Jones Lang LaSalle Hotels says that $1 billion in hotel real estate has transacted in the Americas region during first quarter 2010, representing 29 percent of the firm’s full year forecast of $3.5 billion. The volume of U.S. hotel transactions declined to a decade-low of $2.2 billion in 2009, down from the already greatly decreased $9.7 recorded during 2008, according to the firm’s proprietary database, which tracks transactions $10 million and above.
“First quarter U.S. transaction volume rose from $583 million in 2009 to $1 billion in 2010, demonstrating the increase in market liquidity,” says Arthur Adler, managing director and CEO-Americas for Jones Lang LaSalle Hotels. “Investors are beginning to pursue hotel asset and debt investments more aggressively as it is clear that fundamentals have bottomed. We expect transaction activity to accelerate throughout the year as more product becomes available. As in years past, we expect that the last three months of the year will show higher transaction activity.”
U.S. volume declined to $1.8 billion in 2009, with the remaining $400 million in transactions being recorded in Canada, the Bahamas, Mexico, and Brazil. Following the U.S., the Canadian market had the second-highest level of transactions in 2009, followed by Brazil, which recorded $115 million in
transactions above the $10 million mark.
Due partially to the scarcity of debt, particularly for larger transactions, portfolio transactions dropped to 9 percent of total deal volume in 2009, down from 41 percent in 2008 and a staggering 71 percent in 2007, evidencing just how illiquid the transactions market was in 2009. The 10 largest hotel transactions in the Americas in 2009 amounted to $790 million, representing 37 percent of total transaction volume for the year.
High-quality, branded, and well-located hotel assets will increasingly garner the interest of international investors in 2010. The export of Asian capital, in particular, is expected to become more prevalent as investors, understanding the intrinsic value of hotel assets, seek to acquire prime assets at favorable prices relative to replacement cost and to historical norms.
“The limited stock of quality assets available for sale is creating a synthetic sellers’ market, whereby there is significant equity competing for property, which is resulting in assets trading at low cap rates, albeit at deep discounts to replacement cost,” says Adler.
