The big picture for 2015 won’t look much different than 2014. Regulations will continue to stay looser than in recession and immediately post-recession markets. In the United States, mezzanine financing might continue to enjoy its resurgence. But, says Russell Kett, managing director, HVS London, rising interest rates could be a concern.
Here is what industry leaders said about the road hotel investment will take in 2015.
HOTELS’ Investment Outlook: Where might traditional investors go next?
Deric Eubanks, CIO, Ashford Hospitality, Dallas: Construction loans. Equity requirements are coming down for them. I would expect that as the CMBS market continues to improve and more traditional lenders start to lose out on deals to CMBS lenders, they will turn to construction loans as an avenue to put their capital to work.
HIO: What might put the brakes on lending?
Dominic Murray, director, head of EMEA Brokerage, CBRE Hotels, London: It is already robust for assets valued above US$50 million with REITs and off-balance sheet lenders like Blackstone, Starwood Capital, M&G, GE and MetLife active in this space. But, the continued pressure banks face (25 banks failing the ECB’s stress test) will temper this growth.
HIO: What’s on banks’ radar for 2015?
Ivar Yuste, partner, PHG Hotels & Resorts, Madrid: The debt secondary market is starting to get traction. Debt acquisitions like the one executed in October this year by Sankaty Advisors (Bain Capital) and Starwood Capital Group with a US$999 million portfolio of hotel debt and other collateral from BFA-Bankia Group are expected to be replicated by other banks in Spain.
HIO: Is this growth sustainable?
Josh Wyatt, investment director, Patron Capital, London: It should be. LTVs should return to the 60% to 70% range, with margins in the 200-300bps range. A solid balance between the larger national banks, bulge bracket banks and mortgage REITS will continue to drive competition and liquidity in the hotel lending space.