reits to capitalize on buying opportunities · minneapolis—a string of high-profile properties...

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REPORT FROM THE U.S.—Expect real-estate investment trusts to make a lot of noise next year.

Several REIT executives and analysts have told the Hotel Investment Barometer in recent weeks that REITs will be active buyers during 2011.

Hotel REITs are in a good position to pick up properties, said John Arabia, managing director of Green Street Advisors.

“They have been deleveraging balance sheets to pay off maturing debt,” he said. “Now, there’s a continuation of that deleveraging, but we have found that’s funding external growth.”

Low cost of capitalOne of the REIT buyers would appear to be blind pool Pebblebrook Hotel Trust. The

REIT has been active in recent days, having announced three acquisitions—Skamania Lodge outside Portland, the Sheraton Delfina Santa Monica, and the Sofitel Philadelphia—since 3 November for a combined US$245.6 million.

According to a research note from R.W. Baird analyst David Loeb, Pebblebrook has approximately US$300 million of investment capital remaining. Loeb expects Pebblebrook to use its undrawn US$150 million credit facility, along with approximately US$155 million in cash and property-specific debt, to fund future acquisitions.

Pebblebrook’s CFO Ray Martz agreed the company’s low cost of capital gives the company “a distinct advantage” over potential rivals.

“We’ll probably continue to have (a cost of capital advantage) for some time,” he said. “We don’t need a meaningful amount of debt, whereas on the private side, they need debt.”

REITs to capitalize on buying opportunitiesBy Shawn A. Turner | Finance Editor Hotel Investment Barometer

ADR growth could accelerate in 2011By Shawn A. Turner | Finance Editor Hotel Investment Barometer

Highlights:■ REITs’ ability to circumvent

the debt markets gives the companies a competitive advantage over their rivals.

■ Lenders are seeking LTV of 55%.■ Bid/ask spreads are narrowing.

REPORT FROM THE U.S.—Demand is coming back. So is revenue per available room. But average daily rate? Well, that’s another story.

ADR has been suppressed during the ongoing hotel sector recovery. For the week ending 4 December, for example, STR reports the metric increased by just 0.5% to US$96.87. By comparison, occupancy for the week ended

up 4.7% to 49.9% while RevPAR increased 5.3% to US$48.31.

Hoteliers have been through a lot during the past 18 months, so some hesitancy might be expected. But with demand returning, that hesitancy might be coming to an end, said Brad Garner, COO at STR.

Hoteliers are going to push rate, he said. “It’s certainly good to hear.”

U.S. cities among the top 25 markets that showed the highest ADR gains for the week were:■ Orlando, Florida: +11.3% to US$99.80;

■ San Francisco/San Mateo, California: +8.2% to US$132.65; and

■ Miami-Hialeah, Florida: +7.1% to US$169.78.

Starwood Hotels and Resorts Worldwide, for one, seems to believe ADR will come back, according to information released during its 2010 Investor Day event. Given the choking off of new supply—the 40-year compound annual growth rate is 2%, according to Starwood—ADR should begin to pick up, executives noted during the event. http://www.starwoodhotels.com/corporate/company_info.html

“We expect strong pricing power, given new hotel supply approaching historic lows, coupled with growing demand,” the company said.

What is the Hotel Investment Barometer?You’re holding a rare item: A printed version of the otherwise digital Hotel Investment Barometer. It was produced to showcase the unique content the Hotel Investment Barometer brings to its readers.

The Hotel Investment Barometer is brought to you by HotelNewsNow.com, a division of STR. Our goal is to provide subscribers the latest hotel real-estate transaction news. We’ll be digging through city and county records, SEC filings and other sources to bring our subscribers facts & figures news beyond typical press releases.

The Hotel Investment Barometer, which will predominantly cover the U.S. hotel transaction market, provides in one spot the status of two dozen metrics that real-estate pros need to know. Also included: a listing of some of the latest transactions, hotel openings, foreclosures and signed management contracts.

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see REITs on page 8

Sheraton Delfina Santa Monica, Calif.

Highlights:■ U.S. ADR for the week

ending 4 December was up by just 0.5%, while occupancy and RevPAR jumped by 4.7% and 5.3%, respectively.

■ Hoteliers are going to push rate, said Brad Garner, COO at STR.

■ Slowdown in supply will aid pricing power.

Brad GarnerCOO at STR

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Property Location Rooms PricePrice/Rm

Buyer Seller Shawn A. Turner’s take

Sofitel Philadelphia

Santa Monica, California

306 87,000,000 284,314 Pebblebrook Hotel Trust

GEM Realty Capital, Whitehall Street Global Real Estate, Accor

Hotel’s 2010 gross tax: US$224,780.80.

