According to the latest report from Real Capital Analytics US hotel sales in the first two months of this year were up 41% on the same period in 2012. According to the firm's hotel trends report the largest increases were in portfolio sales, with a dozen sales totalling $2.3 closed in the first two months of 2013. Another $2.1 billion in portfolio sales is pending according to the firm.
While such an increase in sales has to go in the positive news column, the dominance of portfolio sales could arguably be a sign that investors are making their exit from the market. However, for every seller there is a buyer, so it could also be a sign of increasing investor appetite to be in the market - the prices portfolios sell for is the deciding factor in this.
The RCA report put the increase in sales down to increased investment from equity funds and the private sector, which made up for a drop in activity from REITs. According to the report the increase in private-sector activity was driven by increased access to finance both from banks and CMBS lenders.
Based on preliminary data, RCA believes total sales figures for the first quarter of 2013 will be far above 2012, reflecting shifts taking place in the hotel buying market. Although public REITs slowed down their acquisition activity in 2012, there was more buying by equity funds and private investors.
Private investors purchased $6.7 billion worth of hotels, up 26 percent from the previous year. Non-listed REITs are included in the private sector category and accounted for about 20 percent of the 2012 total. Equity funds continue to buy hotel portfolios, especially in the limited service sector.
The 41% growth in January and February is a continuation of the growth from last year, when over $5.4 billion of hotels were purchased, up 41 percent over 2011. There has been a significant shift into secondary markets, where almost two thirds of the acquisitions were made in 2012.
Indeed only listed hotel REITs made fewer purchases last year. Acquisition volume of listed REITs totaled $3.6 billion in 2012, down 47 percent from the prior year and, at 18 percent, their market share was the lowest since 2009.
Hotel acquisitions by institutional investors rose 15 percent in 2012, compared to 2011. More than half of their acquisitions were in primary markets such as Manhattan, Los Angeles and San Francisco. Their acquisition cap rates averaged 6.4 percent compared to the overall average of 7.9 percent as institutional buyers have targeted the highest quality properties.
One major seller is Starwood, which this week announced plans to sell as much as $3 billion worth of its hotel portfolio.
European Hotel Investment Activity - Traditional and Emerging Market Performance
- Thursday 11 April 2013