Hotel Transactions Are Coming Back—Maybe

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Sometimes the best evidence is anecdotal, and this may be one of those times. While most people in the hotel industry still believe financing is extremely difficult to find and, as a result, the hotel transactions market is at a standstill, there's a lot of buzz lately that at least some deals are getting done.

In the last week alone, we reported on these transactions:

• FelCor's completion of its $99-million purchase of the Fairmont Boston Copley Plaza,

• The acquisition of two Holiday Inns near the Denver airport by Stoneridge Capital Partners,

• Chatham Lodging Trust's 13th acquisition since April, a $32-million deal for an Embassy Suites north of San Diego,

• Fairwood Capital's purchase of an Embassy Suites at the St. Louis airport and

• RockBridge Partners' purchase of a 197-room Four Points by Sheraton in Ann Arbor, MI.

And yesterday, Host Hotels & Resorts, the largest lodging owner in the business, said it plans to dive back into the public markets to raise up to $400 million to buy more hotels. Jones Lang LaSalle Hotels recently re-forecast its projections for the size of the 2010 transactions market. The firm now says hotel sales should total between $4 billion and $4.5 billion this year, up by nearly $1 billion over its previous estimate.

“The uptick in investment volume gained considerable momentum with deal volumes marking a rise for three consecutive quarters,” says JLL Managing Director Art Adler. “The outlook for hotel transactions is increasing favorable.”

This flurry of deals doesn't mean you'll probably be able to go out and get an 80-percent loan to buy that Hilton Garden Inn you have your eye on. In fact, much of the current deal flow is fueled by cash-rich lodging REITs who must consummate transactions to meet their investor obligations. But, like with most things in business, as the number of deals begins to increase, lenders will slowly develop a greater affection for the lodging market again, opening the money spigot that might even be wide enough for you to get funding for that Hilton Garden Inn. But don't bet it will be an 80-percent loan. Those days are over for a while.

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