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