|By Sara K. Clarke, Orlando
SentinelMcClatchy-Tribune Regional News
Jan. 29, 2013--The days of snapping up a Central Florida hotel on the cheap may be waning, as Orlando's lodging-resale market appears to be heating up.
About $240 million worth of hotels in the area changed hands last year, compared with $163 million in 2011, according to a report by HREC Investment Advisors. The Denver-based firm's report excluded hotels sold as part of larger portfolios as well as foreclosures and other instances in which properties didn't change hands at market prices.
The report also noted that there were fewer foreclosure sales in the area in 2012.
Paul Sexton, a broker in HREC's Orlando office, described the local market's performance as "a truly incredible recovery" and said it has been "very efficient in working its way through a significant number of highly distressed hotel assets," though lenders continue to hold on to assets with resale values they think may increase.
"If there's people out there who think they're going to get these highly distressed assets for 50 cents on the dollar, those days are pretty much gone," Sexton said.
The improving sales trend has been bolstered by an improving hotel market overall. Properties in the Orlando area filled 68.8 percent of their rooms on an average night last year --the market's highest occupancy rate since 2005. The average room price rose 2.9 percent to $96.88 a night, its highest level since 2008, according to data released recently by Smith Travel Research.
For Danny Patel, a Central Florida hotel investor who bought two properties in 2011, "a good deal" is now hard to find. He didn't buy anything locally in 2012.
"The business turns, and it gets better, and people hold on to their properties," said Patel, owner of Jasmin Hospitality Inc. in Orlando. "And the prices are higher."
Among the biggest hotel deals in Central Florida last year: the $77 million sale of the Grand Bohemian in downtown Orlando and the $29.3 million purchase of the Westin Imagine on International Drive, HREC said.
At a price of $11.7 million, the 672-room Econo Lodge on International Drive attracted the Brazilian investment firm Brasif, which bought the lender-owned property last May. Marcus Valpassos said the cost, location and low interest rates left his company with little downside.
"Even thought the daily rates in Orlando are among the lowest in the world, it is a stable market in that location, if you are confident with your management ability," Valpassos said. "So it provides a relatively low-risk, positive cash flow."
Despite the progress in getting distressed properties through the system, some "weeding out" must still be done, said Don Stephens, vice president of HVS Consulting & Valuation. HVS, which recently opened an Orlando office, expects the total value of local hotel transactions this year to eclipse the 2012 mark.
"We are absolutely seeing and expecting an increase in 2013," Stephens said.
As recession-related deals dry up, one issue will be whether buyers' and sellers' price expectations reach an equilibrium. Speculators are likely to exit the market, even as more conventional investors return, said Bill Seyfried, an economics professor at Rollins College.
"Once they've got the bargain-basement deals done, some of those people [speculators] may disappear," Seyfried said.
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