encountered. However, those investment banks that entered the
industry in order to advantage of a hot market are now out, leaving
the borrowers who may have depended on them high and dry.
“There were many new entrants in the lending market in the
last five years. They didn’t have a history of being large-scale
lenders and many of those loans are experiencing higher default
rates,” Hanson says. “Those lenders’ experience has been less
favorable, and the overall exposure of those organizations to real
those in the Americas, primarily the US.
“We are still on pace in terms of deal signings, in fact, we’re
slightly ahead of last year, so that piece of it continues to go
along well,” the Atlanta-based executive states. “However, we
are watchful of the headlines out there and we monitor the
pipeline to see whether construction starts are down. To date,
according to the data that we have, they aren’t. Of the hotels that
are planned to open in 2008, 70% have already been financed.”
“Midscale properties use
more modest construction
loans from local banks.”
JIM ANHUT
INTERCONTINENTAL HOTELS GROUP
“From an industry-wide
perspective, the term
‘overbuilding’ doesn’t apply.”
BJORN HANSON
PRICEWATERHOUSECOOPERS
estate-based lending, including residential, has caused those
institutions to either reduce their allocation to real estate, including hotels, or basically depart from the market.”
As senior vice president of franchise development for
InterContinental Hotels Group, Jim Anhut says that he is not
aware of any projects in his company’s development channel
that have dropped out due to financing difficulties. Globally,
the firm has 1,675 hotels in its pipeline, with about 1,300 of
Rockefeller Group Development Corporation is pleased
to announce the following acquisitions in Arizona:
Gilbert Gilbert
152 acres 47 acres
Warner and Germann and
Recker Roads Mustang Roads
2 million s.f. office 500,000 s.f. office
and industrial/flex and industrial/flex
Paul Sieczkowski, SIOR, Phil Breidenbach, SIOR,
Rob Martensen,CCIM Colliers International
represented the properties above.
Chandler
22 acres
Chandler Boulevard/101
For office buildings
Tucson
21. 5 acres
Tucson Airport Commerce Center
411,000 s.f. industrial/flex
Peter Douglas, SIOR, Rob Glaser, SIOR PICOR
represented the transaction.
Tom McCormick, SIOR
Senior Vice President and
Regional Development Officer
tmccormick@rockgrp.com
rockgroupdevelopment.com
Anhut says that financing is available to its franchisees from local
banks, which could also be a function of the type of projects that are
in IHG’s pipeline. “Midscale properties, which are the girth of the
pipeline for us, use more modest construction loans from local
banks,” he says. “To our knowledge, the availability of credit
through those banks remains good. Some of the terms may be
changing slightly, but they are still at historically favorable levels.”
In the current restrictive lending climate, upscale, midscale without food and beverage and economy properties are easier to finance due to their lower
capital requirements. According to Lodging
Econometrics, 25% of the rooms in the
pipeline are classified as midscale without
F&B and 20% are in the upscale category.
That is where developers are focusing
because funds are available, Ford finds.
“Lending is much tougher today, but it’s
nonexistent on big projects,” he relates. “On
these middle-sized projects, lending is available. It’s much tougher, much more selective and requires much more equity—but it’s
still there.”
Consequently, upscale and midscale
without F&B will both see a 4% jump in supply growth this year, according to PwC. The
economy segment is in line for a supply
uptick of 1.3%. Conversely, the forecast for
midscale with F&B is for a 2.2% drop in
incoming inventory.
The luxury and upper upscale segments are also on track for supply
increases of 2.5% and 2.1%, respectively.
That could be considered somewhat surprising in light of today’s lending climate,
but as Hanson points out, those larger
properties may have been planned two or
three years ago when rates and occupancies justified them. Also, the lenders who
entered the industry at its peak favored
urban projects, which tend to be more
luxury and upper upscale in flavor.
“Many of them also include residential