Homewood Suites Seattle Convention Center

Seattle 195 53,000,000 271,795 Chesapeake Lodging Trust

AEW SBCO Seattle LLC

Taxable total value of the property for the 2011 tax year: US$21,491,400, down 12.9%.

Hyatt Rosemont

Rosemont, Illinois

206 See note 1 N/A AREA Property Partners, Aimbridge Hospitality

Hyatt Hotels Corporation

AREA/Aimbridge JV plans to invest US$13.5 million in capital improvements at the hotels.

Hyatt Lisle Lisle, Illinois 311 See note 1 N/A AREA Property Partners, Aimbridge Hospitality


JV enters into long-term hotel franchise agreements with hotels.

Hyatt Deerfield Deerfield, Illinois

300 See note 1 N/A AREA Property Partners, Aimbridge Hospitality


Hyatt: Sale of hotels represents strategy of “recycling capital” to expand company’s presence in underrepresented markets.

Hyatt Regency Greenville

Greenville, South Carolina

328 13,725,000 41,845 JHM Enterprises, Inc.


Pre-tax gain on the sale is US$6 million, according to a Hyatt SEC filing.

Hampton Inn & Suites Dallas-Arlington-South

Arlington, Texas 98 9,900,000 101,020 Apple REIT Nine, Inc.

Waxwing #1, Limited 2010 appraised value is US$4,967,203, Tarrant County records show.

National Hotel Jackson, California

22 458,000 20,818 New World Properties

Bill Smith The 2010 assessed value of the property is US$831,178, according to the Amador County (California) Assessor’s Office.

Courtyard Detroit Downtown

Detroit 242 37,800,000 156,198 General Motors Company

Forest City Enterprises, Inc.

Sale is expected to generate net proceeds of US$14.4 million, according to Forest City.

Chamberlain West Hollywood

West Hollywood, California

113 38,500,000 340,708 LaSalle Hotel Properties

Chamberlain Hotel Wh Holdings

Land is valued at US$9 million, according to Los Angeles County Office of the Assessor.

Hampton Inn Pine Bluffs

Pine Bluffs, Arkansas

80 7,000,000 87,500 Boerne Texas Investment Associates

Pine Bluff Host Lodging, LLC

Total assessed value is US$479,990, according to Jefferson County Assessor’s Office.

Recent Hotel TransactionsA sample of recent hotel transactions, researched by STR Analytics and HotelNewsNow.com

Note 1: Total transaction price for the three deals listed at US$51 million.


PHILADELPHIA—Pebblebrook Hotel Trust has acquired the Sofitel Philadelphia from GEM Realty Capital, Whitehall Street Global Real Estate LLC and Accor for US$87 million.

Pebblebrook’s financing of the deal includes the assumption of a US$56.1-million secured loan. The loan, which matures in February 2012, is a non-recourse, interest-only loan subject to a floating interest rate based on the 30-day LIBOR rate plus 1.3%, according to a Pebblebrook news release. As of 3 December, the interest rate for the loan was 1.56%. Pebblebrook CFO Ray Martz could not be reached for comment.

“We view the debt as attractive and

the debt assumption is in line with management’s previously announced plans to increase leverage through the use of property-specific debt,” David Loeb, an analyst at R.W. Baird, said in a research note 6 December.

Following are additional details about the hotel as disclosed by Pebblebrook.■ 2009 occupancy was 77% with an

average daily rate of US$169.■ Earnings before interest, taxes,

depreciation and amortization during the next 12 months are expected to be US$4.7 million to US$5.3 million.

■ Net operating income after capital reserves during the next 12 months are expected to be US$3.8 million to US$4.4 million.

Steve Hennis of STR Analytics contributed to this report.Contact: Pebblebrook Hotel TrustRay Martz, CFOPhone: 240-507-1330

Sheraton Delfina Santa Monica, Calif.

Deal spotlight: Sofitel Philadelphia acquired for US$87mThe 306-room hotel has a market value of US$23 million, according to the Philadelphia County Office of Property Assessment.By Shawn A. Turner | Finance Editor Hotel Investment Barometer

Deal spotlight: Courtyard Malvern (PA)Apple REIT Nine said it assumed a US$7.9-million loan on the US$21-million acquisition of the 127-room hotel outside Philadelphia.By Shawn A. Turner | Finance Editor Hotel Investment Barometer

Highlights:■ Deal includes a US$56.1-million, non-recourse,

interest-only loan subject to floating interest rate based on 30-day LIBOR plus 1.3%.

