NEW YORK CITY-The $3.9-billion buyout that lifted Extended Stay out of bankruptcy also helped the hotel investment sales market recover this past year from the doldrums of 2009. Even without that massive portfolio deal, though, 2011 is poised to do even better, with Jones Lang LaSalle Hotels forecasting up to $13 billion in transaction volume in the Americas, up nearly 25% compared to a projected $10.5-billion tally for 2010.

And while the Extended Stay buyout may prove to be the largest transaction of its kind for awhile, in one way it’s typical of the current market. “We’re definitely seeing more portfolio activity in the marketplace” whether it’s asset or note sales, Arthur Adler, New York City-based managing director and CEO-Americas for JLLH, tells GlobeSt.com. “It may come through a lender, an owner or jointly. We’re seeing more consensual sales between owners and lenders.”

Adler points out that this doesn’t mean, though, that the portfolio will trade as a portfolio. JLLH will take bids on portfolios in their entirety or as pieces, and the outcome depends on what is best for the client, he says.

This past November, JLLH and partner Real Estate Disposition LLC ran what Adler says was “the largest non-performing hotel note auction,” with nearly $500 million of non-performing debt. It comprised 62 notes and two REO properties from five different special servicers and two regional banks. “Thirteen of the assets traded as a group” while the others traded as “onesies, twosies, threesies,” Adler says. “We are seeing more of that, where investors are looking for scale.”

He says “the vast majority” of that $13-billion total this year will come from transactions on domestic assets. “The US real estate market in general, and lodging in particular, is the most liquid in the world, let alone the Americas,” Adler says.

Outside North America, much of the action will be centered on development, especially in Brazil. “There’s 190 million people in Brazil and multiple cities with well over one million people, and they really don’t have a critical mass of quality hotel inventory, particularly outside of Rio de Janeiro and Sao Paolo,” says Adler.

Asked whether distress will still be a prime motivator for sellers, Adler responds, “Sellers are motivated by the fact that hotels are trading at very low cap rates. Even though it’s below replacement costs and below historic peak valuations,” which was the case in ‘10 and will be again this year, “on a purely cap rate basis, hotels are trading at fair value from the sellers’ perspective.”

He notes that sellers may have many different reasons to sell. A private equity fund may require liquidity, for example, or “you may have debt maturing where the property is worth the debt. That’s one way to exit the debt: sell the property and repay the loan.” Alternately, institutional owners such as REITs may be looking to sell an asset and redeploy capital to get something with a higher yield.

Having said that, Adler adds, “we’ll continue to see deals being worked out between owners and lenders that will result in a transaction. It may be a sale of the asset, it may be a sale of the note or it may be a restructuring that requires new equity to come in.”

In the lodging sector as elsewhere, ’10 was marked by bifurcation, as investors focused on institutional quality assets and gateway markets. “What was driving that was the dominance of the REITs in acquiring hotel properties,” says Adler. “Fully 60% by dollar volume and 40% by number of assets traded in 2010 were bought by REITs.”

This year, he says, “there will be a bit less of that. As liquidity starts to free up, particularly on the debt side, it allows private equity to come back into the market. And they’re looking for yield wherever they can get it, so that’s going to open up the markets a bit more in other parts of the country.”