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Americas Hotel Transaction Volume to Eclipse 2012 at $18.5 Billion in 2013



  Americas Hotel Transaction Volume to Eclipse 2012 at $18.5 Billion in 2013

Private equity funds expected to be the largest net buyers of hotels

PR Newswire

CHICAGO, Jan. 17, 2013

CHICAGO, Jan. 17, 2013 /PRNewswire/ -- Hotel real estate investors, who
unlocked capital and aggressively bid on hotel assets in 2012, are expected to
increase their buying activity in 2013.The abundance of equity capital and
improving debt markets will support a buoyant market for hotel trades this
year. Americas hotel transaction volume for the year is expected to surpass
the $17.5 billion that 2012 netted, with a moderate increase to $18.5
billion[i], according to initial results from Jones Lang LaSalle's annual
Hotel Investment Outlook report. 

(Photo: http://photos.prnewswire.com/prnh/20130117/CL44381-INFO )

The Hotel Investment Outlook report is a forward-looking, global analysis
which tracks key factors affecting the hotel investment market. The Americas
highlights include:

  o Competition for high-quality assets will push up capital values and drive
    down yields
  o Strong re-emergence of hotel financing will be driven by CMBS
  o Private equity funds to be the largest net buyers of hotels in 2013

"We expect 2013 to be another strong year for hotel transactions," said Arthur
Adler, Americas CEO of Jones Lang LaSalle's Hotels & Hospitality Group. "The
United States remains the world's most liquid hotel investment market which
will lead the Americas region to transact approximately 55 percent of the
global transaction volume. We should see global volumes top $32 billion this
year."

Urban Land Institute's Emerging Trends in Real Estate 2013 report agrees that
this year will continue to gain transaction velocity, noting "transaction
volume should finally gain momentum as buyers capitulate in the face of strong
revenue growth and lenders dispose of more foreclosed assets."[ii]

The Propellers of Debt Liquidity
A strong re-emergence of hotel financing driven by CMBS will propel debt
liquidity to its highest level since 2007. CMBS lenders will continue to drive
pricing, terms and accessibility. Balance sheet lenders are more selective
with regard to asset quality, market and sponsorship, but will continue to
provide floating rate structures that are favored by hotel owners. It's
expected that hotels will remain a targeted asset class for lenders as they
offer high yields, relative to other real estate and fixed income classes,
relative to the risk.

"The unpaid balance of hotel CMBS loans with initial maturity dates through
2013 totals nearly $19 billion[iii]. Lenders, and in particular subordinate
lenders, have shown an increased willingness to foreclose or exercise other
rights and remedies, including note sales. Consequently, 2013 could very well
mark the beginning of the long-awaited 'great deleveraging' particularly for
hotel assets," added Mathew Comfort, Executive Vice President of Jones Lang
LaSalle.

Striking While the Iron's Hot: The Big Buyers
There are several key drivers of deal activity including: availability and
cost of capital, changes in supply and demand fundamentals, REIT stock prices,
the size of the assets brought to market and the overall hotel ownership
composition as more hotels are in the hands of traders verse long-term
holders. Jones Lang LaSalle expects private equity funds to be the largest net
buyers in 2013 as the funds unleashed more than $6.5 billion of capital into
Americas hotel investments in 2012. During the next several years these funds
will have a buying capacity with leverage of up to $45 billion for hotel
acquisitions. Coupled with REITs, private equity will likely comprise as much
as 70 percent of total acquisition volume.

REITs will remain active buyers of single-asset acquisitions or small
portfolios of institutional quality hotels in the top 15 markets; however, the
exact force of REITs on the market will depend largely on their ability to
raise capital when it is accretive to shareholders. On the flip side, private
equity funds will be seeking needle-moving bulk investments in either large
single assets or portfolios as well as high-yield driven trades in the
secondary and tertiary markets.

