Blackstone closed on the sale of the 424 room Miami Beach Resort to Chetrit Group for $117 MM ($276K

Nationally, RevPAR had a stronger big bear california lodging than expected first quarter of 2013 despite the Easter holiday which held down the March numbers. As predicted, most of the growth is coming from ADR, as occupancies approach or exceed the peak levels for this cycle. Most sectors had a strong start to the second quarter, enjoying big bear california lodging the easy year over year comparison, although the trend has moderated in the past couple of weeks. Boston, as would be expected, slowed down due to the impact of the April 15 bombing big bear california lodging and subsequent business disruptions and we will watch carefully if this affects results during the traditionally strong graduation period and summer season. New York is also showing a slowdown but it is really returning towards more normal levels after a huge first quarter that was driven in part by Sandy-related activity. Washington is showing surprising resilience in the face of the sequesterization, although occupancy is starting to slip, and San Francisco has been exceptionally strong over the past few weeks. Other top performing markets in recent weeks have been smaller areas such as Atlanta and Minneapolis.
The Upper Upscale segment has been the biggest beneficiary big bear california lodging of the Easter calendar shift in the second quarter. Group business is traditionally non-existent during big bear california lodging the week leading up to Easter, which also usually includes Passover. It came back very strongly in the first two weeks of April, with 40 to 50% pickup compared to last year. It has since fallen back, averaging about a 5% decrease for each of the last three weeks. Group booking pace has generally been reported as steady to moderately increasing after a very slow start to the year.
As usual, the public company higher-end brands have generally big bear california lodging followed the national big bear california lodging trends, although there are a couple of anomalies. Hyatt, for example, reported relatively weak results, citing the impact of renovations and loss of group business, although they said that their group booking pace is starting to pick up. The Westin brand also looked a little weak, but there were no direct comments from management or the analysts. Group shifts big bear california lodging may have impacted this brand as well.
The performance of the hotel industry keeps defying the malaise of the overall economy. Demand is still growing; supply is still over the horizon, so no worries, right? That seems to be the consensus of industry experts big bear california lodging at most of the conferences this year, although a few contrarians are beginning to see dark clouds among the silver linings.
The chart on the following page illustrates how the current cycle compares with the previous ones. Although the percentage increases in GDP and employment have been within the normal range during this recovery phase, the drop leading in to the current cycle was much deeper, so the economy has not yet fully dug itself out of its hole. Most hotel industry experts feel that, to use the favorite baseball big bear california lodging analogy, the recovery is clearly in the middle innings, but there is some question as to how long the game is going to last. The consensus is that by 2017 or 2018 things will turn, as supply will inevitably catch up at the same time demand goes south, as has happened in most previous cycles. This has disturbing implications for investors who are currently buying hotels and looking big bear california lodging to exit in the traditional 4 to 5 year time frame. Some REIT s have already remarked that they see an end to their acquisition strategy as soon as next year, and several private equity players have indicated that they are not raising any new funds at this time but are just filling out their existing ones and/or cashing out some of their previous hotel acquisitions.
The short term concerns continue to be the effect of government spending cuts, as they directly affect certain markets but also may constrain non-government travel. big bear california lodging Even though the furloughs of air traffic controllers were averted, TSA workers and customs officials are still subject to sequesterization, as are potential closures or reduced hours at national parks. International visitors might also be a little more cautious, as undoubtedly there will be more visible security following the Boston attack, which would add to the perception that the US is not really welcoming to foreign visitors.
New supply also worries some analysts, as despite near record low construction levels over the past couple of years, it is definitely trending upwards (about 600 new properties are expected to open in 2013 vs. 420 last year according to Smith Travel). Lenders are definitely starting to get back into the construction loan business, especially for select service properties in gateway cities, and several cities, including Norfolk VA, Ft. Lauderdale FL and Austin TX have recently announced new convention center hotel initiatives.
