Hotels Smart To Shed Debt, Add Equity, Analyst Says
PKF Capital -- Hotels, 4/9/2008 1:47:00 PM
Daniel Hayward, recently named managing director of PKF Capital for the Central Valley-to-Reno region, today predicted that many hotels and resorts in his area will seek to reduce debt (“de-lever”) by attracting new equity capital.
“By potentially reducing the amount of debt by adding a new infusion of equity capital, hotels and resorts owners under this current duress can regain their health, ward off the need to sell out and go forward with needed investments in their properties,” says Hayward.
Much of the overall U.S. commercial real estate market is presently “over leveraged” and many property owners are stuck with few financial alternatives. A typical hotel owner may have a conduit or securitized debt piece, which is tough to shed because it requires a large “defeasance,” based on current rates. Also much of the securitized debt will not allow secondary financing. This can be problematic for an owner who is seeking some “liquidity,” needs or wants to sell or renovate and requires capital to do it.
“Our research shows that hotels and resorts have taken a hit as the result of the general credit crunch,” says Hayward. “But we are coming up with ways to get them the cash they need for things like operations, promotions and renovations.”
“At PKF Capital, we are often approached by foreign investors interested in joint venture opportunities with U.S. hotels,” says Hayward. “This could be a viable source of liquidity for over-leveraged hotels.”
PKF Capital is one of the country’s leading hotel transaction firms, providing full investment services to sellers and buyers of properties of all sizes. Hayward joined PKF Capital from Coldwell Banker’s Commercial Hospitality Group, where he helped hotels secure capital. Before that he provided hotel and resort owners and managers with advertising and marketing services.
Hayward notes that tourism is such a major California industry that creative financing methods must be found to keep the state’s travel and convention sector growing and competitive.
PKF Capital is affiliated with PKF Consulting, the country’s leading consulting services provider to the hotel and tourism industry. PKF Capital is commonly owned with Colliers International, which has 267 offices in 67 countries.
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