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South Florida single-asset hotel trades to reach $2 billion by year-end, matching 2015 peak
NEW YORK, June 5, 2018 – In the first trimester of 2018, U.S. hotel transaction volumes reached more than $11.9 billion – a 93.0 percent increase over last year, according to preliminary figures released by JLL. Deal pace is driven by South Florida and West Coast markets including Hawaii, resort properties, and portfolios of prime full service hotels.
The exceptional transactions activity to date is underpinned by the acceleration in performance growth. Cap rates sharpened further due to the high profile of assets transacted and ongoing strong investor sentiment, shaping the story for hotel deals this term.
"Going into this year, we were hopeful that the improving economy and strong employment trends would translate to an acceleration in RevPAR," said Arthur Adler, Chairman for the JLL Hotels & Hospitality Group. "Since March, that is exactly what has happened. Investor sentiment has markedly improved based on the widely held belief that demand will outstrip supply for the foreseeable future resulting in stronger pricing power and solid profit improvement."
In 2017, transaction volume was down about 15 percent, and we're already seeing a pickup, year-over-year, in 2018. The industry is flooded with available capital for acquisitions: from public and private REITS, private investors, family offices and offshore investors. However, two things are holding deal volume down: the lack of property coming to market; and, the option to finance– currently, many owners are opting to re-finance instead of sell.
"The acceleration of GDP and RevPAR marks a key turning point for investors, who are now convinced that this will be an extended cycle. Recent earnings calls have been resoundingly positive," Adler said. "Investors are now firmly in the camp that this will be an elongated cycle, therefore, they are positively pre-disposed to investing in lodging compared to other forms of real estate."
Based on the South Florida deals that have already transacted this year, coupled with a strong pipeline under contract, JLL expects South Florida hotel sales to reach $2 billion by the end of 2018. The bids on Miami and other South Florida hotels are meeting and exceeding seller expectations.
"Durability is what's going to stimulate investment and product to market – and the tea leaves are signaling a return for South Florida – it's the market to watch. I think we'll see $2B in
I think we'll see $2B in transactions before year end," said Gregory Rumpel, Managing Director for JLL's Hotels & Hospitality Group.
If that happens, South Florida would surpass the recent peak of $1.4 billion achieved in 2015, following a rough couple of years including the heartache of 2016 and the Zika virus hangover.
"Florida keeps doing what it's doing. With people moving in, HQs moving in, there is only a good prognosis. Businesses don't like heavy taxes in other southern markets," Rumpel said. "We offer a great atmosphere – that is, on a relative basis, affordable."
The Big Picture in U.S. Lodging
Demand: 2018 operating fundamentals continue to reach new highs, underpinning investor sentiment
Transactions: U.S. hotel transaction volume totaled $11.9 billion, an increase of nearly 93.0 percent relative to the first trimester of 2017
Markets: A majority of the top-25 markets experienced positive trailing-twelve month RevPAR growth in April
Who’s buying: Canadian and Mainland China investors represented the main sources of non-domestic investment, which represented 18.0 percent of total transaction volume. Private equity firms accounted for 48.0 percent of trades in YTD April 2018.
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