■ KHP II Philadelphia LLC acquired the property in 2007 for US$21 million.

■ Pebblebrook expects the hotel’s EBITDA during the next 12 months to be in the range of US$4.7 million to US$5.3 million.

Guestroom at the Sofitel Philadelphia

MALVERN, Pennsylvania—Apple REIT Nine disclosed details of the loan related to its US$21-million purchase of the Marriott Courtyard Philadelphia Malvern.

In a United States Securities and Exchange filing dated 2 De-cember, Apple REIT said it secured a loan with a balance of US$7,893,592 for the purchase of the 127-room property. The annual interest rate on the loan, which matures 1 October 2032, is 6.50%.

The loan, which predates Apple REIT’s purchase, is secured by the hotel and provides for monthly payments of principal and inter-est on an amortized basis.

The real property tax rate for the hotel is 2.2% for the 2010 tax year, representing the tax period from 1 July 2010 through 30 June 2011 and the calendar year. The real property tax for the property was US$123,252.

Apple REIT executives did not return a call for comment. A representative of the Chester County (Pennsylvania) Department of

Assessment said she was unable to immediately identify the seller of the property.

The hotel’s occupancy dipped to 57% during 2009 from 59% in 2008. Revenue per available room also declined to US$80 from US$94 in 2008. Apple REIT said average daily rate for the property is within the range of US$199-US$209.

Contact:Apple REIT CompaniesPhone: 804-344-8121E-mail: [email protected]

Highlights:■ Interest rate on the loan is 6.50%.■ The loan’s balance is US$7,893,592.■ The real property tax rate for the hotel is 2.2%.


MINNEAPOLIS—A string of high-profile properties have changed hands during the past year and real estate investment trusts have led the charge.

Most notable are the 821-room Hil-ton Minneapolis, which DiamondRock Hospitality Company bought in June for US$155.5 million, and the 140-room Grand Hotel Minneapolis, which Pebblebrook Ho-tel Trust bought out of foreclosure in August for US$33 million.

Of the six sales so far this year, four were in the upscale chain-scale segment and above.

“There is a relative premium for quality these days, especially as buyers recalibrate and re-price risk,” said Hans Detlefsen, man-aging director of HVS Global Hospitality Services in Chicago.

REITS are naturally in a position to accom-modate this premium, he added. They have the capital which allows them to be all-cash or low-leverage buyers. “This is an advantageous position because direct lenders have increased their loan requirements and decreased their loan-to-value comfort level,” he said.

Prices per room for higher-quality assets in the market ranged between US$150,000 and US$250,000, Detlefsen said.

“The Hilton (Minneapolis) and the Grand Hotel (Minneapolis), earlier this year, transacted at prices that are consistent with the interpretation that buyers are looking for quality and willing to pay decent prices now on a per-room basis,” he added.

The Grand Hotel MinneapolisPebblebrook was able to come in on the low end of that per-room basis because the Grand Hotel Minneapolis was in foreclo-sure. The REIT paid US$33 million for the property, which included two tenants—a fitness club and restaurant—that will pay more than US$1 million each year in net rent, according to Ray Martz, the company’s CFO. Assuming a net rent cap rate in the 7%-8% range, the value of the health club and restaurant is somewhere between US$12 million and US$15 million, meaning the value of the 140-room hotel component is

closer to US$20 million, or just more than US$140,000 per key. The previous owner paid closer to US$350,000 per key.

Forward 12-month projected net operating income for the property is between 6.1% to 7.6%.

Though he declined to give further prop-erty-specific details, Martz said this purchase fits with Pebblebrook’s broader acquisition criteria:■ unlevered internal rates of return,

typically in the 10%-12% range on a five-year basis;

■ cash yield average in the 7%-8% range on a five-year basis; and

■ 20%-50% discount-to-replacement cost.Kimpton Hotels & Restaurants assumed

management of the property.

The Hilton MinneapolisThe biggest sale of the past year was that of the Hilton Minneapolis, an 821-room prop-erty located in the heart of downtown. Dia-mondRock in June purchased the property from Haberhill LLC and Starwood Capital Group for US$155.5 million.

Though DiamondRock declined to com-ment for this article, a company news release revealed the hotel was expected to generate US$13.3 million of earnings before inter-est, taxes, depreciation and amortization for full-year 2010. The purchase price represents an 11.7 times multiple of forecasted 2010 EBITDA.

