Once in a Lifetime Buying Opportunity

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As Richmond McCoy told me last week, this is a “historic buying opportunity in the hospitality space.” McCoy, the CEO and founder of UrbanAmerica, a prominent real estate private equity firm focusing on urban centers, isn't alone with those feelings.

Jeffrey Fisher, chairman and CEO of Chatham Lodging Trust, recently said almost the same thing. “This is the best buying opportunity in my lifetime,” he told H. Lee Murphy for an upcoming story on the lodging industry in our sister publication, National Real Estate Investor.

Just yesterday, these transactions were announced.

• Churchill Downs agreed to buy Harlow's Casino Resort & Hotel in Greenville, MS for $138 million. CDI is funding the purchase with cash and the company's credit line.

• Full House Resorts agreed to buy the Grand Victoria Casino & Resort in Rising Sun, IN for $43 million (using $20 million in cash).

• DiamondRock Hospitality acquired the 169-room Hilton Garden Inn Chelsea New York City for $68.4 million (an all cash purchase for the REIT).

Many of the sizable acquisitions are from all-cash buyers like REITs. Pebblebrook Hotel Trust is a prime example, with recent purchases of the InterContinental Buckhead Atlanta for $105 million, the Sir Francis Drake in San Francisco for $90 million and the Monaco Washington DC for $74 million.

With RevPAR rising faster than expected—Smith Travel Research has revised its 2010 forecast three times with more optimistic projections each time—buyers are once again becoming bullish on lodging assets. HVS, as Stephen Rushmore details in his most recent story, projects in many U.S. markets hotel values will recover to the record levels of 2007 by 2013.

McCoy, whose firm was just honored as Hilton's developer of the year, said he's looking for more opportunities in the lodging world after such success with his first hotel acquisition, the Doubletree Resort Orlando – International Drive.

The challenges, of course, are finding the capital to take advantage of the discounted prices and having the patience to hold the asset for more than a year or two while the industry returns to its previous levels of success.

But if you can, now may be a once-in-a-lifetime opportunity.

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