DESPITE the continuing economic uncertainty, global hotel transaction volume is expected to hold steady in 2012, to again reach upwards of US$30 billion in deals, according to initial results from Jones Lang LaSalle Hotels’ Hotel Investment Outlook 2012 report.
In the first half of 2011, the volume surged impressively, with REITs leading the way and signs of debt market revival encouraging activity. But economic uncertainty in the second half of the year affected the momentum, although deals continued, especially in the US, reaching Jones Lang LaSalle Hotels’ forecast of US$30 billion worldwide in 2011, an increase of 13 per cent over 2010 volume.
“So far, the dislocation in the financial markets has not impacted underlying trading fundamentals. This has reassured investors to a certain degree and has underscored the attractiveness of high quality, income producing hotel real estate as an asset class,” said Arthur de Haast, chairman, Jones Lang LaSalle Hotels.
“Constraint will be driven by illiquid markets and the shrinking balance sheet capacity of international banks to lend significant sources of new money. Still, the market will be flushed with equity capital that will come into play.”
Private equity players are expected to remain ambitious in 2012, selectively acquiring assets in secondary locations, as well as distressed portfolios and non-performing loans.
Joining the buyer mix are sovereign wealth funds and private high net worth individuals who will take a long-term view and make strategic acquisitions globally, according to Jones Lang LaSalle Hotels.
The biggest sellers in 2012 are likely to be bank-induced, as a result of debt maturities and consequent refinancing challenges. In addition to the influx of assets expected to come to market, a significant amount of note sales are anticipated as well. Private equity firms and institutional investors are also expected to liquidate some previous acquisitions, either to divest select non-core assets or to return capital to investors as funds reach maturity.
Emerging markets remain the global growth engine, greatly driven by rising domestic demand. Fundamentals continue to point to further growth in 2012. Although growth in China and India is slowing, both have good momentum, activity is building in Central and Eastern Europe, notably Poland, Russia’s activity jumped up, and South America continues to excite investors, with Brazil as the region’s growth engine.
