Headlines – Week of August 19, 2012

September 3, 2012

High-End Hotel Investment Sales Getting Hot Again

According to information provided by CoStar, hotel investment sales cooled off considerably in the first half of 2012, after trading at a blistering pace last year.

However, early third-quarter transaction activity suggests that lodging sales should finish the year on a strong note.

Total volume of sold hotel transactions valued at $25 million and above was $2.5 billion in the first six months of 2012 — well below the strong $6.4 billion recorded in the first half of 2011.

Due to a handful of hotels that sold for top dollar, sales volume has already surpassed second-quarter 2012 and about equaled first-quarter figures just a month into the third quarter. The average price per key remained strong at around $233,500 at midyear.

The uptick in sales in recent weeks come as the U.S. hotel industry heads into the Labor Day weekend, traditionally one of the busiest travel and vacation periods of the year, and reflects what lodging analysts say is the continuing and growing strength in fundamentals in spite of this year’s slow economic growth and fiscal uncertainty.

Such numbers are prompting sellers to get off the sidelines. The sales activity at the high end of the market mirrors especially strong fundamentals for luxury properties. While hotels across the spectrum are benefiting from the recovery, those in the higher-priced tiers are expected to see the strongest gains, according to PwC.

Occupancy levels at hotels in the luxury, upper-upscale and upscale segments are expected to meet or exceed each segment’s 2007 peak. Hotels in the lower-priced segments have not experienced as solid of a recovery in occupancy but are still expected to realize increased room rates as demand gradually strengthens.

Starwood has pursued an “asset-light” strategy in recent years, opting to focus on fee income from hotel operations and management. During a recent call with investors, the company laid out plans to unlock $4 billion to $5 billion in cash by selling its hotels and Bal Harbour condominium residences.

Starwood continues to bring their own hotels to market, either one at a time or all at once, depending on demand. Sources from Starwood state that their strategy is to be left with a global high-end fee business. The fee business is built on long-term contracts, low variable costs, but absent the capital needs and volatility of owned real estate.

Florida Housing Market Continues Positive Track

Pending sales, closed sales and median prices rose, while the inventory of homes and condos for sale dropped in Florida’s housing market in July, according to the latest housing data released by Florida Realtors.

According to the Realtor association, Florida’s real estate recovery is on solid ground, and since May 2011, pending sales have increased every month for both existing single-family homes and for townhome-condo properties.

In July, pending sales were up more than 42 percent for existing single-family homes and 26 percent for townhouse-condo units, compared to a year ago. Home prices are on the rise in many markets, while the inventory of homes for sale is down. Florida’s housing market is growing stronger and stronger.

Pending sales refer to contracts that are signed but not yet completed or closed; closed sales typically occur 30 to 90 days after sales contracts are written.

Statewide closed sales of existing single-family homes totaled 17,420 in July, up 9.8 percent compared to the year-ago figure, according to data from Florida Realtors Industry Data and Analysis department and vendor partner 10K Research and Marketing. The statewide median sales price for single-family existing homes last month was $148,000, up 7.8 percent from July 2011.

According to the National Association of Realtors® (NAR), the national median sales price for existing single-family homes in June 2012 was $190,100, up 8 percent from the previous year. In California, the statewide median sales price for single-family existing homes in June was $320,540; in Massachusetts, it was $325,000; in Maryland, it was $268,910; and in New York, it was $220,000.

Looking at Florida’s year-to-year comparison for sales of townhomes/condos, a total of 7,779 units sold statewide last month, up 2.8 percent from those sold in July 2011. The statewide median for townhome-condo properties was $102,000, up 10.9 percent over the previous year. NAR reported the national median existing condo price in June 2012 was $183,200.

Last month, the inventory for single-family homes stood at a 5.3-months’ supply; inventory for townhome-condo properties was at a 5.4-months’ supply, according to Florida Realtors. Industry analysts note that 5.5-months’ supply symbolizes a market balanced between buyers and sellers.

Posted by Scott R. Lodde

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