It’s fair to say that the real estate investment trust sector has provided more than just a little bit of juice to the transactions market.
For instance, Ernst & Young reports in its “Global perspectives: 2013 REIT report” that REITs accounted for 14% of the transactions volume a year ago, and that figure rose by 20% during the first half of this year. Further, an E&Y survey revealed that 30% of REIT executives said they plan to expand into new markets at some point during the next 24 months, while 25% intend to exit markets during the same period.
“The REIT industry as a whole is likely to remain a valuable source of deal flow on both the buy and sell side,” the report reads. According to data from STR Analytics, sister company of Hotel News Now, REITs have acquired nearly $22 billion in 403 deals since 2010.
I’ve heard it said that the key to a healthy hotel sector is a healthy transactions market. That’s the thought that immediately went through my head this week as I read story after story of REITs and the REIT sector struggling to take hold outside the borders of the United States.
Hotel News Now’s Terence Baker reported earlier this month that REITs are facing a rocky road in Europe, in part because of localized regulations and codes governing different investment decisions for different regions, assets and ownership structures.
“There is no tax regime that is pan-European and gives REITs the tax efficiency found in the U.S.,” Carmen Hui, senior VP of acquisitions in Europe for Host Hotels Limited, said during a panel discussion at last month’s Hotel Investment Conference Europe. “In Europe, the REITs themselves are restricted from investing in management contracts, while in the U.K., sitting on a long lease that will just taper off with time is not particularly attractive.”
I also find it troubling that thus far no entities have applied for REIT status in Thailand, a country that recently enacted regulation that would have created a REIT industry in the country early next year. That law, however, is likely to be delayed because issues have popped up around a law governing tax incentives, the Bangkok Post reports.
There’s also trouble afoot in China, where the introduction of credit asset securitization this year in certain markets sparked interest in REITs, but challenges, including establishing a tax code and the lack of a trading platform, could act as roadblocks, according to the Want China Times.
So to sum up, REITs are facing an uphill battle in the not-at-all important hotel markets of Europe, southeast Asia and China. My hope is that regulators in these respective nations get their tax laws in order and invite in the REITs to help inject additional life into the ongoing global hotel sector recovery. Otherwise, losing momentum at this time could have disastrous ramifications for the industry.
Tweet of the Week
Sometimes you just have to be direct with people, and no one does direct like Gordon Ramsay. That’s especially important in this industry, where icebergs abound.
Gordon Ramsay is deep! He says to a hotel owner - "You are not the bloody captain of the Titanic, you're the iceberg" LMFAO!!! Wow!! — Boitumelo Thulo (@Boity) October 22, 2013
Email Shawn A. Turner or find him on Twitter.
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