Institutional Investors Seeking Profit in the Select Service Hotel Sector
Strong investor appetite buoys select service investment activities
Select service hotel product has become more sophisticated in the last 10 to 15 years, attracting an increasing number of institutional invests to the sector, according to Jones Lang LaSalle Hotels. The product quality has improved, and become more diverse, customized and available in prime locations, leading to a more competitive overall investment climate in 2012. Institutional investors, traditionally focused on full service and upscale hotels, are now entering the market, adopting select service portfolios as part of their holdings.
"In urban locations, it"s not uncommon to see a higher RevPAR for upper select service product versus a three-star or four-star hotel, because they can drive a higher occupancy rate," added Fair.
"A stabilized select service hotel get typically trades at 100-150 basis points higher on a cap rate as compared to a stabilized luxury hotel," said Al Calhoun, Managing Director of Jones Lang LaSalle Hotels. "With the same amount of dollars, the select service sector offers diversification, and investors are taking advantage of that. For the price of one luxury property, an investor can purchase multiple select service assets in various markets, thus diversifying risk."
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 115 select service transactions in the United States, spanning nearly 18,000 rooms.
Managing Directors Al Calhoun and Mark Fair lead the Jones Lang LaSalle Hotels Select Service Division. Notable transactions in 2011 include:
- A portfolio of six West Coast hotels comprised of 1,245 rooms
- A series of non-performing mortgage loans secured by a portfolio of 64 Red Roof Inn Hotels
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About JLL's Hotels & Hospitality Group
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. AFortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December 31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.co.uk