2015 Canada transaction volume reaches $2.2B

Westin Harbour Castle in Toronto
The Westin Harbour Castle in Toronto is on the market and it’s expected to command between $350 million and $400 million.

In 2015, the Canadian lodging industry experienced the highest level of transaction volume since 2007 with a total of more than $2.2 billion, according to new research from HVS. This represents a 64-percent increase over the transaction volume recorded in 2014. The number of transactions increased from 116 in 2014 to 143 in 2015, representing an increase from 14,733 to 20,210 rooms. Acquisition interest in high-quality, well-located hotel assets drove the average value per room up to $108,994, representing a robust increase of 19.6 percent over the previous year.

According to the “2015 Canadian Hotel Transaction Survey,” the substantial increase in hotel transaction volume in 2015 is largely attributable to the acquisition of large hotel assets in high-barrier-to-entry markets in major urban centers, particularly Toronto, Vancouver and Montreal. Strong hotel performance in the major urban markets of Toronto and Vancouver and the resort markets in British Columbia and the Alberta mountain region also were factors in the vigorous growth in hotel values in 2015.

The largest transaction in 2015 was the Westin Bayshore, which Vancouver-based real estate company Concord Pacific purchased for $290 million, or $569,000 per room, according to HVS. The 510-room hotel is located in downtown Vancouver. Another newsworthy transaction was the purchase of the 1,363-room Fairmont Royal York in Toronto for $187 million, or $137,000 per key. InnVest REIT and Kingsett Capital acquired an aggregated 80-percent interest in the property in a joint venture through which Ivanhoe Cambridge retained a 20-percent interest, the survey indicates.

The largest resort transaction in Canada involved the Delta Lodge at Kananaskis, which Pomeroy Lodging Group acquired for $42.5 million, or $103,000 per key. The 412-room property will undergo a $26-million renovation that is expected to be completed in 2017. The renovation will turn the hotel into a conference and destination resort.

According to HVS, six hotels that transacted for more than $50 million accounted for 39.8 percent of the transaction volume in 2015. All six are located in either Vancouver or Toronto. Portfolio transactions represented 17 percent of the year’s total volume, let by Fortis selling its 22-property portfolio to Westmont Hospitality Group for $365 million.

One of the biggest transactions in the country during 2015 happened during the first quarter, when Marriott International purchased the Delta Hotels and Resorts brand and management and franchise business from Delta Hotels Limited Partnership, a subsidiary of British Columbia Investment Management Corporation for C$168 million (approximately $135 million). The Delta brand comprises a range of hotels and resorts with 38 hotels and 10,000 rooms in more than 30 cities across Canada.

2016 most likely will see a new record sale price set. The Westin Harbour Castle in Toronto is on the market, according to the Globe and Mail, and it’s expected to command between $350 million and $400 million. Curtis Gallagher, vice president of hotel investments at Cushman & Wakefield, who was hired to sell the property, told the paper that the 977-room Harbour Castle is likely to attract a buyer who wants to own a well-performing hotel, but with the added prospect of being able to build up to three new towers on the site.

An affiliate of U.S. investment firm Starwood Capital Group, backed by investors from the Middle East, currently owns the property. Gallagher said the hotel will be marketed to both local developers and foreign investors.