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Hospitality Lawyer: What’s going on in the buy-sell of California hotel transactions?

Author of www.HotelLawBlog.com
20 May 2008

Hospitality Lawyer on California Hotel Transactions.
Our friends at Atlas Hospitality are one of the dominant hotel brokerage operations focused exclusively on California hotel properties. At JMBM’s recent Meet the Money®, Tim Edgar, Senior Vice President of Atlas, gave conference attendees an update on “A Transactional View of Hotel Values” in California. Some of the numbers were surprising, and here is Tim’s full presentation.


A Transactional View of Hotel Values in California

Only a year ago at Meet the Money® 2007, based on then-current trends (and before the credit crunch), Atlas predicted that 2007 would surpass the record number of hotels sold in 2006, sales prices would appreciate in Northern California, the number of new hotels under construction would dampen 2008 volume, and the number of hotels for sale would increase sales.

What a difference a year makes! This year, Atlas reported that 2007 sales declined 12% and sales volume was down 32%, although the median price per room in the San Francisco Bay area was up 50%. The number of hotels for sale had increased by 15% by year end 2007.

A few other highlights from the summary of 2007 sales results:

After reaching unprecedented heights in 2005 and 2006, 2007 saw the California market level off. The state’s sales volume was $3.5 billion, a 32% decrease from 2006’s record-breaking $5.1 billion. Individual transactions were down 12%.

There were some bright spots in 2007, including the 18% increase in the median price per room sold in California. The average price per room also rose, up 9%.

Individual transactions in Southern California were down 19%, but the median price per room increased 17%. Northern California had a 4% drop in transactions, but a 26% increase in the median price per room.

Predictions for 2008

Atlas certainly has its hand on the pulse of California hotel transactions. Here’s what they forecast for 2008:

The total number of 2008 transactions will be down by over 30% from 2007. This equates to about 250 individual sales, one of the lowest figures seen in over 10 years of reporting.

Total dollar volume of transactions in 2008 will decline by over 30% to around $2.5 billion, almost 50% below the peak in 2006.

A number of factors will continue to negatively impact sales activity, including financing difficulty; Rev PAR growth slow-down or decline, disconnect between buyers and sellers on price expectations.

Sales will continue to be slow through 2008 and at least through mid-2009.

Tim Edgar of Atlas Hospitality

By the way, I find this data to be an interesting complement to the national hotel transactional data presented by Suzanne Mellen of HVS. (See “Report on Major Hotel Transactions.”)
Thank you, Tim!

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We’ve done more than $87 billion of hotel transactions and more than 100 hotel mixed-used deals in the last 5 years alone. Who’s your hotel lawyer?

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Our Perspective. We represent developers, owners and lenders. We have helped our clients as business and legal advisors on more than $125 billion of hotel transactions, involving more than 4,700 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or 310.201.3526.

Jim Butler is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” or “hotel mixed-use” or “condo hotel lawyer” and you will see why.

Jim devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM’s Global Hospitality Group® — a team of 50 seasoned professionals with more than $87 billion of hotel transactional experience, involving more than 3,900 properties located around the globe. In the last 5 years alone, Jim and his team have assisted clients with more than 100 hotel mixed-use projects — frequently integrated with energizing lifestyle elements.

Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.

Jim is frequently quoted as an expert on hotel issues by national and industry publications such as The New York Times, The Wall Street Journal, Los Angeles Times, Forbes, BusinessWeek, and Hotel Business. He is the Conference Chairman of The Hotel Developers Conference™ and Meet the Money®.

Contact him at jbutler@jmbm.com or 310.201.3526. For his views on current industry issues, visit www.HotelLawBlog.com.

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