Jones Lang LaSalle Hotels (JLLH) has released its updated U.S. hotel transaction forecast, which notes deal volume increasing to $6.5 billion from $4.5 billion for 2010. Year-to-date, hotel deal volume has notched to $4.7 billion, outpacing the original forecast by $200 million. And deal pace has accelerated significantly throughout the year. With a limited supply of high-quality hotel investment product on the market, the bidding environment has become highly competitive.
“Investment capital has continued to be attracted to lodging investments, resulting in increased transaction volumes during each of the first three quarters of 2010, driven by the recovery in operating fundamentals,” says Arthur Adler, managing director and CEO-Americas for JLLH. “Transaction volumes totaled $814 million in the first quarter of 2010, increasing to $1.5 billion in the second quarter and jumping to $2.2 billion in the third quarter. In the month of September alone, more than $1.1 billion in transaction activity closed. Transaction momentum is expected to continue as increased valuations result in more owners testing the property sale market.”
Hotel real estate investment trusts (REITs) have been the most acquisitive buyer group by a wide margin as a result of their wide trading multiples, accounting for 58 percent of hotel purchases to date, according to the firm’s proprietary transactions database. “Eight of the 10 largest single-asset transactions have been purchased by REITs,” Adler notes. “Most of these transactions have been funded by all cash.”
He adds: “There is a substantial amount of equity in the marketplace waiting to be invested in hotel real estate. Additionally, debt liquidity for both for acquisitions and re-financings is slowly increasing. These market dynamics will lead to further increases in transaction activity by year end.”
