Friday, October 10, 2008

Where is the money?

Attendees at the HHOA’s Hotel Investment, Development & Management Conference, which ends today in Miami, don’t seem to be in the mood to buy or sell hotels anytime soon. Yesterday, when asked for a show of hands of who was planning a deal within the next six months, only four or five hands went up from the more than 200 attendees.

Panelists this morning were asked, “Where is the money?” and the answers were an illuminating insight into where our industry is headed for the coming months, and certainly into 2009.

Patrick J. Feltes, senior VP of GE Capital Solutions, said, “Money is very expensive today, and it’s going to stay expensive.”

Mark Naddler, FVP and senior Commercial Real Estate Relationship Manager, HSBC Bank USA, said that there is plenty of liquidity, but he emphasized that relationships were critical.

“The smart developers usually try to develop relationships with lenders. Unfortunately, they may have relationships with some lenders that aren’t around anymore,” said Naddler.

Naddler told audience members that if they didn’t have relationships with a major, very strong bank, they needed to start working on building some.

“Funds are out there, but for the right developer and the right project,” he said.

Jose Alvarez, managing director with Molinero Kroger, said that the bankruptcy of Lehman Brothers was especially bad news for the lodging industry. Alvarez commented that the firm was one of the most prolific capital providers in the real-estate sector not only for debt, but also for equity. He also pointed out that lodging industry stocks have been taking a beating.
“Some of them are at a 75 percent discount from what they were a few months ago … what’s really happening is a huge re-pricing of our assets. … The fact is cap rates are way up, transaction volume is way down,” said Alvarez.

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