Hotel & Motel Management - May 5, 2008 - (Page 28)

28 On the Block FINANCING H&MM May 5, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Silver lining in bleak hotel sales market IN THE details Midscale, economy deals getting done The credit crunch and the effects of the residential housing bust have dampened lending for hotels and all types of commercial projects signiﬁcantly. Lower- and mid-tiers funded Local banks back sales Foreign investors eye luxury By Christine Blank CONTRIBUTING EDITOR done deals The Mumford Co. served as exclusive adviser to Norcal Management Co. in the sale of the Super 8 in Alamogordo, N.M., to a private individual. Molinaro Koger structured the sale of the Richmond (Va.) Marriott Hotel to Apple REIT Seven on behalf of The Procaccianti Group. The 18story, 401-room downtown convention center hotel will retain the Marriott ﬂag. The property will be managed by White Lodging following the sale. In mid-2007, CB Richard Ellis Hotels sold The Lodge & Spa at Cordillera in Edwards, Colo.Currently, buyers might struggle to get funds for luxury assets. hile hotel owners are having trouble obtaining funds to buy luxury properties in the current capital market, some midscale and economy properties still are being funded. “We have seen a complete shift in the transaction world. The portfolios and individual assets in the middle area are abundant, and there is abundance of equity capital and debt available,” said Kevin Mallory, senior managing director for CB Richard Ellis Hotels, Chicago. Mid-tier properties such as Hilton Garden Inn or Residence Inn by Marriott, along with economy properties, typically are achieving ﬁnancing. “Deals in hotels that are $10 million and higher are the hardest to get funded,” said Terry Baltes, manager of Baltes Commercial Realty in Dayton, Ohio. “Ten million dollars and under are easiest to get funded.” The mid-tier and economy projects are getting funded because local banks are more likely to provide loans for those proper- W ties. The sales that are $10 million and higher typically are funded by large regional banks and national banks, which have clamped down on loans for many commercial projects. Yet the credit crunch and the effects of the residential housing bust have dampened lending for hotels and all types of commercial projects signiﬁcantly. “The activity has slowed down considerably for hotel and commercial projects,” said Frank Mallory Nardozza, chairman and CBRE c.e.o. of REH Capital Partners, Fort Lauderdale, Fla. “The primary reason is that the capital markets are in a state of freeze right now: There are very few sources of funding.” Over the past six months, about half of the hotel sales planned in the industry have been put on hold because of the difﬁ- culty in obtaining capital, according to Nardozza. In addition, investors are concerned about the underlying fundamentals of the lodging business, making loans potentially harder to obtain. “We’re seeing an increase in supply growth, a decrease in demand growth, but we’re still seeing an increase in [revenue per available room],” Mallory said. “There is caution from the investor world with respect Baltes to the underBALTES COMMERCIAL lying fundaREALTY mentals.” The good news is that deals to buy small or mid-size properties sales are going through. “I’m not having any trouble at all ﬁnancing small hotel sales, especially through the Small Business Administration,” Baltes said. Banks feel more comfortable putting up at least 50 percent of the money to fund the purchase when the SBA is putting up at least 30 percent of the rest of the project, he said. And some hotel buyers are obtaining capital from international sources. More often, luxury properties can be purchased by capital from non-U.S. lenders and other sources. “What we’re seeing in the upper segments is much more interest from offshore capital,” Mallory said. “Foreign investors have mainly been active with luxury hotel deals in large major cities like New York, Chicago, San Francisco and Washington over the past two years, possibly due to the weak dollar and wanting to invest in a fairly safe haven like the U.S.,” Nardozza said. When selling a property that is desirable to international investors, Mallory suggests retaining brokers with a global footprint, who can handle clients and capital on a cross-border basis. There are some other bright spots for hotel owners trying to sell in this market. Brokers and real-estate experts provided the following tips for moving the sale along: Price the property appropriately for its condition and the market. Because of the difﬁculty in obtaining loans, buyers have the upper hand in negotiating a lower price. Provide good ﬁnancial information and have property improvement plans in place. Work with brokers who understand the hotel industry and can match up your sale with sources of funding. hmm@questex.com CB RICHARD ELLIS The Best Western Berkshire in Danbury, Conn., was purchased by a Fairﬁeld County-based owner and operator who will retain the property as a Best Western under membership agreement with Best Western International. Optimum Hotel Brokerage represented the seller in the transaction. The 2008 board of directors for Hotel Brokers International consists of: President Brandt Niehaus, Huff, Niehaus & Associates; President-elect Jeff Westgor, Westgor & Associates; Secretary Joe McCann, Optimum Hotel Brokerage LLC; Treasurer Tony DeGeorge, Greene, Canﬁeld, DeGeorge Ltd.; Director Jennifer Church, Milmark Hotel/Motel Investments LLC; Director Greg Meinhold, Swoboda Hospitality Specialists; Director Steve Ferrarini, ProCom Lodging Brokers; Associate Director Diana Alt, Scoggin Blue LLC; Associate Director Lee Vasché, Western Hotel Brokers; Member-at-large Dick Lopez, Lodging Property Brokers; and Member-atlarge Charles Fritsch V, MBA Hotel Brokers. Compiled by Emily Hanna, ehanna@questex.com Grand Prairie, Texas The Mumford Co. represented Motel 6 and Accor Hospitality in the sale of the Motel 6 in Grand Prairie, Texas, to AUM LLC, a regional owner and operator of extended-stay hotels in Texas. The hotel will undergo an extensive refurbishment of the property. Following the update, the hotel will operate as a Studio 6 under a long-term license agreement. The Mumford Co. celebrates its 30th anniversary in 2008 as a hotel brokerage ﬁrm specializing in mid-market assets. CREDIT http://HotelMotel.com http://www.HotelMotel.com/digital_edition

Table of Contents Feed for the Digital Edition of Hotel & Motel Management - May 5, 2008

Hotel & Motel Management - May 5, 2008 Contents Pipeline Favors Established Companies 3 Palms Debuts in Upscale Tier Guests Want Reward Options Perspective Legally Speaking Marketing Matters Consultant’s Corner On Finance What Women Want Maintenance Doctor Trends & Stats Special Report: Top Hotel Brokers Design: Tune Into Music Programs Hot Products: PTACs On the Block: Silver Lining in Bleak Hotel Sales Market Events Transactions Supplier News Consumer Insight: The Importance of Creature Comforts When Traveling Ad/Editorial Index Marketplace Classifieds Checking Out

Hotel & Motel Management - May 5, 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.