Despite the wider real estate industry feeling the effects of high interest rates and a sluggish transactions market, hospitality remains a “relative outperformer against other commercial real estate verticals”, according to Bill Grice, head of CBRE Hotels – Americas.
Grice says: “I think everybody would like to see more capital flow and more transactions—the dislocation in the U.S. debt capital markets has cast a pall across all of commercial real estate.
“We're seeing transaction volumes this year of around 20 percent from where we were this time last year. And the good news is, if you look domestically, there is a lot of liquidity in the market.” He suggests that there is no shortage of lenders despite the increased cost of capital and adds: “The bid-ask spread has widened so much that we are almost a victim of our own success in hospitality,"
For Grice, “solid cashflows” from “durable assets” mean that owners of successful hotels are very reluctant to see prices reach a level that would suit buyers having to account for more expensive debt. Despite this apparent stand-off, he suggests that deals are still happening and that “North America is going to continue to see the majority of action”.
This is not to say that other global markets aren’t of interest, he notes; adding: “We're starting to definitely see a number of groups that have been more regional, super-regional operators, expand into Latin America and look into Asia as well for opportunities because that's really where the value add is.”
Cross-border Buzz
This international interest has created a cross-border buzz, according to Benjamin Leahy, partner, Cedar Capital Partners. “When I joined Cedar five years ago, I thought that the capital funding transactions would be much more siloed. So European investors would like to invest in Europe, U.S. investors would like to invest in the U.S.” However, he notes that there has actually been “a lot more cross-pollination... from a funding perspective, we see a lot of crossing the pond back and forth."
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