Upon purchase of the property, Dia-mondRock forecasted full-year 2010 revenue-per-available-room growth of 7.5% with EBITDA expected to increase 19% compared to 2009. The hotel forecasted EBITDA of US$8.4 million for the period from 16 June 2010 (the purchase date) to 31 December 2010. The hotel’s 2011 group booking pace is up 13% compared to the same time last year.

Market outlookThe Minneapolis-St. Paul, Minnesota-Wis-consin market experienced strong recovery thus far in 2010. October gains rose to the

tune of 7.3% for occupancy, 1.7% for aver-age daily rate and 9.2% for RevPAR, accord-ing to research firm STR.

Year-to-date through October, occupancy was up 9.1%, ADR dropped slightly by 0.8%, and RevPAR was riding high with 8.2% growth. Perhaps most important, total rooms sold increased 9.7%.

“We felt very good about the downtown Minneapolis demand and felt that there was definitely another opportunity that we should take on considering our learn-ing curve on the market,” said Russ Urban, senior VP of development for HEI Hotels & Resorts, which purchased in June what was formerly the Hotel Minneapolis Doubletree from Hempel Properties for US$21 million.

HEI has since dropped the Doubletree affiliate, reflagging the 224-room property as part of Marriott’s Autograph Collection. The company also owns the Westin Minneapolis.

“It’s pretty much been a steady performer,” Urban said of the downtown market. “… We think the market has developed into a nice mix of restaurants and sporting venues and other things that would allow for a weekend attraction as well as the normal midweek biz travel.”

HEI expects an IRR near 20% for the property, Urban said.

HVS’ Detlefsen expects continued growth in the transactions market, “with a gradual progression down the quality spectrum being considered by investors as the super high-quality assets get purchased and cash holders continue to seek assets to buy.”

That growth will occur when lenders begin offering “higher loan-to-value ratios to a broader group of buyers because this will expand the pool of investors bidding on properties,” he said.

The Grand Hotel Minneapolis was purchased in June by Pebblebrook Hospitality Trust for US$33 million.

Market report:

REITs active in MinneapolisBy Patrick Mayock | Features Editor HotelNewsNow.com


Property Location Rooms Price Date Previous Sale Price

Previous Sale Date

Avg Annual Appreciation

Hilton Checkers Los Angeles 188 46,000,000 01-Jun-10 18,500,000 3-Jun-00 9.5%

Westin Chicago River North

Chicago 424 165,000,000 31-Jul-10 120,000,000 1-Dec-00 3.3%

Fairmont Copley Plaza

Boston 383 98,500,000 19-Aug-10 46,000,000 10-Feb-03 10.6%

Hotel Roger Williams

New York 180 90,000,000 06-Oct-10 26,500,000 15-Dec-03 19.7%

Sir Francis Drake Hotel

San Francisco 417 90,000,000 21-Jun-10 50,000,000 30-Jun-05 12.5%

Westin Philadelphia

Philadelphia 294 145,000,000 01-Sep-10 89,000,000 9-Nov-05 10.7%

Sofitel Lafayette Square

Washington, DC 237 95,000,000 01-Mar-10 81,000,000 6-Mar-06 4.1%

Hilton Minneapolis & Towers

Minneapolis 821 155,500,000 16-Jun-10 92,000,000 22-Mar-06 13.2%

Embassy Suites Philadelphia Center City

Philadelphia 288 79,000,000 01-Sep-10 70,000,000 31-Oct-06 3.2%

Sofitel Philadelphia

Philadelphia 306 87,000,000 02-Dec-10 61,000,000 8-Jan-07 9.5%

Hotel Appreciation UpdateSTR Analytics research of hotel appreciation in major markets


Hotel Data DashboardTransaction Development Finance


PerformanceEconomy


Martz said Pebblebrook tracks three data points as far as return expectations:

■ five-year unlevered returns of 10%-12%;

■ discounts to replacement cost of 25%-50%; and

■ five-year average cash yields of 17.5%.

The company as yet has no specific goal in mind for the number of 2011 acquisitions. “We’re opportunistic investors,” he said.

Lending termsFor those real-estate investors that do approach the debt market, there is capital available. But lenders appear hesitant to grant anything beyond five-year terms, said Andy Stewart, a principal with Argosy Real Estate, which plans an initial close of its Argosy Real Estate Partners II, LP acquisition fund for early 2011. The fund eventually will invest between US$60 million and US$80 million in premium-branded, select-service and extended-stay hotels.

Lenders also are seeking 55% loan-to-value ratio. “It’s an evolving market,” he said.

