Foreign investment driving record global hotel transactions

Global hotel transactions continue to zip along at a swift pace, a stride that continues to smash records. According to JLL, 2015 will be a banner year for global hotel deals, and it's foreign investment that is driving it all.

In the first half of this year, global hotel transactions reached US$42 billion, according to JLL, and the full year is forecasted to break records. Leading the growth is foreign wealth, which is acquiring a slew of high-end assets, particularly in global gateway markets.

Americas the Beautiful
The largest total deal volumes in the first half of the year were in the Americas at US$24 billion, up 73 percent year-on-year. This is followed by EMEA, up 55 percent to US$15 billion, while the Asia-Pacific region saw a slight decline in investment volumes, down 6 percent to US$4 billion.

Though American private equity funds remain the largest source of capital flowing into hotels, H1 2015 saw a significant rise in transactions involving Mainland Chinese and Middle Eastern investors, who allocated US$9.8 billion to global hotels real estate, up from US$2.3 billion during the same period last year.

"One of the biggest trends of 2015 is the surge in Middle Eastern and Mainland Chinese investment into hotels globally. This is despite some underlying concerns across the globe, such as the Greek debt crisis and the recent fluctuations in the Chinese stock market," said Mark Wynne Smith, global CEO JLL Hotels & Hospitality. "At the start of the year we predicted full-year global hotel transaction volumes of US$68 billion. We've achieved 60 percent of this already in the first half of 2015 and, if momentum continues in the second half of the year, we could surpass our forecast."

Total foreign investment into hotels in the Americas in the first half of 2015 hit US$4.2 billion, up a whopping 176 percent on the same period in 2014. Of this total, US$4 billion came from Mainland Chinese and Middle Eastern investors, whose volumes demonstrated an even-more-staggering 308-percent uplift from H1 2014.

Key Transactions
Look no further than Manhattan for some of the biggest transactions in the first half of the year. These include Marriott International's US$343-million sale of the Edition New York to the Abu Dhabi Investment Authority, and Starwood Capital's sale of the Baccarat Hotel & Residences NYC to China's Sunshine Insurance Group for US$230 million, or a record $2 million per key.


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Portfolio Buys
In terms of cross border hotel transactions, EMEA received the largest amount at US$9 billion in the first half. "Portfolio sales are increasingly popular in EMEA and accounted for 65 percent of the total transaction volumes," said Wynne Smith. "This tells us that investors are looking for scale in what's becoming a very competitive market."

The largest portfolio deal in Q2 2015 was the sale of the Maybourne portfolio in London to a Middle Eastern investor for US$2 billion.

Single-Asset Sales
Meanwhile, single-asset transactions dominated the Asia Pacific market, accounting for 82 percent (US$3 billion) of total deal volume. Sovereign wealth funds were the most active buyers in Q2 2015. The largest deal was the 50-percent sale to ADIA of three hotels in Hong Kong (Renaissance Harbour View, Hyatt Regency Tsim Sha Tsui and Grand Hyatt) worth around US$1 billion.

Leading off the second half of the year was the $938-million sale of the InterContinental Hong Kong, acquired by Gaw Capital Partners from IHG.