RealShare Hotel Investment & Finance Summit
Greg O'Stean, EVP and managing director at GE Real Estate, told the audience that underwriting hasn't really changed that much. "The market has changed, but we have kept our basic standards." He continued that there has been a bit of a shift from last year. "Today we have a mixture of center cut deals."
Angelo Stambulus, VP of hospitality at Capmark Finance, agreed with O'Stean's comments, noting that the market has definitely changed, however he said that spreads have widened. "There is a scarcity of capital out there. Wall Street investment banks have a limited appetite for hotel debt."
Stambulus explained that "we are back to the basics," a point that was stressed throughout the day by other participating speakers and panelists. "We are back to underwriting principals."
Much change has happened since the conference last year, Stambulus said. "We are looking at selective loan purchases that are being marketed for sale from other lenders. We see returns better for existing assets so we are deploying out money in that direction."
Bernie Siegel, principal of KSL Capital Partners, noted that from a buyers' prospective, capital structure is entirely different today. "Supply and demand fundamentals have changed dramatically. We are looking at supply more carefully." He explained that there is a disconnect in debt financing. "We came here from four years of record transaction volume. We aren't going to see those numbers for a while due to lack of debt."
Siegel said that on the lodging side, those who are in the market right now have to have a reason to be. "Broken deals are rampant now. I think we are going to see more opportunities going forward." Siegel did note, however, that he believes the second and third quarter will be tougher for business and that 2009 might be challenging in some markets.
Jack vanHartesvelt, SVP and principal of Kennedy Associates Real Estate Counsel, agreed with Siegel in that he is seeing a lot of broken deals at the moment, however he said that he feels good about the future of the industry. "We underwrite looking at long-term fundamentals of the industry. Right now, there isn't enough money out there, and prices need to drop."
As far as a recession goes, vanHartesvelt said that "whether we are or aren't, demand for hotel rooms is directly correlated to GDP. Based upon that, I would say that we weren't in one in January and February, but if we are in one now, it is pretty mild. I think we are going to be in this for a relatively short time." He continues that now is the time to buy properties in you want them at a cheap price. "Our demand is largely driven by our economy. I think foreign investors are looking at professional US investors, trying to get ideas from the US companies. If US companies are all sitting on the sidelines, foreign investors will most likely do the same. Foreign investors are not doing things that are opportunistic."
Bill Weber, director of Credit Suisse, agreed with vanHartesvelt that a "recession, if you call it that," won't last for too long. "There will be a period of stability until people get more comfortable."
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