Depending on deal size, several sources contacted for this story reported interest rates of approximately 5%-7%.

Narrowing bid/askBid/ask spreads have narrowed considerably, REIT sources said, and sellers have begun to take what multiple REIT executives deemed a more reasonable assessment of their properties’ values.

In the prospectus for its US$1-billion initial public offering, Carey Watermark Investors pointed to declining values as providing strong buying opportunities.

“We believe that the current distress in the credit, financial and real property

markets presents us with opportunities to acquire distressed or undervalued real estate assets,” the prospectus reads. “As a result of this distress, many commercial property owners have been unable to meet (debt service) obligations, loan maturity obligations or arrange financing for scheduled purchases.” In a phone interview,

Carey Watermark’s CEO Michael Medzigian declined to elaborate more specifically about the topic of valuation and instead referred to the prospectus.

Doug Vicari, CFO of Chesapeake Lodging Trust, expects cap rates in the mid to upper single

digits in 2011. Yield on earnings before interest, taxes, depreciation and amortization should be approximately 8% next year.

Chesapeake’s benchmark for internal rate of return is 11%-12%, he said. Vicari declined to be specific about how many deals the REIT might close next year, but said “the pipeline looks strong.”

The REIT on 10 November announced its definitive agreement to acquire the Homewood Suites by Seattle Convention Center for US$53 million, or US$272,000 per room. The property, which AEW SBCO Seattle LLC acquired for US$29.3 million from Fan Pier Land Company in 2006, has a 2011 taxable total value of US$21,491,400, according to the King County Department of Assessments. The taxable value is down 12.9% year-over-year.

“We’re working on a number of deals in our pipeline … We’re focusing on the top 15 markets and particularly the markets on the coastlines are key markets,” Vicari said.

Michael MedzigianCEO of Carey Watermark

REITs from page 1

BETHESDA, Maryland—Pebblebrook Hotel Trust on Friday said it secured a US$52.5 million loan with Goldman Sachs Commercial Mortgage Capital.

The loan has a fixed annual-ized interest rate of 4.88% and a term of five years. The InterContinental Buckhead Hotel in Buckhead, Georgia, is collateral for the loan. Pebble-brook acquired the property in July for US$105 million.

Proceeds from the loan will be used to fund acquisitions and for general corporate purposes. Officials at Pebblebrook and Goldman Sachs did not immediately return calls for comment.

Following completion of the financing, the REIT said it has US$143.6 million of debt outstanding at a weighted average annual interest rate of 3.78%. There is no out-standing balance on Pebblebrook’s US$150-million senior secured facility.

Goldman Sachs Commercial Mortgage Capital is a wholly owned subsidiary of Goldman Sachs and a com-mercial mortgage lender. Terms for the company’s fixed-rate products, according to its website, are:■ loan amounts of US$15 million, though smaller

amounts might be considered;■ target loan-to-value of 70% (75% LTV is considered

also);■ target 9.5% debt yield based on underwritten cash

flow; lower debt yield also might be considered;■ fixed-rate pricing of 4.25% to 5.75%, varying by loan

term, asset and leverage characteristics;■ maximum 30-year amortization schedule; and■ five- and 10-year loan terms.Pebblebrook owns eight hotels comprising 2,300 rooms.

Contact: Pebblebrook Hotel Trust CFO Ray Martz: 240-507-1330. Goldman Sachs Commercial Mortgage Capital Phone: 1-800-710-7616

Deal spotlight: Pebblebrook Debt FinancingBy Shawn A. Turner | Finance Editor Hotel Investment Barometer

Highlights:■ The InterContinental

Buckhead Hotel is serving as collateral for the loan.

■ Following completion of the financing, the REIT has US$143.6 million of debt outstanding at a weighted average annual interest rate of 3.78%.

■ The loan was secured through Goldman Sachs Commercial Mortgage Capital.


CHICAGO—Although Aimbridge Hospi-tality has no plans to flip three Hyatt Hotels it purchased last month in a joint venture with Area Property Partners, the ownership/management company will dump US$15 million back into updating the properties.

Aimbridge and Area bought the three hotels outside of Chicago—in Lisle, Deer-field and Rosemont—for a total of US$51 million from Hyatt Hotels Corporation. Robert Burg, executive VP and COO for Aimbridge, said the properties have been underperforming because they have capital needs that hadn’t been addressed.

“We love these markets; we still think there’s an appropriate amount of demand there,” he said. “We were able to get them at a good price. Not a steal; it was a good deal for both parties involved.”

