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The second-longest recovery period in history endures, with a national unemployment rate at an 18-year low and robust consumer confidence across most sectors. As a result, the U.S. economy continues to exhibit very strong growth. Gross domestic product (GDP) is forecast to rise as much as 3% this year with relatively mild inflation. Thus far, interest rate increases by the Federal Reserve System have had little effect on commercial real estate lending. Rising debt costs have been somewhat negated by strong NOI growth, and the tremendous amounts of equity chasing yield creating downward pressure on underwriting returns.

It appears however that headwinds may be in the offing.  The escalatory nature of America and China’s trade relationship represents a potential catalyst for upward pricing of fundamental risk.  Furthermore, while the impact of the new tax code on the economy has yet to be realized, in the short-term GDP growth is anticipated to remain strong, placing upward pressure on inflation and interest rates. Additionally, during the recent past the yield curve, the difference between short-term and long-term bond rates, has flattened to a razor-thin margin. Many economists believe there exists a strong possibility that the curve will invert this year, creating an abnormal condition where long-term rates are lower than short-term rates, and one that has served in the past as a reliable indicator of an impending recession.  Finally, with the current Presidential administration, domestic political turmoil appears unabated.

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Daniel Lesser

Daniel H. Lesser, President & CEO of LW Hospitality Advisors LLC (LWHA), brings more than 35 years of expertise in a wide range of hospitality operational, investment counseling, valuation, advisory, and transactional services. He provides services to corporate, institutional, and individual clients as well as public agencies on all facets of hospitality real estate including: litigation support and expert testimony, site evaluation, highest and best use analysis, appraisals for mortgage, acquisition, and portfolio management, workout strategies, operational analysis, development consulting, property tax assessment appeal evaluations, economic impact studies, fairness opinions, deal structuring, and negotiation of management and franchise agreements. Mr. Lesser had been retained in connection with a broad variety of lodging assets throughout the Americas, as well as in Europe, the Middle East and Asia.

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