CHICAGO, April 19, 2012 — Transactions involving large portfolios of notes, many of which are collateralized by hotels, along with increasing sales of bank real estate owned (REO) hotel properties, will take center stage in 2012. This, as lenders continue clearing their balance sheets of non-performing mortgages and lodging assets. According to Morningstar, Inc., nearly $21.7 billion of hotel CMBS loans are maturing in 2012 and Jones Lang LaSalle Hotels’ experts say many of these loans have already been extended at least once.
“Lenders are seeing an opportunity to bring these non-performing assets that have been weighing down their balance sheets to market,” said Mathew Comfort, Executive Vice President with Jones Lang LaSalle Hotels. “Many of the ’06 and ’07 vintage loans have undergone workouts, giving them extensions of 12 to 24 months. However, banks and special servicers are realizing the time is right to divest these assets as the discount to par is not as significant as it’s been over the past two years.”
In 2009 to 2010, notes that were not good candidates for restructuring were put on the market by special servicers or lenders as the best way to dispose of a transaction in the absence of financial liquidity from borrowers. In many cases the servicers only choice was to liquidate via a note sale, which frequently happened at a deep discount due to uncertainty in operating performance and a lack of experienced note buyers.
“The increased liquidity in today’s capital market has provided additional options for both the borrower and the existing lender or servicer. Previously, there was no “plan B,” and now there is,” said Bill Grice, Senior Vice President of Jones Lang LaSalle Hotels. “In 2009, the majority of hotel notes were selling for all cash at significant discounts to par, whereas today the discounts are typically less significant. Overall lodging asset performance has improved and there is less distress in the market so bulk transactions are rare and very attractive today.”
Large note sale portfolios, those in excess of $150 million or collateralized by multiple select service properties, will be in greater demand this year as investors look to put capital to work in search of higher returns. REO sales will also achieve higher prominence, following a cooling off period that began in the first quarter of 2011. In addition, the firm also expects loan-to-own scenarios to remain strong.
Grice added, “For loan-to-own note sales there is likely to be a two- to three- year window, which began in 2011, that will provide exceptional buying opportunities to seasoned hoteliers with the resources to acquire lender controlled lodging assets.”
Jones Lang LaSalle Hotels’ market-leading select service division focuses on the transaction needs of clients in the mid-tier segment of the hotel industry, ranging from $5 to $20 million in asset value. In 2011 the firm completed more than 76 select service transactions in the United States, representing more 20,000 rooms.
About Jones Lang LaSalle Hotels
Jones Lang LaSalle Hotels is a global real estate services firm focused exclusively on hotels & hospitality. We provide acquisition and financing advice, valuations, investment sales and asset management for luxury hotels, select service and budget hotels, smaller hotels and pubs, from single assets to large portfolios and mixed-use developments.
In the last five years we completed nearly 4,000 advisory and valuation assignments and more sale, purchase and financing transactions than any other hotels real estate firm in the world…worth over $30 billion. With 42 offices in 20 countries, no other firm is better connected. Through our depth and breadth of research and experience we know the market at every level, we know the players and we know how to get results. www.joneslanglasallehotels.com