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News for the Hospitality Executive |
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Jan. 5, 2012
– Global hotel investment volumes surged impressively in the first half
of 2011, with REITs leading the way and signs of debt market revival
encouraging activity. Economic uncertainty returned in the second half
of the year causing momentum to falter, although deals continued,
especially in the United States, reaching our forecasted $30 billion
worldwide, an increase of 13 percent over 2010 volume.
Despite the continuing economic uncertainty,
Jones Lang LaSalle Hotels forecasts that global hotel transaction
volume will hold steady in 2012 to again reach upwards of $30 billion
in deals, according to initial results from the firm’s Hotel Investment
Outlook 2012 report.
“So far, the dislocation in the financial
markets has not impacted underlying trading fundamentals. This has
reassured investors to a certain degree and has underscored the
attractiveness of high quality, income producing hotel real estate as
an asset class,” said Arthur de Haast, Chairman of Jones Lang LaSalle
Hotels. “Constraint will be driven by illiquid markets and the
shrinking balance sheet capacity of international banks to lend
significant sources of new money. Still, the market will be flush with
equity capital that will come into play.”
“Private equity players increased investment
activity in the second half of 2011, and we expect them to remain
ambitious in 2012. With significant buying power and risk tolerance in
a volatile environment, they are in position to achieve opportunistic
returns,” de Haast said. “Notwithstanding, deficient debt markets and
limited availability of attractive acquisition opportunities will
likely hamper higher levels of activity. Still, these players will
selectively acquire assets in secondary locations, as well as
distressed portfolios and non-performing loans.”
Joining the buyer mix are sovereign wealth
funds and private high net worth individuals who will take a long-term
view and make strategic acquisitions globally. Public companies,
notably REITs, are expected to focus on existing stable acquisitions
rather than new ones, consequently diluting the buyer pool.
The biggest sellers in 2012 are likely to be
bank-induced, as a result of debt maturities and consequent refinancing
challenges. In addition to the influx of assets expected to come to
market, a significant amount of note sales are anticipated as well.
Private equity firms and institutional investors are also expected to
liquidate some previous acquisitions, either to divest select non-core
assets or to return capital to investors as funds reach maturity.
In the United Kingdom, the U.S. and Ireland,
institutions with significant real estate exposure have started taking
action by means of placing stressed assets into the market, although
activity has yet to start in Spain and Japan. Borrowers in Spain have
more control over administration processes, as opposed to the U.K. and
Ireland, creating reduced certainty for the banks and stemming greater
levels of workout activity. Lenders in Japan are still reluctant to
realise losses on hotel loans, which is causing delays in sales
transactions.
“We expect that portfolio deals will dominate in several of these markets as banks, whenever they have a large portfolio, prefer to look for a portfolio solution to exit as opposed to selling assets individually,” said de Haast. Emerging markets remain the global growth
engine, greatly driven by rising domestic demand. Fundamentals continue
to point to further growth in 2012. Although growth in China and India
is slowing both have good momentum, activity is building in Central and
Eastern Europe, notably Poland, Russia’s activity jumped up, and South
America continues to excite investors, with Brazil as the region’s
growth engine.
“Flexibility is a key theme for 2012, and
the ability to react to change quickly will feature as a success
indicator. Unexpected events, such as political unrest and natural
disasters seem to have become “the new normal” and success will be
predicated by investors and operators who can calculate risk and adapt
the quickest,” de Haast said.
About Jones Lang LaSalle Hotels Jones Lang LaSalle Hotels, the first and leading global hotel investment services firm, is uniquely positioned to provide the depth and breadth of advice required by hotel investor and operator clients, through a robust and integrated local network. In 2010, Jones Lang LaSalle Hotels provided sale, purchase and financing advice on $4.1 billion worth of transactions globally. In addition, advisory and valuation services were provided on over 1,000 assignments. The global team comprises over 225 hotel specialists, operating from 39 offices in 20 countries. The firm's advice is supported by a dedicated global research team, which produced 70 publications in 2010 in addition to client research. Jones Lang LaSalle Hotels' services span the hospitality spectrum; from luxury single assets and large portfolios to select service and budget hotels, resorts and pubs. Services include investment sales, mergers and acquisitions, capital raising, valuation and appraisal, asset management, strategic planning, operator selection, management contract negotiation, consulting, industry research and project development services. Jones Lang LaSalle Hotels' clients have access to the resources of its parent company, Jones Lang LaSalle (NYSE: JLL). www.joneslanglasallehotels.com
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| Contact: Paige Steers +1 312 288 2797 [email protected] |