top single-asset hotel transactions YTD 2010 Source: Jones Lang LaSalle Hotels
- 6. 6 Recent prime full-service asset transactions in U.S. Intrinsic value of real estate value matters; well-located assets sought after Case Study: Sale of Royal Palm Hotel for $121.1M ($306,000/key) in August 2010 Transaction summary •Jones Lang LaSalle Hotels was hired to arrange the sale of the 422-room, five- diamond property. •The Hotel was offered encumbered by brand and management. •This transaction represents one of the first major U.S. hotel transactions coming out of the major global economic crisis. •Buyer: Pebblebrook Hotel Trust Sale of St. Regis Aspen for $70 million ($391,000 key) in September 2010 Transaction summary •Jones Lang LaSalle Hotels represented Wachovia/Wells Fargo Securities in the foreclosure sale of the 412-room property. •The asset was sold via an online foreclosure auction. •Received over 250 signed confidentiality agreements; conducted 50+ property tours. •Property was acquired by an entity of Sunstone Hotel Investors, Inc. Case Study: Sale of InterContinental Buckhead for $105M ($249,000/key) in July 2010 Transaction summary •Jones Lang LaSalle Hotels represented Starwood Hotels and Resorts in the sale of the 179-room hotel. •The hotel has 20,000 sq. ft of meeting space, the 13,000 sq. ft. Remède Spa, and a signature restaurant. •The Property was acquired by OptAsia Capital who has committed to an immediate comprehensive renovation of the resort.
- 7. 7 HNWI 3% Institutional Investor 7% REIT 15% Receiver 7% Owner/ Operator 26% Investment Fund/PE 23% Developer/ Property Co. 20% Investment Fund/PE 23% REIT 58% Developer/ Property Co. 15% HNWI 3% Corporates 2% Owner/ Operator 11% Institutional Investor 2% Buyers by acquisition volume Sellers by disposition volume Source: Jones Lang LaSalle Hotels Composition of hotel buyers and sellers in YTD 2010 REITs are dominant buyers; owner/operators and private equity are big sellers
- 8. 88 Capital markets overview - Equity No shortage of equity in marketplace Common equity investor traits There is plenty of equity on the sidelines – REITs, private equity, foreign capital, operators, etc. Most major YTD hotel acquisitions by REITs have been funded by all-equity Targeting high-yield investments, but increased pressure from investors to deploy capital sooner rather than later Still focused on distressed assets and debt at a discount Visibility for underwriting future performance is improving Trough operating performance has rendered cap rates virtually meaningless—value is viewed on a “price per pound” basis
- 9. 9 Capital markets overview - Debt Still selective but opening up The market is still tight relative to historic norms, but gradual easing is evident Underwriting standards are increasingly viable Lenders are seeking opportunities, but there is a lack of product in the market Exceptionally low indices have created an attractive lending environment Case Study: Jones Lang LaSalle Secures $158.5 Million Senior Debt Financing for Sheraton Chicago Hotel & Towers in July 2010 Transaction summary •Jones Lang LaSalle was hired to source the capital to refinance the existing loan for the 1,209-room Sheraton Chicago Hotel & Towers. •The marketing effort was met with interest from financial institutions, despite the large loan size and the leasehold ownership structure. •Jones Lang LaSalle secured $158.5 million in senior debt financing from Goldman Sachs Real Estate Mezzanine Partners, in one of the largest single-asset hotel loans in the U.S. in the past two years.
- 10. 10 CMBS hotel loan maturities by year $- $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 Remainderof 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019and beyond Currentunpaidbalance($B - 100 200 300 400 500 600 700 800 900 Loancount Performing loans Delinquent loans Total loan count U.S. hotel CMBS loan delinquency rate is 13.3% Source: Realpoint. Based on all 3,110 loans tracked in Realpoint (total unpaid balance of $66.7 billion) As of September 2010 Comprised predominately of 3-year loans collateralized by large upscale and luxury properties. Extensions will push many maturities into 2012 but at that point they will increasingly need to be refinanced Dominated by mid-scale and smaller upscale properties with 10-year loans with no extension options Currentunpaidbalance($billions)
- 11. 11 Thank you