Hotel investments on the up: Jones Lang LaSalle
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Global hotel investment volumes recovered strongly in 2010 after reaching the lowest level of the decade in 2009, according to new research conducted by Jones Lang LaSalle Hotels.The company forecasts that global hotel transaction volume will increase a further 30 to 40% in 2011. The expected increase marks the second consecutive year of improvement.Following a very challenging year in 2009, characterised by frozen liquidity, stalled transactions and drastic drops in hotel performance and values in many hotel markets globally, 2010 signalled dramatic improvement and a fresh pace for opportunistic, cashed-up buyers, the company said.The across-the-board rebound in operating fundamentals and the broad cross-section of equity capital in the market is motivating both buyers and sellers. Having gathered pace in 2010, volumes are expected to continue to rise substantially in 2011, reaching $28bn to $30bn. Among the active buyers, the firm anticipates to see Reits, institutional investors and private and high net worth investors with opportunistic capital investing next year.”With more stock hitting the market in 2011, there will again be an increased depth and breadth of opportunities for investors,” said Arthur de Haast, global CEO of Jones Lang LaSalle Hotels. “Until liquidity improves in the debt markets, however, the most acquisitive hotel investors will likely be those that make all-equity purchases or structure acquisitions with low leverage levels.” he added.When considering the Middle East and North Africa, the hospitality market is polarising with some early positive signs emerging in select countries like Morocco, Saudi Arabia, Qatar and the UAE, the company stated.”Compared to the broader region, these markets show greater political stability, have generally better or improving supply-demand dynamics, and benefit from government initiatives to support development, facilitate investment and generate demand. Long term hospitality development in Qatar, for example, has been bolstered by the 2022 FIFA World Cup. The UAE hospitality investment market seems to show positive signs as demonstrated by the $115m of financing from Standard Chartered Bank secured for the Fairmont Palm Jumeirah by IFA Hotel Investments in late 2010 as well as by the recent sale of the Ritz Carlton DIFC by Union Properties PJSC for $300m,” said Jalil Mekouar, MD of Jones Lang LaSalle Hotels Middle East and Africa.While hotels have become a more mainstream asset class over the past decade, the combination of property and business risk makes them inherently complex. Investors who have a strong track record in the sector will be most successful, the company predicted.Debt remains selectively constrained in the markets which relied heavily on leverage in the lead-up to the global recession, such as the U.S., U.K., Ireland, Japan and Spain, but it is easing. Nevertheless, new lending will remain fairly limited until lenders fully rebuild their balance sheets and write down asset values, a delicate process which needs to be carefully balanced and is taking longer than expected.
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