Charting
M & A
Experts opine on nearterm potential for M & A in U . S ., Europe and Asia .
Contributed by Mary Scoviak
Outlook
Bankers ’ forbearance and stimulus measures have kept most hotels off the trading blocks in all the markets severely impacted by COVID-19 . But how much longer will that forbearance last , and what is the outlook for M & A in the United States , Europe and Asia Pacific ?
HOTELS Investment Outlook reached out to industry analysts and M & A experts to get their takes on what to expect late in 2020 and into 2021 . Here is a roundup by region .
U . S . ( DiS ) StreSS teSt M & A activity in the U . S . hotel sector is likely to remained gridlocked for at least six months to a year .
It ’ s hard to drive a deal pace when there ’ s nothing to buy — even with midyear estimates showing losses of US $ 400 million a day since March , according to STR and Tourism Economics . Any hopes that a continued hard line by CMBS lenders would speed more assets to market foundered as Q3 wore on , and no one expects an RTC-style liquidation sale either .
The scarcity of hotels combined with weak availability of debt has disincentivized both buyers and sellers . “ The asking price for individual assets has not changed materially since owners are still focused on pre-COVID-19 values . The bid / ask gap is too wide ,” says John Pritzker , founding partner and director , Geolo Capital , San Francisco .
Still , there are points of entry into the hotel market . “ In the immediate term , it ’ s a debt play ,” says Chad Crandell , managing director and CEO of asset management company CHMWarnick , Beverly , Massachusetts .
“ There ’ s so much private equity with no place to go ,” adds Michael Cahill , CEO and founder , HREC — Hospitality Real Estate Counselors , Denver , Colorado . “ Buying opportunities won ’ t come until after Q1 of 2021 , and maybe not for a year . Investors need to get some money [ placed ] out in the interim .”
The potential to help hotel borrowers bridge the liquidity gap hasn ’ t been lost on the investment community . “ Although it ’ s still premature , we expect there will be more opportunities in distressed debt situations ,” Pritzker says . “ The CMBS market is under duress and the number of assets that are entering special servicer status ( a sign of financial distress , which sets the stage for bankruptcy ) has increased with each month following COVID-19 . Lenders have boosted loan loss reserves , which
D
November / December 2020 • HOTELS ’ Investment Outlook • www . hotelsmag . com