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Hotels Rebounding But New Rules Apply

NEW YORK CITY-Off-market opportunities, all-cash deals and the need for value-add are among the realities as the sector recovers, panelists said Tuesday afternoon.

By Paul Bubny | Updated on March 31, 2010

NEW YORK CITY-Hardest hit of the five major food groups by the downturn, the hotel sector is showing signs of rebounding. The investment opportunities that emerge amid the recovery will need to be approached from a different perspective than before, said panelists during Tuesday’s “Hotel Sales Poised for Uptick” webinar.

For one thing, a great many of those opportunities have been coming via off-market transactions, said Jon Bortz, chairman and CEO of Pebblebrook Hotel Trust, adding that he’s seen an increase in deal flow since late last year. He predicted that we’ll see more opportunities from lenders selling their positions “as they can afford or need to take writedowns.” Kennedy Associates EVP Jack Van Hartesvelt concurred that most of the action is off-market, noting that when foreign banks indicate that they want to get out of their US real estate exposure, it’s a good time to be in contact with them.

There are other ways in which the hotel landscape has changed since the market peak. Chuck Bedsole, managing partner of Alvarez & Marsal Real Estate Advisory Services, observed that equity is key, although deals that involve seller financing are also a factor. Van Hartesvelt advised that investors need to be prepared to provide some value-add, such as a major remodeling, after acquiring the asset.

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