Are you wondering whether now is the right time to invest in distressed hotels? Many investors are thinking along these lines. The U.S. economy is in recovery and the hotel industry has come out of the recession phase. Since prices might rise in the near future and discounted prices could be a thing of the past, investors are determined to make the most of the present hotel market - especially in major centers like New York City.
Hotel Sales – Past and Present
During 2007, hotel sales priced at $5 million (and above) reached $80 billion. By 2009, sales of hotel properties had dropped to $2.5 billion. In 2010, hotel sales brought in $13.2 billion. During the first quarter of 2011, hotel sales came to $3.4 billion year-to-date through March.
Despite the economic recovery, however, buyers can choose from a wide selection of distressed properties. In fact, several distressed hotels have not showed up yet in the market. The signs are encouraging for investors in hotels especially NYC properties.
Capital markets are showing recovery. As well, an improvement is evident in hotel operating fundamentals. More Hospitality sale transactions and an increase in construction activity are positive signals.
Cautious Hotel Investors
Of course, several investors are proceeding with caution. Potential hotel buyers are uncertain about government policies including taxes and the budget. If there is not a plentiful supply of distressed properties, sellers can expect higher prices.
Investors do not want to make mistakes; they remember the reality and effects of earlier recession periods. Generally, lenders adopt an indecisive strategy.
Wall of Debt
The "wall of debt" exerts a huge influence in this situation. Several investors will wait for various loans to mature in the coming years. They think that owners will be unable to finance and, therefore, could decide to sell at discount prices.
Obviously, owners do not want to be burdened with huge losses. Actually, many owners expect to refinance or wait and sell at a higher price. They are pinning their hopes on a continuing economic recovery and improvement in fundamentals. Owners aim for higher values.
“Bad boy” guarantees (owners are held liable for a loan if a company files for bankruptcy) have resulted in fewer bankruptcies – and a decline in the number of distressed properties. Although varied trends might discourage investment, previously granted loan extensions will expire at a certain point. Lenders will have to work out the loans.
In that instance, owners will be forced to sell properties or return keys to lenders. Often owners realize that stabilization is expensive and risky while a sale might be the better option. Since lenders prefer not to be in the real estate game, more distressed properties should be entering the marketplace.
Buyers who invest in distressed properties must practice "due diligence." Investors examine purchases from every angle. Buyers must think about future values. As well, investors know that there is always a potential risk in any business transaction. They must consider capital structure, operations, location, market demand, and several other issues.
Hotel Market New York City
- The Carlyle Hotel Parent Company Rosewood Acquired by New World Hospitality
- On the Ave Hotel Sold to The estate of Lehman Brothers Holdings
- Paramount Hotel Sold to Aby Rosen
- Sofitel Hotel Invested in Winthrop Realty Trust
- Hilton Long Island Sold for $32 Million to The Dow Hotel Company
- Park Central Hotel Purchased by LaSalle Hotel $405.5 MM $434 Per Key
- Manhattan Leads U.S. Hotel Transactions
- NoMad Hotel New Life
- Four Points Midtown Times Square Sold to The Gehr Group $460k Per Key
- Algonquin Hotel may be sold to Cornerstone Real Estate Advisers
- Crackdown on NYC Illegal Hotels
- New York City - Perfect Place to Invest In Hotels
- 15 Little West 12th Street Sold to Epic LLC
- Morgans Hotel Group Sells Mondrian LA
- New York City is No. 1 for Business (AGAIN)
- The Moderne Hotel to Undergo Complete Redesign - Boutique Hotel Experience to the Heart of Manhattan
- RLJ Lodging Trust Plans IPO
- You need To Know This about REITs and Hotels Right Now
- Gansevoort International Plans
- The Carlyle Hotel - a Luxury with History in NYC
Hotel Real Estate News NYC
- Determined Investors Choose Distressed Hotels
- Radisson Lexington Hotel in Midtown for $335 million to DiamondRock
- Hersha Hospitality Trust - Healthy Future for NYC Hotels
- Cooper Square Hotel for Sale
- DiamondRock Hospitality Group Delivers First Quarter Report
- MetLife ClockTower A Possible Hotel Conversion
- Hersha Hospitality Announces 1st Quarter Results
- Luxury Hotels on Fully Recovery ! Not Fast Enough
- Hyatt Hotels Doubles first quarter profit
- Bryant Park Hotel $89 million mortgage Issue