Jones Lang LaSalle Hotels Debt Capital Markets Update : January 2011 (United States)
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Jones Lang LaSalle Hotels Debt Capital Markets Update : January 2011 (United States)
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Category: North America & West Indies / Carribean islands - United States - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2011-01-13
A world of difference
What a world of difference 12 months makes. At the end of 2009, we faced continued declines in operating performance, a distinct lack of availability of both debt and equity capital, and tremendous uncertainty regarding lenders’ actions on troubled loans. As we wrap up 2010 and begin to turn the corner into 2011, we have much greater clarity on these concerns, and the outlook is generally positive. The question now is: will the recent trends continue through 2011?
The driving engine behind the recovery of the hotel capital markets has been operating performance. Eighteen months of cost reductions has resulted in hotel operating margins so efficient that even a mild uptick in occupancy and rate can lead to significant bottom line revenues. As hotel owners and management teams have been able to halt the bleeding and begin to once again grow both occupancy and rate, equity and debt sources have actively sought to catch the market on its upswing.
Debt markets responding favorably
The debt capital markets have favorably responded to the stabilized hotel operating environment, and moved quickly from simply sniffing around at the beginning of 2010 to taking giant bites at the end of the year. The continued low interest rate environment has encouraged lending at spreads attractive to the lender while maintaining an overall interest rate appealing to the borrower. These market dynamics have opened the playing field of lenders, and over the course of 2010 Jones Lang LaSalle Hotels secured financing from a growing pool of specialty finance groups, insurance companies, Wall Street securitized lenders and domestic banks.
Uptick in loan sales and foreclosures
Simultaneous to the re-emergence of hotel debt and increase in value data points, lenders and servicers have also begun to take action on their portfolios of troubled loans. We have seen a notable increase in our portfolio analysis and strategic decisions advisory business for lenders, and this is directly related to the uptick in loan sales and foreclosures. Lenders are currently evaluating whether it behooves them to sell the note on a hotel, foreclose and sell the asset, or restructure with the borrower. A litany of factors govern this decision making process, and consequently while lenders have increasingly taken action on troubled loans, there remains a significant degree of uncertainty on what the prevailing course of action will be in 2011.
A more dynamic market
These factors have re-created a dynamic market where the sale, financing, and workout of a hotel are once again possible. The stage has been set for the trends to continue into 2011 and even 2012. However, given how quickly the markets moved in 2010, the most certain trend is for owners and lenders to proceed with caution, and know that anything is possible.
About Jones Lang LaSalle Hotels
Jones Lang LaSalle Hotels, the first and leading global hotel investment services firm, is uniquely positioned to provide the depth and breadth of advice required by hotel investor and operator clients, through a robust and integrated local network. Last year, Jones Lang LaSalle Hotels provided sale, purchase and financing advice on over $1.6 billion worth of transactions globally. In addition, advisory and valuation services were provided on nearly 800 assignments. The global team comprises over 200 hotel specialists, operating from 36 offices in 19 countries. The firm's advice is supported by a dedicated global research team, which produced 80 publications in addition to client research. Jones Lang LaSalle Hotels' services span the hospitality spectrum; from luxury single assets and large portfolios to select service and budget hotels, resorts and pubs. Services include investment sales, mergers and acquisitions, capital raising, valuation and appraisal, asset management, strategic planning, operator selection, management contract negotiation, consulting, industry research and project development services.
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