REPORT FROM THE U.S.—While hotel trades involving upper chain-scale properties are slowing, activity appears to remain at the lower end of the scale.
The hotel transactions market—highlighted this year by splashy acquisitions of high-end resorts and high-priced portfolio buys—has slowed as lenders have become more nervous about the recent capital markets downturn. But lower-priced deals, which attract all-cash buyers, are moving forward, sources report.
Steve Kirby, a principal with brokerage firm Mumford Company, said midscale deal activity is strong. “We are seeing a healthy transactions environment,” he said. “Year-to-date, we’re having our best year since 2007.”
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Kirby added that debt is also available for these midscale deals. “It’s a huge discount-to-replacement cost,” he said. “There are lenders out there for that stuff right now.”
For instance, Super 8 and Motel 6-type hotels are finding financing under the auspices of SBA loans, Kirby said.
A buyer’s perspective
It remains a good transactions market for Carey Watermark Investors, a non-traded real-estate investment trust, because the REIT is not a highly levered buyer, said Michael Medzigian, chairman and managing partner, who, along with W.P. Carey, created Carey Watermark.
Carey Watermark in May invested US$43.6 million in acquiring shares in two Long Beach, California, properties: the Hotel Maya, a DoubleTree by Hilton Hotel, and the Residence Inn Long Beach Downtown. The investments were the first made by newly created Carey Watermark.
Medzigian declined to discuss how many more deals the REIT might complete.
“Our pipeline is outstanding,” he said. “There is a lot of product on sale in the market. … From our perspective as buyers, we like this market.”
Medzigian said Carey Watermark’s acquisition targets run the gamut.
“We’re not trying to build a homogenous portfolio,” he said, adding, “We continue to see a very, very strong flow of assets for sale. Nothing’s changed.”