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PHOT
ETEL
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PERSPECTIVES
EDITORIAL ADVISORY BOARD
Arthur Adler
Managing Director & CEO, Americas
Jones Lang LaSalle Hotels
A Quarterly Supplement
MAY 2008
Sumner A. Baye
President/Partner
International Hotel Network LLC
ews watch
Monty J. Bennett
President & CEO
Ashford Hospitality Trust
Lower Deal Volume Expected in ’08
Last year signaled a high-water mark for transactions in the US lodging industry.
But with the sea change in the credit markets, the best brokers can hope for this
year is to match 2007’s volume.
Hotel Brokers International tracked 736 sales transactions last year, up from
693 in 2006. The per-room price also increased, rising to $117,000 from
$110,000. However, the outlook for 2008 is cloudy.
Statistics from the first quarter show that while the absolute number of trades is
down from the same period a year earlier, the total dollar value is up about 20%,
says Brandt Niehaus, HBI’s current president and president of Louisville, KY-based
Huff, Niehaus & Associates. That indicates, he says, that larger deals that were originally targeted for a fourth-quarter ’07 close were delayed until the first quarter as
buyers scrambled to get new financing after the conduit market collapsed.
In the coming months, cap rates are expected to go up while values go down,
he predicts. “Buyers are not willing to take a risk that there is still upside in the
property. That puts a downward pressure on price,” the executive explains. “Cap
rates will go up, even if the economy stays steady.”
Jones Lang LaSalle Hotels researchers envision a slower 2008. In 2007, US
transaction volume reached a peak of $45 billion, 38% more than in 2006,
largely due to several mega-deals. Yet JLL Hotels predicts that with debt less
plentiful, funding huge portfolio deals or even larger single-asset trades will be
more difficult.—Maria Wood
James E. Fitzgerald
Managing Director, Hotel Investments
Principal Real Estate Investors
John Hamilton
SVP, Acquisitions & Business Development
Pyramid Advisors LLC
Joel W. Hiser
CEO
Horwath Hospitality Investment Advisors
Kirk Kinsell
President, Europe, Middle East & Africa
InterContinental Hotels Group
Robert Koger
President
Molinaro Koger
Mark Lanspa
Vice President
Goldman, Sachs & Co.
Kimpton Launches Third Acquisition Fund
Kimpton Group Holding LLC, the parent company of Kimpton Hotel &
Restaurant Group LLC, has launched its third acquisition fund. KHP Fund II LP
closed last month with a war chest of $246 million, which the San Francisco-based sponsor intends to parlay into $800 million worth of hotel purchases over
the next three years.
Despite the wobbly economic situation, Michael Depatie, Kimpton’s president
and CEO, says now is a good time to raise funds for acquisitions, especially in
the boutique segment where Kimpton plays. “There seems to be a lot more
demand than supply,” he says. Depatie asserts that this latest vehicle is the only
discretionary fund dedicated to boutique hotels.
Athough Depatie suggests that the credit market disruption will create opportuni-
ties on the buy side, he says the fund will consider ground-up development, con-
versions and adaptive reuse opportunities as well.
Two projects earmarked for KHP Fund II—the
redevelopment of the historic Architects Building
office property in Philadelphia into a 234-room
Hotel Palomar and a new-build, 250-key Hotel
Palomar in Chicago—fall into those categories.
In total, the fund intends to collect about 10
hotels with average equity investments of $25
million, Depatie says, with a hold period of seven
Hotel Palomar in Philadelphia to 10 years.—Maria Wood ◆
Greg Marcus
SVP, Development
Marcus Corp.
Gary Mendell
Managing Member
HEI Hospitality
Nelson F. Migdal
Shareholder
Greenberg Traurig LLP
Lori Raleigh
Executive Director
ISHC
Rick Swig
President
RSBA & Associates
Donald W. Wise
Global Hospitality Industry Managing
Partner
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HOTEL PERSPECTIVES IS PUBLISHED IN THE JANUARY, MAY, AUGUST
AND NOVEMBER ISSUES OF REAL ESTATE FORUM.
EDITORIAL INQUIRIES: Maria Wood, mwood@remedianetwork.com
