(Mark Your Calendars: RealShare HOTELS 2011, September 15 in New York City)
LONDON-About $14.8 billion in hotel assets traded hands around the globe in the first half of 2011, according to a recent Jones Lang LaSalle Hotels report, a 117% increase from the same period last year. With debt flowing faster and a lack of new construction, experts believe volumes could reach almost $35 million by the end of December.
Hotel trades in the United States accounted for 50% of the first half volume, according to the report, with large deals in core cities such as Morgans Hotel Group selling the 168-room Royalton and 114-room Morgans Hotels in New York City to FelCor Lodging Trust for $140 million.
Arthur Adler, CEO of JLL Hotel’s Americas, says that US Sales are expected to reach $16 billion, based on the current pace and expected large deals such as Chatham Lodging Trust and Cerberus Capital Management LP’s purchase of 64 assets for about $1.1 billion. He tells GlobeSt.com that the hotel market is usually the first into the tank when the market drops, but then also the first one out when resurgence hits.
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“People and companies start cutting back on traveling, that has an immediate effect on this property type,” Adler says. “We started seeing a turnaround sometime mid-2010. Owners became more willing to sell as prices improved, and investors started spending based on where the market is going, not where it is.”
A total of $4.7 billion in hotel transactions took place in Europe, the Middle East and Africa. Mark Smith, CEO of JLL Hotels’ EMEA region, said the transactions were marked by lenders taking over troubled assets and pushing them out into the market. For example, in June RBS took control of a portfolio of 42 Marriott hotels in the UK. “We expect hotel investment volumes across EMEA to rise to $15.1 billion…as significant product is expected to come to market in the second half of 2011,” Smith said in a statement.
Asia saw the least amount of transactions, with deal volume at $2.6 billion, which is still an increase of almost 60% over the first half of 2010. Scott Hetherington, CEO of JLL Hotels’ Asia office, said almost half of the deals took place in Singapore. He said there’s pent up demand in the city, but the growth is expected to be offset in the region by the March earthquake in Japan.
Adler says improvement in lending, REIT and private equity returns to the market and a significant drop in the hotel development pipeline in the next few years should signify a more robust recovery than in past cycles.
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