He believes that interest rates are poised to move up 25 basis points again , but abate by the fourth quarter . “ There may be slower transactions over next few months but could then pick up into Q4 and into the next year .”
He further added that ' s not taking into account the extraordinary amount of loans coming due , which will force owners to refinance at likely higher rates or sell . Beginning at the start of 2022 and through the end of 2023 , nearly 45,000 CMBS hotel loans totaling about $ 30 billion in value were set to mature , according to analytics provider Trepp .
Higher interest rates increase the cost of capital ; they also impact cap rates and have a knock-on effect on profitability . “ Higher interest rates are impacting our bottom line as much as deal flow ,” said Dana English , CFO of Excel Group , a private equity shop focused on the hotel space , particularly limited-service assets .
For now Excel Group , which owns 42 assets in the U . S ., is biding its time , English said , which means a combination of acquiring assets and “ sitting and waiting .” In the interim , English said that her firm is making sure that its bank partnerships are on solid footing for when they become more earnest buyers .
SIZING UP OPPORTUNITY The murky macro-economic climate is hard to navigate , but advantageous for both specialist hospitality investors and thematic investors who have a finite understanding of the operating landscape . Though panelists acknowledged the investment space becoming more crowded , Bhoopathy noted the advantage to be had over what he called “ generalists ,” or those investors without the background . “ You have to have conviction when things are unclear ,” he said . “ With capital markets as they are , it ’ s not one size fits all ; being a specialist allows you to access debt easier .”
Tapping into debt is more expensive , but available . All-cash buyers have an advantage , but not everyone has the juice to do that . Meanwhile , recent regional bank upheaval has made it harder , but could bolster debt diversity . According to a recent Moody ’ s report , 135 U . S . regional banks with between $ 10 billion and $ 160 billion of assets hold 13.8 % of commercial real estate debt , far lower than what was initially believed . Though there is no underestimating the stress on the debt markets caused by regional bank failure , Moody ’ s also noted that commercial real estate could benefit from a larger pool of lenders , from life insurance companies to bridge lenders .
“ Debt is available and a basis of optimism ,” said Bhoopathy , but noting the pressure on middle-market banks that has opened up the door to more private lenders , including mezzanine and rescue .
For traditional loans , more equity is required to secure debt compared to last year , said Magazine . Whereas debt could be financed at 65 % loan to cost compared to prior years , now , according to Magazine , debt seekers are looking at 50 % to 55 % LTV . “ The equity is higher , it ' s not easy and it is taking longer ,” Magazine said .
The Deals Getting Done panel at the Bisnow Lodging Investment Summit in Washington , D . C . From left : moderator Heather Purdy , St . Associate , Hospitality Counsel , Brookfield Properties ; Adi Bhoopathy , Managing Director , Noble Investment Group ; Dana English , CFO , Excel Group ; and Marc Magazine , executive managing director , Savills Hospitality Group .
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