DEVELOPMENT
Because of the risk profile , hotels tend to have higher cap rates than residential properties . Hotel cap rates typically range from 8 % to 10 %, while residential cap rates are generally between 4 % and 6 %, depending on the market . “ The current state of capital markets is causing cap rates to widen ,” Wolf said . “ The past couple years of a low-interest-rate environment drove stabilized multifamily caps in headline markets into the low 3 % s , but those conditions no longer exist and investors are requiring higher caps to avoid negative leverage . The groups that bought multifamily at low 3 caps with floating rate debt will be squeezed as rates remain elevated .”
And while there hasn ' t been a tsunami of distressed assets for the taking , some , like Wolf , believe otherwise , making them ripe candidates for conversion . “ It might actually already be here ,” he said .
Certes is also converting an exterior corridor Surestay Plus Hotel in Raleigh , N . C ., into a residential property .
46 hotelsmag . com September 2023