Denver Hotel Investment Alert: Market Strong, Active, Aggressive and Bright Future
April 23, 2015 2:39am
Current research by HREC - Hospitality Real Estate Counselors (metro Denver headquartered; www.hrec.com) indicates that existing and new investors in the greater Denver lodging industry are reaping record returns; not seen in seven years, since the last 2007 peak of the hotel real estate cycle.
Key Indicators: Lodging Investment Trends
* In 2014, 30 hotels transacted in metro Denver, approximately double the 16 facilities traded in 2012;
* The total dollar value of properties sold in 2014 nearly reach $500 million, representing roughly a 50% increase over 2013 and 86% increase over 2012;
* In 2015 so far, 10 hotels have sold representing $140 million in value;
* Currently, multiple downtown hotels are reportedly far along in the sales process. If these deals close, these sales will total almost $160 million in transaction volume;
* Some of Denver's premier hotels are achieving record cash flow levels creating market values approaching $500,000 per room for refinancing purposes;
* HREC's brokers throughout the country continue to receive increased requests for hotel assets to purchase in Denver;
* Consultants with HREC encountering national developers looking for hotel development sites, especially downtown and near DIA
Why Investors Want to Buy a Hotel in Denver?
U.S. based investors and equity capital:
On a macro level, believe metro Denver is a highly desirable market for achieving strong return from lodging investments:
* Fundamentally an economically attractive metropolitan area where people desire to live and work, causing companies to want to operate here;
* Has achieved economic diversification away from oil & gas (relative insulation proved by hotel economy being unaffected by recent drop in oil prices; not your 1980's Denver anymore);
* Downtown has truly evolved to a dynamic 24/7 commercial and residential community and micro economy;
* Many wealthy investors around the country consider Colorado a second home, maintain perceived familiarity based on their second home lifestyle and vacations in our Rocky Mountains;
* Overall, the metropolitan Denver lodging market is thriving. According to STR (www.str.com), in 2014 the area's overall occupancy level was 75.4%, a strong increase of 6.5% from 2013. At the same time, ADR (Average Daily Room Rate) was $112.56, revealing an incredible increase of 9.1%.
* STR forecasts RevPAR growth of over 10% still in 2015.
* Hotel investment stability from nationally recognized major colleges and universities;
* Diversified hotel demand, ranging from growing commercial businesses, leading convention and group demand location and leisure demand/vacationers;
* Chinese investors have noticed Denver, acquiring the Sheraton DTC in 2014;
* Still not premium MSA on radar screen, but improving dramatically relative to currently preferred coastal gateway U.S. cities.
Future? What investors are expecting?
According to Mike Cahill, CEO & Founder of HREC and co-chairman of LIIC - The Lodging Industry Investment Council (www.liic.org),
"A recently completed detailed survey of LIIC members, who are the leading investors, owners and operators of hotels throughout North America, indicates the foreseeable hotel investment future is still bright for U.S. based hotel:
Main Investment Concern for Denver:
New Hotel Supply: All the optimism of Denver lodging real estate has created extremely strong hotel development. Denver is currently ranked 5th in the country in terms of new hotel development underway, with an anticipated 4% increase in hotel supply projects.
Contact: Mike Cahill, CEO & Founder - HREC
Contact: Ashley Hunt - Director of Marketing
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