Hotel Lawyer with Robert W. Baird hospitality research on hotel
We are very pleased to report that David Loeb has agreed to
share his Robert W. Baird hospitality reports with us, and has
agreed to make them available on
HotelLawyer.com. Just click on the "Resource Center"
and then "
Here are the first two reports on C-Corps and REITs and
Highlights from the Lodging Conference.
The first is the presentation given by David to the hotel
industry think tank, the Lodging Industry Investment Council, on
October 3, 2012, titled Hotel Update: C-Corps and REITs.
We asked David to give us his bullet point summary of the
highlights in these reports, and here is what he said:
We at Baird believe we are in a long-term bull market for hotel
stocks. Baird's work suggests that we appear to be years away
from fundamentals flashing a sell signal for hotel stocks, given
robust demand growth and minimal growth in supply.
Demand is strong, despite worries about the global and US
economy. One big change in the demand equation is that
international travel is growing rapidly and the US is finally
taking steps (slowly) to welcome foreign travelers. After 9/11, the
US slammed the door on international tourism, which appeared to
have limited the length and magnitude of the recovery.
We believe group demand has actually recovered strongly, but
that some of that recovery has been masked by market share gains by
Las Vegas, creating the appearance of a much more tepid recovery of
group business in traditional (non-gaming) hotel markets. We expect
that recovery to accelerate nationally in the next year or so.
Supply growth remains tame, despite general easing of credit
conditions. What limited development financing there is available
is expensive and has very tight conditions, including developer
recourse and low LTV ratios. EB-5 is the one area where development
financing is attainable, and we expect more projects to use this
Debt markets are opening, but still primarily for the best
assets, the largest markets and the best sponsors. There has been a
material easing of credit conditions in recent months, including a
newly-resurgent CMBS market for hotel debt. However, even with that
easing, debt is still difficult to attain for all but the public
companies and the largest PE funds and private owners. LTVs remain
in the 60%-65% range but interest rates are very low.
Transaction pace is picking up, as the REITs and PE firms are
becoming more aggressive. With higher hotel REIT share prices, more
hotels that are being pitched to the REITs have come to market, and
we expect more deals to be announced over the next six months. PE
firms are looking at deals in secondary markets, where yields are
higher, and also at portfolios of select service assets, given
attractive yields which can be matched with low-cost debt, locking
in wide spreads and thus high returns.
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