Hotels Values & Cap Rates Suzanne Mellen, MAI, CRE, FRICS, ISHC | Practice Leader [email protected] | (415) 268-0351
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Hotels Values & Cap Rates
Suzanne Mellen, MAI, CRE, FRICS, ISHC | Practice [email protected] | (415) 268-0351
SUNNY, HAZY SKIES AHEAD
Historical Sales (Total Sales $2.5M+)
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$0
$20
$40
$60
$80
$10020
0620
0720
0820
0920
1020
1120
1220
1320
1420
1520
1620
17
2017
Q1
2018
Q1
Pric
e Pe
r Key
$ Bi
llion
s
Sales Volume ($2.5M+ in Billions) $2.5M+ Price Per Key
Source: HVS, RCA
5%
74%
Year-over-Year Transaction Volume Change
Source: HVS, RCA
-100%
-50%
0%
50%
100%
150%
'13 '14 '15 '16 '17 '18
63%
Q1 2018 Quarterly Volume Breakdown
Source: HVS, RCA
Vol ($ Bilions) YOY
Hotel Total 10.9 63%Full-Service 7.2 63%Limited-Service 3.6 63%Single Asset 7.2 30%Portfolio 3.6 229%Major Metros 4.3 101%Secondary Mkts 3.6 39%Tertiary Mkts 2.8 48%
Total Hotel Quarterly Transaction Volume
Source: HVS, RCA
02468
1012141618
'13 '14 '15 '16 '17 '18
$ Bi
llion
s
Individual Portfolio Entity
Q1 Portfolio Sales > $500 million
Source: HVS, RCA
Portfolio Name
GIC Iconic U.S. Hotel Portfolio Hyatt Hotels MassMutual U.S.
Hotel Portfolio Woodspring Suites Hotel Acquisition
Date Apr-18 Mar-18 Jan-18 Feb-18
No. of Properties 3 3 7 107
No. of Rooms 2,327 1,414 2,041 12,340
Total Price $1,635,000,000 $1,000,000,000 $800,000,000 $767,500,000
Average PPK $702,621 $707,214 $391,965 $62,196
Buyer Blackstone Host Hotels & Resorts Junson Capital Brookfield AM
Seller GIC Hyatt Hotels Mass Mutual Life Insurance
WoodSpring Hotels, Lindsay Goldberg
Notable Sales: GIC Iconic U.S. Hotel Portfolio
Source: HVS, RCA. * Estimated
Arizona Biltmore Resort & Spa$403,400,000$566,573 PPK
Cap Rate: 6.5% *
Grand Wailea Resort & Spa $1,100,000,000$1,312,649 PPKCap Rate: 5.0% *
La Quinta Resort & Spa
$148,790,500$191,494 PPK
Notable Sales: Hyatt Hotels Portfolio
Source: HVS, RCA. * Estimated
$136,413,179$300,470 PPK
Cap Rate:5.0% *
AndazMaui
$288,198,471$960,662 PPK
Cap Rate: 5.0% *
Grand Hyatt San Francisco$575,388,247$871,800 PPK
Cap Rate: 5.0% *
Hyatt Regency Coconut Point Resort
PWC RE Investor Survey Cap Rate Trend Data
Source: HVS, PWC
4.0%
6.0%
8.0%
10.0%
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
Full-Service Lodging Luxury Lodging Select-Service LodgingLimited-Service Lodging Regional Mall CBD OfficeSuburban Office Apartment
PWC RE Investor Survey Cap Rate Trend Data
Source: HVS, PWC
6.0%
8.0%
10.0%
1Q07
1Q08
1Q09
1Q10
1Q11
1Q12
1Q13
1Q14
1Q15
1Q16
1Q17
1Q18
Full-Service Lodging Luxury LodgingSelect-Service Lodging Limited-Service Lodging
Sale Derived Cap Rates
Source: HVS
6.2%6.7%
6.4%7.0%
7.5%7.0%
7.4%7.8%
8.2% 8.3%8.6%
8.3%
9.2% 9.0% 9.2% 9.1% 9.0% 8.9%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
2013 2014 2015 2016 2017 2018 YTD
Full Service Incl. Luxury Select Service & Extended StayLimited Service
2.0
7.0
12.0
17.0
22.0
% P
erce
ntag
e
Cap Rate - Historical NOI Cap Rate - 1st Yr. Projected NOI
Unlevered Discount Rate Equity Yield
Going-In Cap Rate Spread
Source: HVS
2.0
7.0
12.0
17.0
22.0
% P
erce
ntag
e
Cap Rate - Historical NOI Cap Rate - 1st Yr. Projected NOI
Unlevered Discount Rate Equity Yield
Discount Rate to Cap Rate Spread Tightened
Source: HVS
Cap Rates Derived from Hotel Sales YTD 2018
Source: HVS
* Cap rate and discount rates derived from actual transactions appraised by HVS at the time of sale.
