Deal volumes increased significantly in 2010, as equity-rich buyers got back in the game, according to the report. “Transaction volumes gained momentum as the year progressed and are on track to total $10.5 billion in 2010—nearly five times the prior-year levels when including the Extended Stay America acquisition,” says Arthur Adler, managing director and CEO-Americas for Jones Lang LaSalle Hotels. The lion’s share of activity, 95% took place in the U.S., he adds.
Transaction pace is expected to notch up another 25% in 2011, as the volume climbs to $13 billion. “Due to additional capital raises, REITs are expected to continue to be dominant buyers in 2011, and private equity groups and institutional investors will increasingly join the mix as leverage levels and terms improve,” says Adler.
The expanded depth of active buyer groups along with a greater number of lender-driven sales are the key drivers behind the increasing number of deals, he notes. The firm’s forecast refers to asset transactions and does not count note and loan sales, restructurings that require fresh equity and deed-in-lieu transfers.
Big-ticket sales are back and due to the abundance of equity in the marketplace and slowly easing debt markets, the number of transactions above the $100 million mark is expected to tick up further in 2011.
Capital flows from Middle East
“One of the re-emerging sources of capital in 2011 will be the outflow of capital from the Middle East. Having faced dislocation at home over the past 18 months, Middle Eastern investors will again vie for prime acquisition opportunities in East Coast markets,” says Adler. Asian high net worth investors, which accounted for 8% of purchases by volume in the United States in 2010, are expected to continue their deal making, primarily in the western U.S.
But other regions of the Americas are expected to surge with potential hotel deals.
“South America will offer tremendous investment opportunity over the next decade. Investors’ focus will be on new