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There are a tremendous amount of 2012 maturities in the hospitality market, particularly in CMBS—and Mark Owens, managing director of Ackman-Ziff’s hospitality group, says he’s surprised that borrowers aren’t being more proactive. He’ll be talking about this and more atBisnow’s second annual New York Hotel Summit tomorrow morning at the Marriott Marquis. (Last chance! Register here.)
Mark Owens, managing director of Ackman-Ziff's hospitality group
These borrowers have been slow to look at financial options (like refinancing) ahead of time, he says. “There is a common thought that the lenders will extend their loans,” he explains. Also, lenders aren’t seeing enough quality product to deploy their capital—and it's not just balance sheet lenders, but also in the securitized market. The lack of product has also hit the equity side, since owners are trying to hold on and the substantial rebounds justify avoiding putting assets up for sale. ("Substantial rebounds" were always the reason our moms said we couldn't have a yard sale.) “This is one of the reasons we’re seeing competitive prices for quality assets,” he says, pointing to transactions like HNA Property Holdings’ $130M purchase of the Cassa Hotel and Residences near Times Square, which sold for $787k/key.
LW Hospitality Advisors CEO Dan Lesser
And worldwide investors like HNA are the reason why now’s the best time to plug capital into value-add assets, says LW Hospitality Advisors CEO Dan Lesser, who’s also speaking at the event. These investors—especially from France, Germany, Spain, Israel, Russia, and China—are looking for top-quality US hotel properties. (At least they have something to talk about while sitting around the UN Security Council.) Here's the upside for them: Risk-adjusted returns, a hedge against inflation, diversification, and stability, since general economic recovery is a "when," not "if," question. On the debt side, billions of dollars of loans will mature over the next two years, Dan says, and it'll be impossible for all owners to refinance. They'll need rescue capital, plus money for upgrades.
Tribeca Associates partner Mark Gordon
Global demand is also coming from travelers50 million people(looking for a warm bed, a hot meal, and a photo with the Naked Cowboy) visited New York City last year, which will continue for the foreseeable future, says Tribeca Associates partner Mark Gordon, who’s also speaking. With this comes new development. “There’s certainly been a meaningful supply increase,” he says, and there are several four and five-star hotels under development, which the NY market hasn't experienced in some time and will also continue for the next few years. Additionally, hotels are being traded at strong valuations—in some cases in excess of replacement cost—from a wide range of buyers, including REITs, which historically haven’t been very active in the New York hotel market, he says.
Hospitality Chat
Want to hear more? Join Mark, Dan, Mark, Sonnenblick’s Robert Sonnenblick, The Chartres Lodghing Group’s Maki Nakamura Bara, Gemini Real Estate Advisors’ Will Obeid, RLJ Lodging Trust’s Jeffrey Dauray, Square Mile Capital’s Nolan Hecht, Arent Fox’s Kimberly Wachen, and Troutman Sanders’ Sonia Kaur Bain as they talk about the hottest trends shaping NY hospitality (sign up here!). And Dan is also speaking at BLIS, our first-ever national hotel investment summit, which will be held May 9 and 10 in Washington, DC. But we know your burning questions about hospitality can't wait. To whet your information whistle, we're hosting a Twitter chat on Thursday, March 29 from 3pm to 4pm with Dan on the state of the lodging market. Participating is simple: Log in to Twitter, and direct your questions to @lwhadvisors using the hashtag #HospitalityChat. If only pro formas were this easy.