PHOENIX-That almost frightening concept of “the new normal” has been accepted over the past year, and fortunately, that hasn’t destroyed deal-making and investing. In fact, it seems like investors have started to come out of their shells to make those deals and look for opportunity. This and more was discussed on the Hotel Investing Today panel. The panel, part of the Lodging Conference, was moderated by Michael Desiato, vice president and group publisher of ALM's Real Estate Media Group.
“The last two-and-a-half days have been back-to-back meetings with people looking for capital on deals,” said Bruce Lowrey, managing director for Rockbridge, “The lodging business itself has been pretty strong. There’s clearly a lot of distress out there, but there’s a re-emerging debt market, and transactions will continue to pick up. There's a sense of optimism.”
Peter Willis, executive vice president and chief investment officer of Chatham Lodging Trust, agreed, explaining “The meetings you’re seeing here are meaningful and filled with a quality of deals we’ve waited a long time to see.” In his experience working within a REIT, it’s been a challenge to build business. “There’s certainly a lot of capital chasing deals, but not enough deals to fill the level of capital.”
While there's been a turnaround, the pace of recovery has been at a snail's pace, and as the hotel industry prepares for the new year, it's becoming clear that things aren’t going to turn around post-election. Of course, however, opinion varies.
Availability of debt is “robust,” according to Peter Dannemiller, exective vice president of Hodges Ward Elliott, who is “encouraged by that. We’re expecting more product to come to market in 2013 and 2014. We definitely see deal velocity increasing and inventory particular in the last quarter or so. Some of that is tax-driven [for instance, capital gains increases] trying to close by year end.”
“A year ago, we had the congress-driven default issue on government debt, which threw capital markets into a bad state. That hasn’t happened this year, fortunately. Last year was a dead zone, this year it’s been the opposite.”
His idea of a good deal today is “one that has cash flow and meaningful upside left in the asset that can be acquired at a discount to replacement cost.”
Dusting off their Tarot cards, the panel expressed their faith in the economy slowly ironing out in the next few years and more deals happenning. “It’s inevitable,” Willis said. "There’s going to be development.”
Dannemiller added his perspective: “There’s a lot of capital looking to deploy, more being raised through a lot of channels – through public and private REITS, it’s looking for yield, it’s looking for a home. People will finance acquisitions.”
He continued, “If you’ve got an asset that’s overleveraged, it almost certainly means that that owner isn't able to reinvest adequately in that property. So that hotel can only go one way, and as it does it puts more pressure on that loan--wheather it's a bank loan or CMBS--to kick out.”
There are a lot of things that could go well, election results notwithstanding, and there’s a lot of things that could go very, very wrong. Lowrey seemed to most succinctly wrap-up his prediction for the coming year.
“There are things that are outside our control," he stated. "There is a lot to be scared about if you want to be. You can’t control any of that.”
Understanding this lack of control and making the smartest investments possible is the best that anyone can hope for. But even better is the knowledge that the market is doing well and going in the right direction. Hotel industry folk have learned from the pits of years past and are ready to look toward a more robust investment future.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
