|By Kevin Post, The Press of Atlantic
City, Pleasantville, N.J.McClatchy-Tribune Regional News
July 11, 2011--Motels and hotels, a huge segment of the Jersey Shore economy, are slow to find buyers in the sluggish real estate market, even now, at the height of the tourism season.
Commercial investors in hospitality properties are scarcer, agents say. Those looking for a motel purchase either want an unrealistic price or unworkable seller financing.
"It's a tough market. There are not a lot of people looking to invest money these days," said Robert Pileggi, of Century 21 Pacesetter Realty in Stafford Township.
"Everyone's out for a bargain," said Sherri Lilienfeld, of Prudential Fox & Roach's Margate office. "It's also very tough to finance hotels. A lot of people buying are looking for owner financing, which is not what the people selling are looking for."
Re/Max agent Sandra Richardson has been trying for two years to find a buyer for a Wildwood motel, Le Voyageur, on East Andrews Avenue.
The property should be appealing: 700 feet from the beach and Boardwalk, 70 percent of its business is repeat clients, it averages 90 percent occupancy at an average daily rate of $110, and plans are already completed for adding 24 units.
Richardson, 56, of Wildwood, said she has gotten nearly a dozen offers for it.
"Many offers fell through. Either they didn't have enough to put down or they got cold feet. It's a tough market," she said.
The owners, Dennis and Grace Krause, who live in a house adjoining the motel that is part of the property for sale, missed one sale opportunity, hoping for more money.
"In 2009 we had a $2.1 million cash offer, but he was chasing the market," Richardson said.
Unfortunately, the market was headed south. The price for Le Voyageur recently was reduced to $1,699,000.
Richardson said that price has gotten some attention and should produce a sale this year.
"There are buyers out there for investment properties, but the numbers just have to work. His will work now," she said.
To get the sale, Le Voyageur must compete with many other motels for sale on Five Mile Beach island.
"I think on the island there are about 12 or 13 motels for sale, including quite a few that are overpriced for the current market," Richardson said.
One indicator of the difficult market: The dozen motels for sale in the Wildwoods have been on the market an average of 438 days. Eight have been for sale less than a year, but two have languished for more than three years.
A dozen hotels for sale in the Wildwoods alone may sound like a lot, but the region and Cape May County in particular are home to a large seasonal hospitality industry catering to shore visitors.
In 2009, there were 223 hotels and motels in Cape May County, down from 314 at the start of the decade, federal Bureau of Labor Statistics data show.
Atlantic County had 100 noncasino hotels in 2009, and Ocean County had 85, both figures little changed in the decade.
Compare those figures with those of South Jersey counties away from the ocean: Cumberland County has just 14 hotels and motels, Gloucester County has 16.
Pileggi, 52, of Waretown, said there are not as many motels on Long Beach Island, where rental homes dominate the market instead.
But there are two for sale in the Holgate section of Long Beach Township, and he is representing one at the southernmost end of Long Beach Boulevard.
The 12-room motel has "phenomenal views, right across the street from the ocean, with two decks where you can watch the ocean all day long," Pileggi said.
The motel has drawn little interest in the three months it has been on the market at $1.9 million, he said, but now things are picking up in the height of the summer.
"People are riding by and looking at it, a couple of builders are looking at the property, and a couple of investors," he said.
As with many of the motels for sale, the economy was not a factor in the decision to sell.
Pileggi said a couple owned and operated the Holgate motel for more than 30 years and "made a good deal of money over the years. It's a profitable business, I can tell you that." Then one of them died, and now the other wants to get rid of it.
He said he believes the two Holgate motels are the only ones for sale on Long Beach Island.
More are available south along the shore, where listings include:
n A 36-room hotel at 633 White Horse Pike, Absecon, for $2,295,000
n A 59-room motel at 111 S. Little Rock Ave., Ventnor, for $6.2 million
n A 21-unit motel at 1605 Ocean Ave., North Wildwood, for $1.8 million
n An 87-room motel at 3300 Atlantic Ave., Wildwood, for $6.9 million
n A 41-unit motel at 7400 Ocean Ave., Wildwood Crest, for $3,895,000
Lilienfeld, 48, of Margate, said too many buyers are looking for distressed properties, whose owners cannot handle the mortgage and are compelled to sell whatever the price.
She is marketing an Egg Harbor Township property -- the 71-room Best Western Extended Stay in West Atlantic City, priced at $4.7 million.
"The hotel and the owner are not in a distress situation, and that's what makes it challenging because the people looking to buy are expecting a distress situation and negotiate as if they were distressed," she said. "The people with cash come in at ridiculously low prices because they know they have an advantage, and the people with no cash, it's difficult to get financing."
Contact Kevin Post:
Jersey Shore hotel industry
2009 figures for the noncasino hotels in the region
County, Hotels, Employees, Total wages, Average wage
Cape May: 223, 1,888, $45M., $23,731
Atlantic: 100, 1,679, $38M., $22,712
Ocean: 85, 960, $19M., $20,030
Cumberland*: 14, 271, $4M., $15,934
Source: Federal Quarterly Census of Employment and Wages
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