(Save the date: RealShare L.A.comes to the Hyatt Regency Century Plaza in Los Angeles, CA on March 27, 2013)
LOS ANGELES-Hunter Hotel Advisors exclusively tell GlobeSt.com that they expect to see a sharp increase in the number of West Coast hotels changing hands in 2013. “Thanks to projected healthy RevPAR growth in the high single digits in 2013, we expect to see the number of hotel transactions in most major West Coast markets to increase at the highest rate since the peak of the last hotel real estate cycle in 2007,” explains firm president Teague Hunter.
Hunter points out that “Despite a multi-year rebound in most markets on the West Coast and neighboring states, we still have a ways to go to reach that peak, creating good market conditions for both buyers and sellers.” Owners are seeing values increase to a point where their hotels can attract acceptable prices, Hunter explains, while buyers, he says, can benefit from a projected multi-year rebound.
And according to Danny Givertz, a SVP at the firm, who heads up the company’s West Coast activities, listing and transaction activity have accelerated since December. “Investors are more confident in the future, which is translating into more hotel transactions,” he says. “Reflecting this outlook, we have seen cap rates move downward from around nine last summer to the mid-sevens for quality properties.”
Givertz expected to see both single assets and portfolios come to market. Equally important, he says “we believe the volume of premium hotels, which mostly have been on the sidelines over the past few years, will increase noticeably.”
Looking into 2013/2014 Givertz made the following observations about a number of Western markets:
- Oahu, Hawaii—“This market is white hot,” he says. “With occupancy at 88.5% last year, its operating results were second only to Manhattan.”
- Other highly active markets—Givertz said that the Bay Area, Los Angeles, San Diego, Denver, Portland and Seattle will be quite active over the next two years. “Oakland also has seen healthy activity.”
- REITs—The West Coast, particularly California, remains highly attractive to REITs which resumed activity in the past year. “Look for increased Wall Street investment in 2013 and beyond,” Givertz predicts.
- New Construction—“There isn’t a great deal of development activity today, but we expect to see construction start to return, especially in Southern California, which has been stagnant the past five years,” he notes.
“Older hotels in strong locations that will benefit from repositioning are in high demand,” Givertz says. “Owners seek these deep turn-around opportunities, especially for conversions to premium-branded select-service hotels. Financing is becoming less of an issue. Our capital markets division says lenders remain conservative, but that they are working closely with them to obtain funding at historically attractive rates.”