Despite these concerns, many industry analysts and public companies are upping their forecasts for the year, or at least narrowing the band, driven by the strong first quarter performance and the assumption that the government cutbacks big bear california lodging will mitigated. RevPAR is now generally seen as growing in the 6 to 8% range for the next couple of quarters, about 50 to 100 bp higher than previously thought. It is expected, however, to slow modestly in the 4 th quarter when the comparisons are tougher. It is also expected that group will continue to grow at a slower rate than transient, as the volume of business already on the books is relatively flat compared to the prior year all the way through the first quarter of 2014. This trend could be reversed if there is an increase in business confidence big bear california lodging in the economy, big bear california lodging but it could also go the other way if there is more uncertainty. There have been mixed signals over the past few weeks, including slower than expected GDP growth and retail sales, big bear california lodging and some are becoming nervous as to whether the housing market recovery can be sustained. This is an important factor in driving consumer confidence, which influences vacation decisions.
Transaction volume is continuing to be fairly strong in top markets like New York, New Orleans and Hawaii. The price per room for some of these properties is definitely getting close to, if not above, replacement cost, which bolsters the argument for new builds. So far this year, there have not been any newly announced major portfolio or M A transactions; in fact one such deal (HPT s proposed acquisition of the European operator NH Hotels) recently fell apart due to problems with one of NH s participating lenders. A list of all major transactions over the past few months is included on the following page.
GIC, the government of Singapore big bear california lodging sovereign wealth fund, finally closed on its purchase out of bankruptcy of the CNL resort hotel portfolio, which included three Waldorf=Astoria branded properties (Grand Wailea in Maui, La Quinta Resort in the Palm Springs CA area and the Arizona Biltmore in Phoenix) and the Claremont Hotel in Berkeley CA. Total consideration was approximately $1.5 billion. Hilton will retain management on the Waldorf s, and Pyramid Hotel Group will continue to manage the Claremont. KSL, who had owned these hotels in the past was appointed asset manager for these hotels.
The land under the 1,300 key Milford Plaza in New York was sold for $325MM to a private buyer. Rockpoint and Highgate were the sellers, who will still own the building subject to a new 99 year lease. Highgate, who is one of the largest hotel managers in New York, will retain management
Sunstone announced that they will purchase the Boston Park Plaza, a 1,053 room property, for $250MM, or $237K per key. Considerable additional investment will probably be needed. The hotel was originally built in 1927 and has seen numerous changes in brand and ownership since then. This transaction is scheduled big bear california lodging to close in the third quarter; Highgate will also retain management here.
Hersha closed on the newly constructed Hyatt Union Square (NY) for $101MM ($567K/key); this was a turnkey deal from developer McSam Hotel Group who has done many similar deals in lower Manhattan over the last couple of years.
Starwood sold both of its W New Orleans hotels to Chesapeake REIT for a total of $93.5MM (average of $188K per key). Starwood will retain management on the smaller one (97 keys) but the larger one (410 keys) may be converted to Starwood s Le Meridien brand and franchised with a different operator. This is part of an overall Starwood strategy to shed up to $3 billion of real estate while keeping the properties in their system. They executed several similar transactions last year in Chicago, New York and Los Angeles but in those cases retained management, as they do not presently franchise their W brand.
Although not in the US, this is still a significant deal- Intercontinental Hotel Group sold the Intercontinental London Park Lane to a group of Middle big bear california lodging Eastern investors for the equivalent of $457MM, a price of over $1 million per key
Blackstone closed on the sale of the 424 room Miami Beach Resort to Chetrit Group for $117 MM ($276K per key). Chetrit also bought some other properties in New York earlier this year including the Flatotel which will be converted to residential use.
Public REIT RLJ acquired the Humble Oil Building Complex in Houston, containing a Courtyard, a Residence Inn and residential units that they intend to convert to a Spring Hill (all Marriott brands). Acquisition cost was $79.5MM or $151K per key.
Hyatt bought the historic Driskill big bear california lodging hotel in Austin TX for $85MM. The $450K per key price seems high, but it was confirmed by multiple sources. Seller was Lowe Enterprises, not to be confused with the Loews Hotel chain
Pebblebrook recently completed a $97MM issuance of 6.5% preferred stock. The offering was led by Raymond James and Citigroup. They also closed on a $50MM loan secured by a mortgage on the Affinia Hotel Dumont in New York. The loan is non-recourse and is at a 3.14% fixed rate, interest only, for a term for five years. Lender big bear california lodging is PNC Bank.
Host Hotels issued $400MM of 3.75% uns