Burg said owning the three nearby assets will enable the operators to initiate some cost synergies. He said the purchase is a long-term investment as Aimbridge has “no immediate thoughts of flipping these at all.”

Burg said Area was the lead investor in the deal that required some equity and some

debt, but would not disclose how much each company chipped in. At press time, the only available public records show Aimbridge was issued the deed to Hyatt Lisle for a cost of US$9.8 million. The value on the property was listed at US$4,152,790, and US$14,700 in taxes were paid at the time of purchase. Hyatt paid US$262,857 in property taxes on the Hyatt Lisle last year.

The purchase gives Aimbridge ownership in five Hyatt properties total and that number will soon be six as Aimbridge plans to convert a Crowne Plaza in Tulsa, Oklahoma, to the Hyatt Regency Tulsa on 1 January 2011.

“We’re ecstatic about our relationship with Hyatt—it’s something we plan on continuing in the future,” Burg said. “We have quickly become one of Hyatt’s largest franchisees.”

Although the deal did require some financing, Burg said Aimbridge is in the

position to perform all-cash deals if neces-sary. The Dallas-based firm partnered with Argonaut Private Equity in June to raise US$100 million and boost its acquisition capability.

However, Burg said he does see the credit market loosening. “In a general sense, outside of these transactions, we do see the lending market opening up,” he said.

Aimbridge to pump US$15m into recently purchased HyattsBy Jason Q. Freed | News Editor Americas HotelNewsNow.com

Sheraton Delfina Santa Monica, Calif.Highlights:■ Aimbridge and Area bought the three hotels for a total

of US$51 million.■ Owning three nearby assets will allow for some cost

synergies.■ Aimbridge was issued the deed to Hyatt Lisle for a cost

of US$9.8 million.

The Hyatt Lisle

PHILADELPHIA—Argosy Real Estate is planning the initial close of its new acquisition fund in early 2011.

The company plans to raise between US$200 million to US$250 million for Argosy Real Estate Partners II, LP. Between US$60 million and US$80 million of that amount will be used to invest in hotels in the United States. The rest will be put toward residential land and multifamily investments.

The fund is seeking premium-branded, select-service and extend-ed stay hotels, Argosy principal Andy Stewart said. He anticipates the fund will have raised between US$100 million and US$150 million at the initial close. Also, Stewart said the fund will closely examine secondary markets, such as Denver, in its search for deals.

Founded in 1990, Argosy specializes in opportunistic and value-added real estate investments, according to the company’s website. The company has invested more than US$150 million through eight previous funds.

Argosy said it is targeting deals that are in the range of US$5 mil-

lion to US$15 million per transaction and plans to acquire two or three hotel properties each year. Investments will be made via joint ventures.

The fund specifically is looking for distressed opportunities.

“We’re an opportunity fund,” he said. “We’re looking for assets with a reposi-tioning potential; assets that are in need of recapitalization.”

Steward said the firm sees hotels’ ability to reset rates on a nightly basis as being a hedge against inflation. He also is optimistic over the sector’s operating prospects. And speaking more broadly, a reversal in the currently sour employment picture will aid Argosy’s deal hopes.

“Things have turned the corner, we believe,” he said. “There’s an opportunity to acquire assets at a discount to replacement cost.”

Argosy to Invest US$80m in HotelsBy Shawn A. Turner | Finance Editor HotelNewsNow.com

Highlights:■ The fund’s total

size will be between US$200 million and US$250 million.

■ Premium-branded, select-service hotels in the U.S. are being targeted.

■ Argosy plans to make between two or three acquisitions per year.

Hotels for Sale


Comfort InnErlanger, KentuckyExcellent suburban Cincinnati location, Off I-75 with easy airport access; four stories; interior corridor; solid occupancy growth in 2010; available at $3,575,000. www.Mumfordcompany.com

Days Inn City CenterSpokane, Washington$2,750,000Seller Financing Possible with $500k down. 10.35% Cap on 2009 Income and 16.84% ROI on Seller Financing. Quick Close Possible. 89 nicely appointed rooms in a variety of configurations offering Wi-Fi, a business center and other business amenities appealing to economy-minded travelers. Strong financial history and ongoing capital improvements make this turn-key property an outstanding option for investors. Income up $60k over last year on year-to-date figures! Property well located with excellent I-90 freeway visibility and access. Prime location in the heart of bustling downtown Spokane near Convention Center and area attractions! Contact Crystal Investment Property at (503) 530-1316 to schedule tours or email [email protected] to discuss. www.crystalip.com

