Global hotel investment volumes reached $30 billion in 2011- an increase of 13 percent over 2010 volume-and Jones Lang LaSalle Hotels forecasts a similar figure for transactions in 2012. “So far, the dislocation in the financial markets has not impacted underlying trading fundamentals,” says Arthur de Haast, chairman of Jones Lang LaSalle Hotels. “This has reassured investors to a certain degree and has underscored the attractiveness of high quality, income producing hotel real estate as an asset class. Constraint will be driven by illiquid markets and the shrinking balance sheet capacity of international banks to lend significant sources of new money. Still, the market will be flush with equity capital that will come into play.”
The firm also expects that private equity investors will remain ambitious in 2012. Adds de Haast: “With significant buying power and risk tolerance in a volatile environment, they are in position to achieve opportunistic returns. Notwithstanding, deficient debt markets and limited availability of attractive acquisition opportunities will likely hamper higher levels of activity. Still, these players will selectively acquire assets in secondary locations, as well as distressed portfolios and non-performing loans.”
Joining the buyer mix are sovereign wealth funds and private high-net-worth individuals who will take a long-term view and make strategic acquisitions globally. Public companies, notably REITs, are expected to focus on existing stable acquisitions rather than new ones, consequently diluting the buyer pool.
The biggest sellers in 2012 are likely to be bank-induced, as a result of debt maturities and consequent refinancing challenges. In addition to the influx of assets expected to come to market, a significant amount of note sales is anticipated as well. Private equity firms and institutional investors are also expected to liquidate some previous acquisitions, either to divest select non-core assets or to return capital to investors as funds reach maturity.
