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Tough Hotel Investment Market Makes Development, Refinancing Preferable

2005-06-09

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External Source Given cap rates today, it makes more sense to develop or refinance hotels than to buy today. That was one conclusion reached at CPN's third annual hotel roundtable, which took place as a complement to the NYU International Hospitality Industry Investment Conference.

Both competition among hotel sector investors and optimism in the sector are driving prices to levels that are deterring the heads of many of the leading U.S. hotel companies. But another culprit is having at least as big an influence: As with other property types, hotel investors are being far outbid by residential players.

Indeed, with strong residential demand driving both conversions to condominiums and outright razing of properties for replacement by condominiums, Wyndham International, for one, has been weighing the sale of one particular property. So if a property were to be sold as a hotel, the company could probably get $40 million for it, but if it were sold for condo development--with the property scrapped and built up from scratch--the company could probably achieve $70 million, according to Nicholas Bonrepos, senior vice president of business development & owner relations.

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Source - Commercial Property News

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