While REITs and many private equity buyers remain quiet, opportunities exist for other investors to take advantage of a lodging market ripe with promise.
“There is a small window of opportunity for you,” said Teague Hunter, president of Hunter Realty Associates, to an audience of mostlyowners and investors at a breakout panel he was moderating Monday at the Hunter Conference in Atlanta. “Dan, Sam and Russ are limited now.”
Dan Hansen, CEO of Summit Hotel Properties; Sam Reynolds, SVP of acquisitions for Apple REIT; and Russ Urban, SVP of acquisitions &for HEI Hotel & Resorts were three panelists on the “Buying and Selling Hotels Today” panel, and also three of the most active buyers during the past couple years. Since the stock market tumbled last summer reigniting fears of another downturn, REITs and other private equity players like HEI have remained largely quiet.
With stock prices climbing and the economy holding steady, the panel didn’t sound as if all would remain quiet for much longer. D.J. Rama, the fourth panelist and president of JHM Hotels, said there was a very short window for entrepreneurial and non-institutional buyers to take advantage of a market not bubbling over with cash-rich players like his co-panelists. “We control our own destiny,” he said, “but it’s a very short window.”
Hunter, the moderator of the panel, said now was the time to buy and build in second and tertiary markets. “These guys will eventually get everything in the major markets and when the machine is going again, they’ll be back in secondary and tertiary markets.”
The panel was hard-pressed to pin down current capitalization rates, but in general agreed they were somewhere between 8% and 10%, depending on the market. Hansen, of publically held Summit, said they were buying at between 8- and 10-caps in top 50 markets. Hunter said 9-caps were roughly the average, with 10-plus being found in more secondary cities and closer to 8 in major markets like Atlanta.
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