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Global Hotel sales forecast to rise 40% next year say JLL as bottom feeders go for value
Global Hotel tranactions in 2009 will total some $9 billion, a lot less than the $24.8 billion that was made last year, and it does not even compare to the $113 billion that was made in 2007.
But luxury hotels will be among the most traded real estate next year as buyers go after high-end properties that have slumped in value, said Arthur Adler, chief executive officer for the Americas at Jones Lang LaSalle Hotels.
“The luxury hotel sector is among the top active sectors because there are more challenges,” Adler said in a telephone interview. “Luxury hotels have suffered the most. The possible discounts, if properties come to market and trade, will be greater in this sector than in others.”
Total hotel transactions in the Americas may increase to $3.5 billion in 2010 from about $2 billion this year, with U.S. properties accounting for 80% of volume, Adler said. Global sales and acquisitions may rise as much as 40% to $13 billion next year. Jones Lang Hotels, a unit of the world’s second biggest commercial property broker, released its forecast today.
About $25.8 billion in debt backed by more than 1,600 U.S. hotels was included on a performance watch-list by Realpoint LLC as of the end of October. The list includes loans in default or at risk of default, according to the Horsham, Pennsylvania-based credit-rating company. Some of the biggest loans were made to luxury properties where rooms can cost more than $850 a night.
“There’s more that has to happen to restructure the debt in that sector,” Adler said. “There are so few good properties on the market. That creates significant interest.”
Dubai World’s Istithmar unit last week lost control of the W New York Union Square hotel in a foreclosure auction after investing in the property near the top of the real estate market. LEM, an affiliate of Lubert-Adler Real Estate Funds, won the auction for mezzanine debt on the luxury Manhattan hotel, named by Conde Nast Traveler as one of the world’s top 500 hotels in 2005. LEM agreed to pay $2 million for a portion of the debt. Istithmar bought the property in 2006 for $285 million.
Starwood Hotels & Resorts Worldwide Inc., the third-largest U.S. lodging company, in July agreed to sell the W San Francisco hotel for $90 million to Keck Seng Investments (Hong Kong) Ltd. as occupancy and room rates fell.
The price equals about $223,000 per key for the 404-room hotel, compared to an estimated cost of $500,000 per key to develop a similar property from scratch, Adler said.
“It’s non-economical to build as sites are harder to come by and construction costs are higher,” he said.
Urban markets, such as New York, Boston and Los Angeles will present good acquisition possibilities next year, Adler said.
The Marriott in downtown Los Angeles is for sale and sparking interest, he said. The property is in the “final stages” of a six-month sales process. Adler declined to disclose further details.
Marriott International Inc. spokesman Thomas Marder didn’t immediately respond to an e-mail message seeking comment.
This year’s hotel sales are less than 10% of about $33 billion made in 2006 and $45 billion in 2007, according to the Jones Lang report.
“I don’t see us getting back to 2006, 2007 levels -- I don’t want to say ever, but definitely not in the next 10 years,” Adler said. “Some stuff happened in these years. A bunch of large public REITs went private. The volume of securitized debt that was available. None of that will likely happen again.”
It has also been predicted that Asian conglomerates will be able to take advantage of currency movements to acquire prime hotel assets in the United States, as well as the UK. They will be joined by sovereign wealth funds from the Middle East and Asia, which will want to place capital in hotels to hedge against inflation.
Of course, the absence of traditional lending is expected to lead to alternative investment vehicles, which includes public flotation, rights issues and real estate investment trusts. The hospitality industry has avoided large foreclosures this year due to lenders extending loans to hard pressed hotel owners. All in all, it could prove to be a decent bounce back year for the hotel industry.
But luxury hotels will be among the most traded real estate next year as buyers go after high-end properties that have slumped in value, said Arthur Adler, chief executive officer for the Americas at Jones Lang LaSalle Hotels.
“The luxury hotel sector is among the top active sectors because there are more challenges,” Adler said in a telephone interview. “Luxury hotels have suffered the most. The possible discounts, if properties come to market and trade, will be greater in this sector than in others.”
Total hotel transactions in the Americas may increase to $3.5 billion in 2010 from about $2 billion this year, with U.S. properties accounting for 80% of volume, Adler said. Global sales and acquisitions may rise as much as 40% to $13 billion next year. Jones Lang Hotels, a unit of the world’s second biggest commercial property broker, released its forecast today.
About $25.8 billion in debt backed by more than 1,600 U.S. hotels was included on a performance watch-list by Realpoint LLC as of the end of October. The list includes loans in default or at risk of default, according to the Horsham, Pennsylvania-based credit-rating company. Some of the biggest loans were made to luxury properties where rooms can cost more than $850 a night.
“There’s more that has to happen to restructure the debt in that sector,” Adler said. “There are so few good properties on the market. That creates significant interest.”
Dubai World’s Istithmar unit last week lost control of the W New York Union Square hotel in a foreclosure auction after investing in the property near the top of the real estate market. LEM, an affiliate of Lubert-Adler Real Estate Funds, won the auction for mezzanine debt on the luxury Manhattan hotel, named by Conde Nast Traveler as one of the world’s top 500 hotels in 2005. LEM agreed to pay $2 million for a portion of the debt. Istithmar bought the property in 2006 for $285 million.
Starwood Hotels & Resorts Worldwide Inc., the third-largest U.S. lodging company, in July agreed to sell the W San Francisco hotel for $90 million to Keck Seng Investments (Hong Kong) Ltd. as occupancy and room rates fell.
The price equals about $223,000 per key for the 404-room hotel, compared to an estimated cost of $500,000 per key to develop a similar property from scratch, Adler said.
“It’s non-economical to build as sites are harder to come by and construction costs are higher,” he said.
Urban markets, such as New York, Boston and Los Angeles will present good acquisition possibilities next year, Adler said.
The Marriott in downtown Los Angeles is for sale and sparking interest, he said. The property is in the “final stages” of a six-month sales process. Adler declined to disclose further details.
Marriott International Inc. spokesman Thomas Marder didn’t immediately respond to an e-mail message seeking comment.
This year’s hotel sales are less than 10% of about $33 billion made in 2006 and $45 billion in 2007, according to the Jones Lang report.
“I don’t see us getting back to 2006, 2007 levels -- I don’t want to say ever, but definitely not in the next 10 years,” Adler said. “Some stuff happened in these years. A bunch of large public REITs went private. The volume of securitized debt that was available. None of that will likely happen again.”
It has also been predicted that Asian conglomerates will be able to take advantage of currency movements to acquire prime hotel assets in the United States, as well as the UK. They will be joined by sovereign wealth funds from the Middle East and Asia, which will want to place capital in hotels to hedge against inflation.
Of course, the absence of traditional lending is expected to lead to alternative investment vehicles, which includes public flotation, rights issues and real estate investment trusts. The hospitality industry has avoided large foreclosures this year due to lenders extending loans to hard pressed hotel owners. All in all, it could prove to be a decent bounce back year for the hotel industry.
Wed, 16th Dec 2009