From New York to Tokyo, Jones Lang LaSalle Hotels steers its clients through complicated hotel transactions.
In a global marketplace where business cultures differ from country to country, Sydney-based Jones Lang LaSalle Hotels is bridging the culture gap. Whether a company wants to conduct a transaction in its home country or overseas, it often needs assistance in navigating the complicated terrain of hotel dealmaking. With its global network of offices, the company helps clients buy and sell property, raise capital, manage assets, form strategic plans and acquire assets.
The hotel investment company started as Jones Lang Wootton Hotels in Sydney in the early-1980s. It wasn't long before the company decided to become a global investment services group. By the early-1990s, the company had expanded to London and New York. By 1996, Jones Lang Wootton ventured into Asia, opening JLW TransAct in Singapore. The different units operated as separate companies until March 1999, when Jones Lang LaSalle Hotels was formed as a result of a merger of JLW TransAct in Asia, JLW Hotels in Europe, Jones Lang Wootton Investment Sales & Finance in the United States and LaSalle Partners in North America. With the mergers, the company has become the world's largest hotel financial advisory group. In the past two years, Jones Lang LaSalle's transaction portfolio has included the sale of 17,027 hotel rooms for $2.2 billion.
As part of its strategy, the company continues to expand into new markets. Earlier this year, Jones Lang LaSalle added offices in Miami and Tokyo. Due to its network of offices, the company can find investors efficiently for its clients, says Arthur Adler, managing director, North America, in Jones Lang LaSalle's New York office. "What sets us apart is that we are a fully-integrated, international company," he says. "We share staff, we exchange people and we are constantly shifting people."
Putting the property on the block Jones Lang LaSalle has a detailed procedure for helping clients sell property. In the early stages of the transaction process, the company provides underwriting services and conducts research on the property. Later, the company identifies global investors who might have an interest in buying the hotel. Jones Lang LaSalle personally contacts these potential buyers on behalf of the client and sends preliminary information, including an offering memorandum containing management background, financialand other information. Advisers also walk investors through inspections of properties.
Due to its global profile, marketing property is one of the company's major strengths. Each region has experts responsible for ensuring that an offering gets marketed in that region, and, if needed, they can obtain assistance from an overseas office. "That is the way we get international exposure to the property," says Adler. At the appropriate time, a call for offers for the property is extended, followed by the collection of written letters of interest or bids on the property. "We are very thorough in terms of checking sources of capital and financing to see where the equity is coming from," says Adler. "We do research on the buyers to see who they are, what they do and what their capital resources are." After those steps, the company selects a buyer for the client. The transaction process takes an average of four to six months to complete.
Adapting to different cultures Being an international consulting firm presents the challenge of helping clients with different business structures around the world. "Most of the time we spend with our clients is helping them come to terms and understand these differences," says David Gibson, managing director, Asia-Pacific region, in Jones Lang LaSalle's Brisbane, Australia, office. He says in Asian-Pacific markets such as Malaysia and Indonesia, foreign investors need more information and more time to complete transactions. "The primary service clients look for is knowledge, and the way we help them with that is to give them a really good understanding of what is available in the marketplace and what investment opportunities are out there," says Gibson.
Every market presents different challenges. In Europe, the lack of financial data in the transaction market is the biggest hurdle for Jones Lang LaSalle. "The lack of information contributes to the volatility in the European market," says Arthur de Haast, managing director, Europe, in Jones Lang LaSalle's London office. The number of transactions in the European markets was about 20% less than in the United States last year. Sellers give very little transaction information."
He adds that investment opportunities are far more limited because fewer properties are available for sale and acquisition. Because of the lower number of properties on the market, de Haast says Jones Lang LaSalle's fastest-growing service in Europe is asset management.
In April, Jones Lang LaSalle provided financial services for the $318 million BAA PLC Airport Hotels Partnership, Europe's first limited partnership of hotel portfolios consisting of eight airport hotels. The company also arranged the sale of the 388-room Hyatt Regency Paris, which is adjacent to the Charles de Gaulle Airport, to Holland-based Hospitality Europe BV from Paris-based TOA Invest France SARL. Jones Lang LaSalle arranged the sale of the Marriott Hamburg, a four-star, 277-room hotel in Hamburg, Germany, from Sweden-based Bilia AB to-based Strategic Hotel Capital.
U.S. market retrenches In Europe, Jones Lang LaSalle's main service is asset management, arranging transactions is the company's chief focus in the United States. Those services include selling property, financing properties or portfolios, debt financing, raising equity, and bringing in joint venture partners for companies or chains.
Adler says investors are not buying as many properties as they were two years ago, when REITs were aggressively seeking properties to add to their portfolios. "I think a lot of companies are retrenching," says Adler. "It's a more difficult market than it was two years ago. Now, it's more of a thinking man's market." There are fewer properties on the market than a few years ago, and sellers are more realistic about their pricing expectations, he says. In another trend, REITs are partnering with private capital to create institutional buyers, he adds.
One of the major transactions Jones Lang LaSalle arranged recently is the sale of the Sutton Hotel, an 84-room luxury hotel and townhouse in New York City. The property was sold by Hong Kong and Shanghai Hotels to New York-based Glenwood Management. In July, the company arranged the sale of the 258-room Holiday Inn at the Park near Disneyland amusement park in Anaheim, Calif. New Age Anaheim LLC purchased the property from Anaheim-based 1221 South Harbor Boulevard Inc.
The company also helped Atlanta-based Lend Lease Real Estate Investments Inc. sell the 372-room Hyatt Richmond Hotel in Richmond, Va., to the Procaccianti Group, a Cranston, R.I.- based hotel management company. In another Jones Lang LaSalle transaction, the 280-room Hilton Greensboro hotel in Greensboro, N.C., was sold by Washington, D.C.-based LaSalle U.S. Realty Income & Growth Fund to Fort Mitchell, Ky.-based Columbia Sussex Corp.
Growth markets Each of the regions in which Jones Lang LaSalle conducts business has standout markets. The main growth markets in Europe are Germany, Spain, France and the United Kingdom, says Peter Barge, company chairman and CEO, who works out of the Sydney headquarters. "At the moment, Europe is definitely on a major upswing," he says. "The economy is firing and the financial industry is booming."
The growing markets in the Asia-Pacific market are divided into corporate and resort properties, notes Gibson. The busiest markets for corporate hotel properties are Sydney, Melbourne, Tokyo, Hong Kong and Singapore. The most active resort markets include Bali and the Gold Coast of Australia. In the United States, the best markets for hotel growth are New York, Chicago, Boston, Miami, Los Angeles, Washington, D.C., and Hawaii, says Adler.