Hotels Companies Try to Wring Value From Their Shares As Deal Market Continues to Rise
With excited purchasers and no lack of investment capital offered to get hotel building, hospitality REITs under increasing pressure from shareholders to put themselves up for sale, spin off assets or take other procedures to bolster share prices.
Most just recently, Dallas-based Ashford Hospitality Prime recently retained Deutsche Bank Securities to assess its strategic options, with Chairman and CEO Monty Bennett specifying he has no doubt that Ashford’s existing share price did not accurately reflect the intrinsic value of the company’s real estate.
Just before that, Strategic Hotels & & Resorts Inc. announced that its board of directors was considering a sale shortly after billionaire Expense Gates’ Cascade Financial investment Inc. revealed it had actually acquired an overall of 1.74 million shares of Strategic Hotels & & Resorts ‘typical stock, generating almost 10 % of the company’s outstanding shares.
Waterfall’s interest helped bump up the price of Strategic Hotels & & Resorts shares, and Cascade Financial investment disclosed it had actually entered into a privacy and standstill arrangement with the lodging REIT.
The growing possibility of mergers and acquisitions activity in the accommodations sector could supply a 2nd wind for hotel stocks in the wake of the current market correction, said hotel REIT analyst Robert A. LaFleur of JMP Securities in a note to financiers.
“We saw a comparable phenomenon in the last cycle as heightened M&A activity brought the group through the later stages of its cycle,” LaFleur said, noting that 11 hotel REITs went personal in buyouts by personal equity, non-traded REITs or management-led groups throughout 2006 and 2007.
“History from the last market cycle suggests that as soon as the M&A gates open, they stay open for some time, are not restricted to a couple of deals, and benefit stock rates and valuations throughout the group,” LaFleur stated.
Previously this year, Starwood Hotels & & Resorts Worldwide worked with Lazard Ltd. to test the marketplace. Hedge fund Paulson & & Co. got a 7 % stake in the business valued at more than $970 million in the second quarter, ending up being Starwood’s biggest investor.
The recent wild revolutions on Wall Street haven’t prevented experts about the outlook for the hotel sector, now in its fifth year of development. PKF Hospitality Research study this week declared its forecast of strong financial efficiency for U.S. hotels, forecasting above-average revenue per offered living room (RevPAR) growth through 2018.
“The forecasts of work and earnings that we depend on to prepare our quotes of future accommodations supply, demand and typical room rates (ADR), continue to be strong,” kept in mind R. Mark Woodworth, senior managing director of PKF-HR. While the current stock market volatility is an indicator of the uncertainty that persists in the U.S. and world economies, likelihood of a hotel market slump stays remote, Woodworth said.
Lodging demand growth has actually exceeded supply increases given that the depths of the Great Economic crisis, and is forecasted to continue to do so through 2016, extending an amazing and extraordinary seven-year stretch of constant occupancy development, according to PKF-HR.
Hotel financial investment transaction volume skyrocketed to $23 billion in the first half of 2015, nearly doubling the total for the very same duration last year, sustained by robust need for spaces and hardly any supply growth integrated with record breaking levels of foreign capital flows from China and other areas, according to JLL’s most current Hotels Financial investment Outlook.
While personal equity need for hotel homes stays unabated, increasing 77 % year over year to more than $10 billion in the very first six months of 2015, other types of purchasers have actually swooped in, notably institutional financiers, which raised their share of acquisitions from 1 % in 2014 to over 10 % at mid-year 2015, according to the JLL report.
Despite the stream of financial investment activity, as other types of purchasers dove in, significantly institutional investors, who asa group raised their share of acquisitions from 1 % in 2014 to over 10 % at mid-year 2015 as an outcome of profile buys by Ashford Hospitality Trust, ARC Hospitality Trust and others.
In spite of big acquisitions, such as Blackstone Group’s purchase of the 116-property Equity Inns profile from Whitehall Property for $1.8 billion, and Centerbridge Characteristic’ acquiring Great Wolf Resorts profile for $1.35 billion, private equity’s share of acquisitions actually declined from 52 % in 2013 to 44 % at June 30 of this year, according to JLL.