Large Portfolio Note and REO Sales to Dominate Select Service Hotel Market in 2012
Jones Lang LaSalle Hotels says impending debt maturities will bring more players to the market
"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 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