Eagle Cap ChaletsJoseph, Oregon$1,950,00013.66% Cap and 39+% ROI on actuals with SBA loan terms. Includes management and reservations!! Fantastic family-style resort property featuring a nice mix of 34 cabins, motel units and “chalet” condos plus meeting space, indoor pool and spa, espresso bar and deli and mini-golf course. Owners/Managers quarters on-site. Modern amenities such as outfitted computer center in well maintained lodge setting surround by natural beauty. Well situated near Wallowa Lake, the sky tram and the popular tourist community of Joseph in the area known as the Swiss Alps of Oregon. Excellent quality of life property. Contact Crystal Investment Property at (503) 530-1316 to schedule tours or email [email protected] to discuss. www.crystalip.com

Inn at Morro BayMorro Bay, CaliforniaThe 98-room Inn at Morro Bay is a coastal hideaway surrounded by natural beauty. It sits adjacent to the 18-hole Morro Bay Golf Course and features over 9,000 square feet of meeting space, a

full-service spa and two restaurants with panoramic views of Morro Bay and Morro Rock. The rooms, decorated in a French country theme, feature a private balcony or patio. The Inn at Morro Bay occupies an irreplaceable location (with huge barriers to entry) with primary frontage along the Pacific Ocean. It is priced substantially below replacement cost and being offered unencumbered by brand and management company. The property sits just inside the 4,000-acre Morro Bay State Park in San Luis Obispo County, halfway between San Francisco and Los Angeles. www.atlashospitality.com

Keizer Renaissance HotelSalem, Oregon area$4,975,000Seller Financing via LEASE OPTION possible! 10.11% Cap and almost 19% Cash Return with 20% down on actual 2009 income. Independent full-service hotel with part-time restaurant and lounge, full conference center, 86 updated rooms, interior corridor with extensive amenities including indoor pool, saunas and exercise room. 3.65 acres with ample parking located a few minutes off interstate highway and near center of downtown Metro Salem area. Fast growing area with attractive upscale development nearby. Adjacent to complimentary businesses, highly respected on-going

business operation and excellent, easily visible location. Carpet in common areas replaced in August, 2010. Contact Crystal Investment Property at (503) 530-1316. E-mail: [email protected]

LakeStar Lodge - Deep Creek Lake ResortMcHenry, Maryland$3,750,000Four Seasons of opportunity are available in one of Deep Creek Lake’s most desirable waterfront properties. The LakeStar Lodge includes 20 newly renovated Lakefront rooms and a three bedroom vacation suite, all within minutes of Wisp Mountain Skiing, restaurants, shopping and other tourist attractions Every waterfront room provides beautiful views of Deep Creek Lake and the Wisp Ski Slopes. Included in this sale is 2.75 acres of vacant land with very flexible “Town Center Zoning” which would allow for the development of Hotel, Retail or Condo. Please contact Charlotte Seale (202) 625-4156 or Bill Moyer (202) 625-4153 at Donohoe Real Estate Services. www.donohoe.com

Lodgian Full-Service HotelsVarious LocationsThe Lodgian offering includes eight full-service lodging facilities. The portfolio includes the 193-room Crowne Plaza Pittsburgh Airport (PA), 295-room Crowne Plaza Phoenix Airport (AZ), 244-room Doubletree Kenner (LA), 133-room Holiday Inn Surfside Beach (SC), 138-room Holiday Inn Meadowlands (PA), 303-

room Holiday Inn Strongsville (OH), 187-room Holiday Inn Monroeville (PA) and 159-room Radisson Phoenix Airport South (AZ). The Seller has placed the asset in a REIT ownership structure for Federal Income Tax purposes. The sales transaction will be structured as a sale of the REIT entity. Prospective purchasers are urged to consult their own tax advisors regarding such a transaction. Broker Information: Geoff Davis Phone: 303-267-0057 ext. 102 Fax: 303-267-0105 Email: [email protected]

Marriott portfolioFort Collins, ColoradoThe Marriott portfolio includes two select-service (Courtyard and Residence Inn) lodging facilities and one full-service (Marriott) lodging facility comprising a total of 454-guestrooms located in Fort Collins, Colorado. Key features of the properties include relatively stable lodging market, strong franchise affiliations, profit margin control opportunities and assets that are unencumbered by management. Broker Information: Geoff Davis. Phone: 303-267-0057 ext. 102. Fax: 303-267-0105 Email: [email protected]

Following are listings of hotels for sale. The listings were supplied by hotel brokers and include a link to the brokers’ website. For information regarding inclusion in this listing, please contact Jeff Higley at [email protected].


NEW YORK—Don’t write off the commercial mortgage-backed securities market just yet.

