Portfolio sellers— led by Innkeepers USA Trust—may be creating oversupply in some markets where offering to closing ratios have widened, says RCA. These imbalances can reflect recent strong sales but more often point to distress, as many large portfolios were purchased near the top of the market with excessive leverage.
Also according to RCA, cap rates year to date through April are highest in the Southwest and in tertiary Western markets. For example, Houston properties yielded a 9.2% in April, and San Antonio hotel sales saw 10.5% average cap rate. Tertiary Western markets, which saw 46 hotel sales, recorded a 9.4% average cap rate.