Jones Lang LaSalle Report: Manhattan Will Remain Darling of Hotel Investors

Unleashing a new report, Jones Lang LaSalle's Hotels & Hospitality Group predicts Manhattan will remain the most active market this year, as it was last year. Transaction volume could reach $2.4 billion.

New York's transaction levels shrunk 20 percent in 2012 to $2.7 billion, but the volume was enough to rank Manhattan as the most active market in the work. New York outpaced key United States cities including Miami, San Francisco, Los Angeles and Washington D.C., and internationally exceeded transaction volumes witnessed in Paris and Hong Kong.

“Looking to 2013, we expect private equity funds to remain the largest buyer group, seeking to achieve opportunistic returns through their significant buying power and risk tolerance. REITs will also feature notably, and continue to make acquisitions of core properties,” said Jeffrey Davis, managing director of JLL's Hotels & Hospitality Group.
“Off-shore capital from Asia and the Middle East will continue to target trophy and high-profile assets in Manhattan as well.”

The Hotel Intelligence New York report showed private equity firms and REITs accounted for 54 percent of the acquisition volume in Manhattan. Meanwhile, the team said the availability of hotel debt this year is expected to be at levels that haven’t been seen since 2007.  The strong re-emergence of the CMBS market is propelling hotel debt..

“Balance sheet lenders tend to be more selective regarding asset quality, sponsorship and location. They favor core markets such as New York and provide floating loan structures that are sought after by hotel owners,” said Mathew Comfort, JLL executive vice president.

This year's active sellers will include private equity funds and institutional investors seeking liquidity, brands in cases where they can retain management contracts, and owners seeking to exploit the dramatically improving transactions market and low cap rates.

"New York maintains a RevPAR premium of 35 percent more than the next highest market," Davis said. "This coupled with a highly diversified base of demand and high occupancy rates are the driving forces behind investors’ interest in Manhattan.”

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