The CMBS market is likely to stabi-lize next year, Huxley Somerville, group managing director of Fitch Ratings’ United States CMBS group, said dur-ing a structured finance webinar hosted by Fitch in December.

The overall outlook for CMBS in the hotel industry is stable and CMBS is on the teetering point of making the transition from a down market to one that is beginning to heat up again.

“2010 was a turnaround year for hotels,” he said. “The rate of new defaults is slowing.”

The Fitch Loan Delin-quency Index has begun to drop after increasing steadily between January 2009 (when the default rate was less than 2%) and September 2010 (when the default rate was more than 8%.)

CMBS danger remainsStill, the default rate remains elevated. Cumulative defaults for all fixed-rate CMBS increased by 112 basis points to 10.6% through the end of the third quarter, Fitch said in an earlier CMBS update. The 1,452 defaults seen during the third quarter this year nearly equals 2009’s full-year total of 1,464.

The defaults that do occur are likely to be those over-leveraged loans, Som-merville said. There is also greater risk for lower investment grade-rated CMBS loans and for floating-rate loans on hotel properties.

It will be difficult for hotels with CMBS debt to refinance next year, even for those hotels with 90% occupancy, he said.

“Properties that are highly levered or have high levels of debt, they will have no trouble becoming delinquent in 2011,” he said.

The CDO perspectiveCollateralized debt offerings also are showing signs of resurgence as several recent transactions have closed, according to Fitch senior director Beth Nugent, who heads up the U.S. Structured

Credit group. That activity level should not come

as a surprise as CDOs tend to perform better during periods of high default, she said.

Fitch last month said increasing loan extensions caused a modest drop in U.S. commercial real-estate loan CDO delinquencies in October. Delinquen-cies dropped to 12.8% from 12.9% in September.

There were a total of 58 loan exten-sions in October, an increase when compared to the 2010 monthly average of 37 extensions.

CMBS to stabilize in 2011By Shawn A. Turner | Finance Editor HotelNewsNow.com

Michael MedzigianCEO of Carey Watermark

Highlights:■ The rate of new CMBS defaults is

showing signs of slowing.■ Properties that are highly levered or

have high levels of debt could be in trouble as refinancing will be difficult to come by during 2011.

■ CDOs also are showing signs of life.

Highlights:■ There appears to be

a loose correlation between price per room and RevPAR change.

■ Relatively high discount in price per room in New York, Boston and San Francisco.

■ Many buyers indicate the inability of many acquisition funds to compete for cash-flowing assets in primary urban locations.

With the flurry of deals occurring in many of the major markets, there is always a question of performance versus price. Looking at the deals that have occurred during the past several months, the current price of assets, particularly those in primary urban locations, appears to be relatively strong, not only in comparison to the perceived value in 2009, but even to so-called inflated values exhibited at the market peak.

Driven by real estate investment trusts acquiring assets in order to invest available funds, our discussions with many buyers indicate the inability of many acquisition funds to compete for cash-flowing assets in primary urban locations. Some buyers have voiced that perception prices are already ballooning to the prior peak levels despite the fact that revenue has not yet returned.

In reviewing transactions in the four highest revenue-per-available-room cities (New York, Boston, San Francisco, and Washington, D.C.), it is clear per-room values are strong. However, in comparison to the prices garnered at the market peak, three of these markets illustrate a relatively high discount. The table below shows the median price per key change along with the RevPAR variance between 2010 and 2006-2007 for these markets.

As illustrated by the table, the median price per key for asset trades in New York, Boston and San Francisco are well below the median price per room achieved at the market peak. Looking at the comparison of value change and RevPAR change, there appears to be a loose correlation.

Of the four markets, Washington, is the only one that shows an apparent increase in value during the past few years. Washington was also the most resilient of these markets during the downturn with its RevPAR only 9% below what it attained at the height of the market.

In contrast, New York City transactions indicate a value decline of 41% while its RevPAR is still 22% below its peak. Nevertheless, the significant upward trend in room-revenue growth for Manhattan in recent months is likely to have an impact on the pace of value recovery as well.

Median Price/ Room2010 2006/ 07 Value Δ RevPAR Δ

New York $276,000 $470,000 (41%) (22%)Boston 257,000 313,000 (18%) (11%)San Francisco 216,000 268,000 (19%) (15%)Washington 401,000 345,000 16% (9%)

Price per room still trails 2006-2007 in some marketsBy Steve Hennis | Director STR Analytics

reits to capitalize on buying opportunities · minneapolis—a string of high-profile properties...

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