By: Vi Thi Dang and Carrie Russell, AACI, - HVS Canada
A new level for hotel investment in Canada was set in 2007. The country
was coming off a record year in 2006, but the total investment increased
almost 70% in 2007. With 165 hotel sales, representing 28,255 guestrooms,
the total value reached over $4.5-billion, which amounts approximately
$162,000 per room.
Two major acquisitions of publicly traded hotel REITs drove the high
level of investment. Legacy REIT was purchased by LGY Acquisition LP, a
limited partnership formed by InnVest Real Estate Investment Trust, Cadbridge
Investors LP (a limited partnership formed by Cadim, a division of the
Caisse de dépôt et placement du Québec), and an affiliate
of Westmont Hospitality Management. Legacy REIT had a total investment
value of $2.5-billion comprising 25 properties, two of which were in the
US. The Canadian portfolio represents roundly $2.0-billion in assets for
23 hotels. The second largest transaction of the year was bcIMC's acquisition
of CHIP REIT, which comprised 32 hotels across Canada with a total value
of $1.2-billion. These two transactions represent 70% of the activity in
2007.
Another notable transaction in 2007 was the sale of ten properties by
the Pomeroy Group to Holloway Lodging REIT. These ten hotels, located in
Northern Alberta and British Columbia, comprise six Super 8 Hotels, a Best
Western, a Holiday Inn, a Pomeroy Inn, and an independent property. The
portfolio sold for $215-million, or $199,300 for each of the 1,079 guestrooms.
Adjusting the transaction volume to exclude the three major portfolio
transactions yields an investment volume of $1.1-billion for 2007. This
is slightly below the volume for 2006 (adjusted for the portfolio acquisition
of the Fairmont Hotels by Oxford Properties). What is notable in 2007 is
that the average price per room, excluding the portfolio transactions,
was $125,626, which is 45% higher than the comparable figure in 2006 and
a record setting average for the country.
On the provincial level, Alberta recorded the largest number of sales
with 67 transacted properties totalling $1.3-billion in investment or approximately
$163,000 per room. The highest price per room paid in the country was in
Fort McMurray, Alberta. The Clearwater Suite Hotel sold for $376,667 per
room, or $56,500,000 for the 150-room all-suite property. Winnipeg-based
Temple REIT purchased this property at an 8.5% historical cap rate. Following
the sale, Atlific Hotels & Resorts took over management of the property.
Looking at the other provinces, Ontario noted 38 transactions yielding
over $1.08-billion in sales volume. Although the number of hotels
sold in Ontario in 2007 was similar to the number sold in 2006, the total
value almost tripled in 2007. British Columbia had 19 hotel transactions
totalling over $569-million or $170,111 per room, roughly 25% lower than
last year's record of $707-million or $215,303 per room. In downtown Vancouver,
The Bosman's Hotel was sold for $270,000 per room, the highest price per
room paid in British Columbia in 2007. The property was purchased primarily
for its land value, which equates to roundly $200 per buildable square
foot for the downtown site. The hotel will likely be demolished and the
site used for the development of high-rise condos. Hotel sales in Quebec
climbed up to 16 transactions totalling $804-million, a twofold increase
in investment over 2006. Saskatchewan recorded nine hotel sales with a
total value of $227-million. This includes the sale of the Delta Regina
for $50-million, or $182,482 per room.
In terms of buyers in 2007, the REITs dominated the transaction volume
in the first half of the year, when Holloway, Temple, and Lakeview all
made major acquisitions, primarily in Alberta. With the slowdown in the
oil and gas sector in some regions and the uncertainty over royalties in
Alberta, the volume of transactions showed a marked decrease in the second
half of the year with a variety of buyers, including the REITs as well
as private companies.
In terms of the outlook for transaction volume in 2008, it is unlikely
that the country will be able to repeat the success of 2007, as there are
no major portfolio transactions on the horizon. Excluding the portfolio
transactions, 75% of the transactions in 2007 occurred in the first half
of the year. The uncertainty in the credit markets and a gap between
vendor and purchaser expectations seemed to put a damper on transactions
in the second half of the year. Looking at the fundamentals, there still
seems to be a ready supply of debt and equity available for transactions,
and hotel operating performance is healthy in most parts of the country;
therefore, we anticipate continued activity this year, albeit at a more
moderate level than in 2006 and 2007.
HVS Canada has not verified all individual hotel sales
in this newsletter; however, we collected the information from sources
we deemed reliable, and the data is thought to be correct. We cannot warrant
its accuracy; it is provided for your convenience only. Use of this information
without verification from original sources is at your own risk. A special
thanks to Bill Stone, Alam Pirani, and Robin McCluskie of Colliers; Angus
Wilkinson of Tyne Hospitality; Greg Kwong and Germain Villeneuve of CBRE;
Denis Chevalier, AACI, of the Altus Group; Peter M. Lawrek, AACI, of Crown
Appraisals; Terry Kerslake, AACI, of Flynn Mirtle Moran; Mike Turner of
Turner Drake & Partners Ltd.; Glenn Balderston of D.R. Coell &
Associates Inc.; Todd Oeming of Oeming Commercial Realty Corp.; and Tammy
Zielke of Glen Cowan & Associates.
Canadian Hotels Sales 1992-2007
2007 Canadian Hotel Sales
CANADIAN LODGING OUTLOOK
HVS INTERNATIONAL - CANADA
November 2007
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CANADIAN LODGING OUTLOOK
HVS INTERNATIONAL - CANADA
November 2007 YTD
© Smith Travel Research, 2005.
Reproduction or quotation in whole or in part without permission is forbidden.
*INS - Insufficient Data
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