LODGING M&A: HIGHER PRICING, FLAT VOLUMES

Firmer UUP/Luxury pricing in a steady M&A environment - positive for HOT

 

SUMMARY


Volume slips but pricing higher

UUP/LUXURY hotel transaction volume slipped a little in Q2 but we did not include 7 deals that did not disclose a transaction price. However, average price per key rebounded nicely due to multiple sales in tier one cities.

 

Based on recent comments from REIT management teams and capital markets participants during 2Q, we believe there is an increased willingness by banks and capital markets (CMBS) to lend to buyers of upper upscale and luxury lodging assets.  As a result, we expect the number and dollar volume of transactions in these segments to increase in the second half of 2014.  The environment bodes well for HOT and it's continued move to an asset light strategy.

 

There were a number of sizable portfolio transactions that were announced during 2Q and will close later this year - including American Realty Capital Hospitality Trust's agreement to acquire the Equity Inns lodging portfolio of 126 hotels totaling 14,934 rooms across 35 states for $1.925 billion from subsidiaries of W2007 Grace I, LLC and WNT Holdings LLC - both of which are indirectly owned by one or more Goldman Sachs Whitehall Real Estate Funds.

 

Intercontinental 

7 Intercontinental hotels changed hands in Q2.  There are 181 Intercontinental hotels worldwide. 

 

Upscale most active

We counted 16 upscale hotel transactions in Q2, up from 9 transactions in Q1.

 

Several large midscale/upscale acquisitions

  • Starwood Capital bought TMI Hospitality (180 hotels)
  • American Realty Capital Hospitality bought Equity Inn Hotels (126 hotels)
  • Accor bought 97 hotels from Moor Park Capital Partners
  • Apollo mgmt bought 18 hotels from Ivanhoe Cambridge
  • Black Sapphire C Cleveland bought 13 hotels from Concord Hospitality

 

UPPER UPSCALE/LUXURY TRANSACTIONS

  • Q2 2014 worldwide hotel transactions (UUP & Luxury brands) volume was close to $2.4 billion, lower than the $2.5 billion seen in Q1 2014 but slightly higher than Q2 2013's $2.3 billion.
  • The number of US luxury/UUP hotel transactions (where price was disclosed) was 11 in Q2 2014 - 1 less sequentially and year ago
  • The number of non-US luxury/UUP hotel transactions (where price was disclosed) was 6 in Q2 2014 – 5 less sequentially and 2 less year ago.
  • UUP
    • US average price per key (APPK) was $469k, above its 6 quarter average of $263k.  
    • International APPK was $315k, above its 6 quarter average of $293k.
  • Luxury
    • US APPK was $519k in the US, above its 6 quarter average of $432k
  • As usual, private equity and REITs were very active 

 

COMPANIES OF NOTE 

 

Starwood (HOT)

  • Sold Aloft Tucson University for $127k APPK
  • Sold leasehold of Park Lane Hotel 

Sunstone (SHO)

  • Bought Wailea Beach Marriott for $599k APPK

RLJ Lodging Trust (RLJ)

  • Sold Holiday Inn Austin NW for $70k APPK
  • Sold Courtyard Portland City Center and Embassy Suites Irvine Orange County for $219k APPK

FelCor (FCH)

  • Sold Doubletree Suites hotel-Dana Point and Embassy Suites BWI Airport for $121k APPK
  • Sold Doubletree Suites Charlotte for $178k APPK

Hersha (HT)

  • Bought Hilton Garden Inn Midtown East for $416k APPK
  • Bought Parrot Key Hotel & Resort for $676k APPK

LaSalle Hotel Properties (LHO)

  • Sold Hilton Alexandria Old Town for $378k APPK
  • Bought Hotel Vitale for $650k APPK

Pebblebrook (PEB)

  • Bought Prescott Hotel for $306k APPK

Strategic Hotels (BEE)

  • Sold Marriott London Grosvenor Square for $876k APPK

LODGING M&A: HIGHER PRICING, FLAT VOLUMES - L

 

Our detailed transaction database is available on request.


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