Jones Lang LaSalle Hotels increases 2010 U.S. hotel transaction volume forecast

Jones Lang LaSalle Hotels increases 2010 U.S. hotel transaction volume forecast

Year-to-date, hotel deal volume has notched to $4.7 billion, outpacing the original forecast by $200 million. And deal pace has accelerated significantly throughout the year. With a limited supply of high quality hotel investment product on the market, the bidding environment has become highly competitive.

Jones Lang LaSalle Hotels released the firm’s updated U.S. hotel transaction forecast, which pegs deal volume increasing to $6.5 billion for 2010, up $2 billion. Jones Lang LaSalle Hotels’ managing director and CEO-Americas Arthur Adler unveiled the new projections during a panel presentation held today at the ULI Fall Meeting and Urban Land Expo held this week in Washington, D.C.

Year-to-date, hotel deal volume has notched to $4.7 billion, outpacing the original forecast by $200 million. And deal pace has accelerated significantly throughout the year. With a limited supply of high quality hotel investment product on the market, the bidding environment has become highly competitive.

“Investment capital has continued to be attracted to lodging investments, resulting in increased transaction volumes during each of the first three quarters of 2010, driven by the recovery in operating fundaments. Transaction volumes totalled $814 million in the first quarter of 2010, increasing to $1.5 billion in the second quarter and jumping to $2.2 billion in the third quarter. In the month of September alone, more than $1.1 billion in transaction activity closed. Transaction momentum is expected to continue as increased valuations result in more owners testing the property sale market,” said Adler.

Hotel real estate investment trusts (REITs) have been the most acquisitive buyer group by a wide margin as a result of their wide trading multiples, accounting for 58 percent of hotel purchases to date, according to the firm’s proprietary transactions database. “Eight of the 10 largest single-asset transactions have been purchased by REITs. Most of these transactions have been funded by all-cash,” said Adler.

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The momentum is also rising in Jones Lang LaSalle Hotels’ strategic asset disposition business. Over the past two weeks, Jones Lang LaSalle Hotels has closed four major hotel transactions in the Americas with total volume of over $165 million, including the J.W. Marriott in Rio de Janeiro, the Custom Hotel in Los Angeles, the St. Regis in Aspen, and the Grand Hotel in Minneapolis.

Marking a definite turnaround, revenue per available room (RevPAR) marked positive growth in year-to-date 2010, shoring up hotel investor sentiment.

“There is a substantial amount of equity in the marketplace waiting to be invested in hotel real estate. Additionally, debt liquidity for both for acquisitions and re-financings is slowly increasing. These market dynamics will lead to further increases in transaction activity by year end,” said Adler.