REPORT FROM THE U.S.—California hotel sales plummeted last year and values went along for the ride, according to Atlas Hospitality Group’s California Hotel Sales Survey Year-End 2009.
Atlas predicts the prices for hotels to fall between 10 percent and 20 percent during 2010. The median price decline by room was 30 percent in 2009, according to the report.
“A lot of lenders were, and still are, in denial as to how much the value has dropped,” said Atlas president Alan X. Reay. “That was the surprise to us.”
Michael D. Blahosky, first VP-director at CB Richard Ellis in Camarillo, California, said he expects value to come back during 2010, especially in light of new initial public offerings and the formation of real-estate investment trusts.
“Just look at the history of our industry,” he said. “When there are a lot of assets and a lot of capital chasing them, it tends to increase value.”
Transactions
Value notwithstanding, Reay said he was most surprised by the lack of activity last year. At the beginning of 2009, Atlas forecast deal volume would drop between 10 percent and 20 percent when compared with 2008. But actual volume decreased by 51 percent.
California’s showcase sale in 2009 was the 404-room W in San Francisco. The property sold for US$90 million and was the largest individual property sale in California during 2009. It sold to Keck Seng Investments, a Hong Kong-based investment firm.
The average price-per-room in northern California declined by 6 percent last year, according to the report.
Meanwhile in Southern California’s Los Angeles County, which saw transactions fall by a state-leading 90 percent to just four deals, the biggest sale was the 208-room Hotel Angeleno in Los Angeles. It was sold to Ascot Hotel for US$35 million.
The average price per room in Southern California declined by 66 percent, according to the report.
San Bernadino county was the only county in California to see a pick-up in transactions, from eight to 11. The average price per room in the county, however, declined by 13 percent.
Picking up in 2010
While there was a big drop-off in deal volume last year, activity should pick up in 2010, Reay said.
Atlas expects dollar volume to double and sales activity to increase to between 150 to 175 transactions, following the 92 deals completed in the past year. More than half of those deals will be lender sales, the report said.
“The stumbling block could be that lenders don’t want to sell at what the market price is,” Reay said.
