Industry Fundamentals

Transaction volume, pipeline in Canada growing

31 Oct, 2013 By: Elaine Yetzer Simon

With the largest portfolio sale since 2007 occurring in Q3, Canadian hotel transaction volume surged to $1.7 billion as of YTD Q3 2013, significantly surpassing year-end volumes for the past five years, according to CBRE Hotels. The portfolio, comprised of five Westins, located in Vancouver, Calgary, Edmonton, Toronto and Ottawa, was acquired by Starwood Capital Group for a total of $765 million. Even without this portfolio, hotel transaction volume is up more than 10 percent over the same period last year.

Other Q3 trends, according to CBRE:

  • Q3 transaction volume reached approximately $893 million, the highest quarterly volume achieved since Q4 2007, when quarterly volume topped $1.3 billion, as a result of bcIMC’s acquisition of CHIP REIT’s portfolio.
  • Of the 78 trades completed, ten exceeded $150,000 per room, two times the number this time last year. Despite the number of trades over this threshold, almost a third of all trades to-date this year were under $50,000 per room.
  • Average per room pricing is up 20 percent over the same period last year, at approximately $130,000, influenced by the Westin hotel portfolio. Excluding the Westins, the price per room is down 13 percent over the same period last year, at approximately $93,000.
  • More than 50 percent of total transaction volume occurred in Ontario, with the greater Toronto area alone accounting for 38 percent of national volume. Provincially, Alberta ranked second reporting 23 percent of total volume, followed by British Columbia at 16 percent.
  • Institutions and equity funds were the dominant buyer group at 48 percent of transaction volume (as a result of the Westin portfolio sale), with hotel investment companies the second most active group representing just under a quarter of the volume. Although only 3 percent of total volume came from offshore buyers, they are a buyer group that is increasingly showing more interest in acquiring Canadian hotels, the most recent example being the purchase of the Super 8 Abbotsford by a high net worth Korean investor for $12.1 million.

In addition to transactions, the construction pipeline in Canada also is robust.

Canada’s hotel development pipeline comprises 200 projects totaling 22,352 rooms, according to the September 2013 STR Pipeline Report. This represents a 6.9-percent increase in the number of rooms in the total active pipeline compared with September 2012. 

Among the chain scale segments, the upscale segment reported the only double-digit increase in rooms in the total active pipeline, rising 26.7 percent with 6,969 rooms, according to STR. The unaffiliated segment reported the largest decrease in rooms in the total active pipeline falling 6.6 percent with 7,013 rooms.

Three segments reported increases of more than 20 percent in the number of rooms under construction: the midscale segment (+100.0 percent with 160 rooms); the upscale segment (+32.5 percent with 3,457 rooms); and the upper midscale segment (+21.1 percent with 2,373 rooms). The unaffiliated segment fell 73.7 percent with 596 rooms, reporting the largest decrease in rooms under construction.

Topic : Canada, Pipeline, Transaction
External Source : STR, CBRE Hotels

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