7.0 7.710.1
17.2
8.3 8.611.3
18.9
8.9 9.511.5
19.6
Historical NOI 1st Year NOI Discount Rate Equity IRR
Full Service SS & ES Ltd. Service
REITS – Cap Rates Decline Modestly
Source: Investment Banking Bulletins, SEC, HVS
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
4/13
/20
18
9.0%
12.5%
6.6%5.1%
6.3% 6.5% 7.0% 7.2%8.3%
7.5% 7.3% 7.2%
Implied REIT Cap Rates
Source: HVS
Hotel Cap Rates and Mortgage Interest Rates vs. 10 Year T-Bill Yields
0.0
2.0
4.0
6.0
8.0
10.020
0720
0820
0920
1020
1120
1220
1320
1420
1520
1620
17Q
1 20
18
% P
erce
ntag
e
Cap Rate -HistoricalNOI
HotelMortgage Int.Rate - ACLI
10-Year T-BillYield
Source: HVS
NOI Growth and Interest Rate Impact - Hotel Value Per Room
4 Year NOI
CAGR
Hotel Mortgage Interest Rate
4.0% 4.5% 5.0% 5.5% 6.0%
-2.5% 200,000 196,000 192,000 188,000 185,000
0.0% 223,000 218,000 214,000 210,000 205,000
2.5% 245,000 240,000 235,000 230,000 226,000
5.0% 273,000 268,000 262,000 254,000 248,000
7.5% 292,000 286,000 280,000 269,000 263,000
Source: HVS
NOI Growth and Interest Rate Impact - Hotel Value Per Room
4 Year NOI
CAGR
Hotel Mortgage Interest Rate
4.0% 4.5% 5.0% 5.5% 6.0%
-2.5% 200,000 196,000 192,000 188,000 185,000
0.0% 223,000 218,000 214,000 210,000 205,000
2.5% 245,000 240,000 235,000 230,000 226,000
5.0% 273,000 268,000 262,000 254,000 248,000
7.5% 292,000 286,000 280,000 269,000 263,000
Source: HVS
NOI Growth and Interest Rate Impact on Baseline Value
4 Year NOI
CAGR
Hotel Mortgage Interest Rate
4.0% 4.5% 5.0% 5.5% 6.0%
-2.5% -15% -17% -18% -20% -21%
0.0% -5% -7% -9% -11% -13%
2.5% 4% 2% 0% -2% -4%
5.0% 16% 14% 11% 8% 6%
7.5% 24% 22% 19% 14% 12%
Source: HVS
NOI Growth and Interest Rate Impact on Baseline Value
4 Year NOI
CAGR
Hotel Mortgage Interest Rate
4.0% 4.5% 5.0% 5.5% 6.0%
-2.5% -15% -17% -18% -20% -21%
0.0% -5% -7% -9% -11% -13%
2.5% 4% 2% 0% -2% -4%
5.0% 16% 14% 11% 8% 6%
7.5% 24% 22% 19% 14% 12%
Source: HVS
NOI Growth and Interest Rate Impact - Cap Rate (Historical TTM NOI)
4 Year NOI
CAGR
Hotel Mortgage Interest Rate
4.0% 4.5% 5.0% 5.5% 6.0%
-2.5% 9.1 9.3 9.5 9.7 9.9
0.0% 8.2 8.4 8.6 8.7 8.9
2.5% 7.5 7.6 7.8 8.0 8.1
5.0% 6.7 6.8 7.0 7.2 7.4
7.5% 6.3 6.4 6.5 6.8 7.0
Cimate Change
Where are we?
Source: HVS
Higher GDP Growth
Higher Inflation
Tax Laws Favoring Real EstateLooser Lending StandardsReduced Regulation
Upsid
e Fa
ctor
Postponed Risk of Recession Labor – Shortage & Increased Cost
New Supply Slowing
Industry Disruptors
Socio/geopolitical Risks
Dow
nsid
e Fa
ctor
Rising Interest Rates
Higher Demand Growth
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Suzanne Mellen, MAI, CRE, FRICS, ISHCPractice Leader
[email protected] | (415) 268-0351
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