"Look for the private equity merger and acquisition market to also pick up,"
added Robert Webster, Managing Director of Jones Lang LaSalle's Hotels &
Hospitality Group. "In addition, Middle Eastern and Asian investors are likely
to fund $1 billion in transactions this year as they selectively pursue
opportunities in prominent gateway markets like San Francisco, Los Angeles,
Miami, Washington D.C. and New York. We also expect several landmark hotels to
trade in secondary cities from opportunistic international investors."

Beyond Brazil: Latin America and the Caribbean
Investor interest in quality hotel product extends beyond the United States as
Latin America and the Caribbean experience considerable growth. Opportunistic
investors and hotel brands with some risk tolerance are looking to Latin
America to make strategic plays in key markets where there are viable
development opportunities. Mexico's expanding network of branded limited
service hotels that cater to the middle class will be a primary growth area
for investors. The Caribbean transaction market will be largely driven by
resort or stalled projects defaulting loans. In terms of fundamentals, the
standout markets will include the Dominican Republic, Jamaica and Aruba. The
hotel space in South America will continue to make dramatic transformations as
under-supplied countries like Brazil, Chile, Colombia and Peru are
increasingly on the radar of intra-regional investors.

Future Looks Bright
Macro-economic pressures have kept a lid on economic growth resulting in slow
but steady growth.  However, as the future comes into focus growth is poised
to accelerate.

"A scarcity of high-quality, performing assets will drive competitive bidding
pushing up capital values and driving down yields." Adler added, "Hotel
fundamentals will continue to be driven by growing tourism, business and
leisure travel in major gateway and convention markets, as well as in resort
destinations throughout the Americas. This will result in increased occupancy
and stronger pricing power. The United States is expected to experience RevPAR
gains of six to seven percent, creating opportunities for buyers and sellers
alike in 2013."

Jones Lang LaSalle's Hotels & Hospitality Group's annual Hotel Investment
Outlook report will be broadly released in January 2013. To request a copy of
the full report, please click here.

Jones Lang LaSalle's Hotels & Hospitality Group serves as the hospitality
industry's global leader in real estate services for luxury, upscale, select
service and budget hotels; timeshare and fractional ownership properties;
convention centers; mixed-use developments and other hospitality properties.
The firm's more than 265 dedicated hotel and hospitality experts partner with
investors and owner/operators around the globe to support and shape investment
strategies that deliver maximum value throughout the entire lifecycle of an
asset. In the last five years, the team completed more transactions than any
other hotels and hospitality real estate advisor in the world totaling nearly
US$25 billion, while also completing approximately 4,000 advisory and
valuation assignments. The group's hotels and hospitality specialists provide
independent and expert advice to clients, backed by industry-leading research.

For more news, videos and research from Jones Lang LaSalle's Hotels &
Hospitality Group, please visit: www.jll.com/hospitality

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE: JLL) is a financial and professional services firm
specializing in real estate. The firm offers integrated services delivered by
expert teams worldwide to clients seeking increased value by owning, occupying
or investing in real estate. With 2011 global revenue of $3.6 billion, Jones
Lang LaSalle serves clients in 70 countries from more than 1,000 locations
worldwide, including 200 corporate offices.  The firm is an industry leader in
property and corporate facility management services, with a portfolio of
approximately 2.1 billion square feet worldwide. LaSalle Investment
Management, the company's investment management business, is one of the
world's largest and most diverse in real estate with $47 billion of assets
under management. For further information, please visit
www.joneslanglasalle.com.

[i] This refers to asset sales and does not include note and loan sales, and
deed-in-lieu transfers

[ii] PwC and the Urban Land Institute. Emerging Trends in Real Estate 2013.
Washington D.C.: PwC and the Urban Land Institute 2012.

[iii] Morningstar LLC.

 

SOURCE Jones Lang LaSalle

Website: http://www.joneslanglasalle.com
Contact: Katie Sershon, +1-312-228-2139, Katie.Sershon@am.jll.com; or Jessica
Martin, +1-312-228-2983, Jessica.Martin@am.jll.com
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