ALIS Update: A Cloud Over Hotel Transactions

The big story at this year’s Americas Lodging Investors Summit is no story. Sure, everyone here in Los Angeles says they’re positive about the near term; yet every pronouncement of optimism comes with a but: Hotel fundamentals look good, but macroeconomics could derail recovery. Hotel transactions may pick up this year, but debt financing is still scarce. Billions in CMBS debt comes to maturity this year, but many of those assets may not come to market.

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“There’s a lot of equity out there, but my concern is that the debt markets are currently schizophrenic,” said Dave Johnson, president and CEO of Aimbridge Hospitality, on a panel of private equity company executives, a group of investors that partially plugged the transactions gap in the middle of last year when lodging REITs backed away from the market.

Aimbridge, like some of the other companies represented on the panel, look to buy “broken assets,” which they can they recapitalize and reposition as need to add value. On a later panel, executives from four leading hotel REITS said they have little appetite for lodging acquisitions, at least for the first part of the year. Richard Smith, president and CEO of FelCor Lodging Trust, said his firm will be a seller of assets in 2012 and use the proceeds to reduce debt and shore up its balance sheets. One panelist, Ashford Hospitality Trust President Douglas Kessler, is hedging his bets.

“We’ll be opportunistic in our approach to possible acquisitions this year,” said Kessler. Ashford took a big bite last year with its $1.3-billion acquisition of the 17-hotel Highland Hospitality portfolio through a joint venture with Prudential Financial. “When there is less noise about possible risks, they’ll be more certainty and confidence in the market and capital will rotate back into the market.”

Another question many speakers tackled is whether the wave of CMBS debt maturing this year will prompt either forced or unforced sales of distressed hotel assets. Ed Walter, president and CEO of Host Hotels & Resorts, seemed to sum up the consensus among many ALIS speakers and attendees.

Continue reading at LHOnline.com.


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