The Capital Transactions panel , from left : Jeffrey Horwitz , senior partner , Proskauer ; Michael Bluhm , managing director , global head of gaming and lodging , Morgan Stanley - Investment Banking ; Greg Friedman ; managing principal , CEO , Peachtree Group ; Tyler Morse , chairman and CEO , MCR ; Mit Shah , CEO , Noble Investment Group .
and transaction activity could continue until investors have stronger clarity or owners have reason to part with their assets . Which comes first ?
Global hotel investment volume & number of trades : 2010 - 2022
Total hotel investment volume ( in billions USD )
$ 120
$ 100
$ 80
$ 60
$ 40
$ 20
$ -
$ 28.4
$ 37.6 $ 35.1
$ 54.2
$ 63.2
$ 97.8
$ 67.8
“ I ’ ve never seen capital markets so closed with the economy so strong ,” said Michael Bluhm , managing director , global head of gaming and lodging , Morgan Stanley Investment Banking . “ You are seeing a liquidity crisis and the ability to lend has become smaller .”
The difficult debt market is apart from what Greg Friedman , CEO of Peachtree Group , called “ interest ” on the buy side , “ but it ’ s a difficult market ,” he said . “ It ’ s a hard deal market in terms of understanding valuations .”
But not for everyone . MCR acquired three hotels recently and Morse said it is buying nine more in the next 30 days . “ People are getting flushed out ,” he said . Translation : It is getting harder and harder to hold assets , having to deal with deferred maintenance , loan maturities and refis on the horizon .
Wrote JLL ’ s Makis , “ The outlook for hotel investment over the medium-term is optimistic with multiple catalysts on the horizon to drive further opportunities for acquisitions , including owners feeling financial pressure from rising CapEx needs , $ 100 billion in impending loan maturities in 2023 alone and interest rate cap renewals .”
$ 71.6
$ 80.3 $ 77.8
$ 32.0
$ 73.5 $ 71.9
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 EMEA APAC Americas # of Trades
Source : JLL Research . Includes all transactions $ 5M + excluding casinos . Entity-level deals are also included .
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Total number of hotel trades
Morse is known for his frankness and bold statements , but his company is one of the largest owners and operators in the country for a reason : they run hotels well , he said . “ Interest rates are at 9 %,” he said . “ If you bought at an 8 cap rate you are running negative leverage . We run the hotels better . That ’ s how you pay 9 % interest .”
Though transactions aren ’ t yet percolating , the consensus among most is that they will pick up toward the back half of the year . “ We are going to see an escalation in transactions ,” said Mit Shah , CEO of Noble Investment Group and a part owner of the NBA ’ s Atlanta Hawks , alluding to the huge amount of CapEx now needed to be put into properties , especially with brands demanding it . “ These hotels haven ’ t been touched . How do you address that ? The stress will drive transactions ,” he said .
Recent transactions include a majority stake in the Mandarin Oriental New York sold to India ’ s Reliance Industries and the $ 800-million sale of the JW Marriott San Antonio Hill Country Resort by BREIT to Ryman Hospitality .
Beyond CapEx spend is the amount of loan maturities coming down the pike that will spur transactions , according to Peachtree ’ s Friedman . “ A lot of groups having to refinance or recapitalize at double will be a catalyst to go sell ,” he said .
In the first three months of this year there have been more than $ 3.7 billion in new maturity defaults with loans failing to pay off on a timely basis , the Commercial Observer wrote recently . CRED iQ , in its CRE Maturity Outlook , showed that $ 162 billion in securitized commercial real estate debt was scheduled to mature in 2023 .
In June , Park Hotels & Resorts said it would cease payment on the loan for the 1,921-room Hilton San Francisco Union Square , the largest hotel in San Francisco by number of rooms , and the 1,024-room Parc 55 , also in San Francisco .
Jul / Aug 2023 hotelsmag . com 7