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Pace of Hotel Transactions in Florida Quickens

Average Price per Key Falls from $70,900 in the first Three Quarters of 2009 to $44,500

(Tampa and Orlando, Florida): March 25, 2010  - A new survey of hotel sales in the State of Florida conducted by HREC Investment Advisors indicates that the pace of transactions is beginning to accelerate.

“In the fourth quarter of 2009, we started seeing signs that lenders are getting serious about dealing with their distressed hotel positions,” said Scott Stephens, a Tampa-based partner of HREC. “On large assets there is still a tendency to extend maturities in the hopes that demand will catch up sooner rather than later. But as you move down the quality scale, lenders are becoming more willing to sell their mortgages at a discount, engage in short sales and to sell hotels that they own through foreclosure.”

Added Paul Sexton, the head of HREC’s Orlando office: “The timing is due in part to the nature of the foreclosure cycle, the first real wave of which hit the beach in the later part of 2009. Likewise, when faced with a decision to either fund actual operating shortfalls or sell out their position entirely, lenders are opting for the later. The funding of operating shortfalls will become a huge issue this summer when revenues cycle down on a seasonal basis.”

“The pickup in sales notwithstanding, the valuation process isn’t getting much easier,” stated Peter Laack, a vice president with HREC. “That being said, we are seeing a relative stabilization of occupancy trends and we have enough transactions to sense the general direction of several key sub-sectors within the overall market.

Significant findings of the HREC/SRA study include:

  • The pace of hotel sales in Florida has been accelerating starting in 4Q 2009. Since last September there have been 21 transactions representing $173 million in volume. This is compared to the first three quarters of 2009 during which there were only 15 transactions representing a volume of $182 million. The higher volume during the first three quarters is due to the closing of two build-to-suits that were contracted for during 2007.
  • The average price per room has fallen from $70,900 in the first three quarters of 2009 to $44,500 reflecting the fact that many of the more recent deals have involved limited-service properties that are well into their economic life.
  • Although Florida has not seen the same level of distress among its upper-upscale and luxury properties as in other sunbelt states such as California and Arizona, the recent transfer of the $89 million ownership interest of the Gansevoort South from the original owners to Credit Suisse (the one-time mezzanine lender) is an indication of things to come.
  • As an indication that the market is stabilizing, Florida’s year-over-year RevPAR trend line has improved in each month since its trough in March 2009, when RevPAR was 21% down from the prior year, to January 2010 when it was down just 5.5%.
  • In January, Florida’s lodging industry experienced year-over-year growth in hotel rooms sold for the third month in a row. January’s 7.2% growth rate was preceded by a 4.4% increase in December and a 2.6% improvement in November.
  • Delinquencies among hotel properties in Florida with CMBS securitized debt have reached 17% which represents a volume of some $1.4 billion in distressed hotel loans. CMBS debt represents between a quarter and a third of all hotel financing in the state.
  • Although lenders are becoming more and more motivated to dispose of their distressed hotel assets (both mortgages and foreclosed properties), significant structural impediments exist, such as unprecedented scrutiny from regulators and poor capitalization at some banks.
Recent Florida Hotel Sales

Altamonte Springs – (September) Serving as a baseline for valuations on well-located limited service hotels outside the main tourist corridors, the 210-roomHampton Inn in Altamonte Springs was acquired by 3H Group Hotels, Inc. for $10.0MM ($47,619/key).

Singer Island – (October) In a test of the marketability of broken condo-hotel projects, Urgo Hotels acquired the public areas and 18 unsold units at the Resort at Singer Island for $7.1MM.

Orlando – (November) The end result of a prior loan sale, the Sheraton Downtown Orlando was foreclosed on and subsequently acquired by Glenmont Capital Management for $8.0MM ($23,500/key).

Central Florida – (December) Taking advantage of the corporate restructuring of at least one national hotel company, Lone Star Funds acquired two full-service properties from Felcor for $26MM (averaging $22,600/ key). The two properties are the International Palms Resort (f/k/a Holiday Inn Orlando/International Drive Resort) and the Holiday Inn Cocoa Beach.

Miami Beach – (December) The 77-unit unbranded/ off-beach Beach Plaza and Villas was acquired by ABH Corp of New York for $12.25MM ($159,000/key).

Altamonte Springs – (January) In a short sale, the Clarion Inn & Conference Center sold to Miro LLC for $6.2MM ($23,600/key).

Orlando – (January) Tarsadia Hotels sold its 60% share in the Renaissance Orlando Airport to joint venture partner JHM Hotels for $21MM, valuing the property at $35MM ($117,450/key).

The full results of the study and other market insights can be found in the attached March 2010 edition of the HREC Newsletter.

About HREC: 

HREC is the nation’s leading lodging and gaming real estate advisory firm specializing in property sales, mortgage brokerage, equity/JV structuring, consulting (market studies and appraisals), asset management and litigation support. With thirteen offices throughout North America- including offices in Orlando, Tampa and South Florida- HREC is distinguished by unwavering commitment to client service through its team approach, intellectual capital and hotel/casino specialization.


Scott Stephens
HREC Investment Advisors
410 S. Ware Boulevard
Suite 700
Tampa, FL 33619
P:  (813) 635-0600
F: (813) 635-0800

Paul R. Sexton
Vice President
HREC Investment Advisors
7380 Sand Lake Road
Orlando, FL 32819
P: (407) 963-4840
F: (407) 540-9377


Also See: Social Media for Hotels: Taming the Beast / Daniel Craig / March 2010
Who is the Voice of Social Media in Your Hotel? / Daniel Edward Craig / December 2009
Does Social Media Make Your Head Hurt? Here Are a Few Helpful Resources for Hotels / Daniel Craig / January 2010


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