Commercial Real Estate Finance

Archive for the ‘Hospitality’ Category

While my associate David Weinstein chose to discuss how the appreciation of the Yuan is a drain on global liquidity, I’d like to take a more optimistic approach, and mention how commercial real estate, more specifically the hospitality industry, stands to gain from this change.  For the past 23 months the Yuan had been pegged to the Dollar, and attracting a lot of criticism for being under valued.  Now, at long last, the People’s Bank of China (PBOC) has decided to sever its dependency on the Dollar’s exchange rate, and institute new policies to make the Yuan’s value more flexible and market-driven.  The PBOC forecasts the Yuan’s value will climb to 6.7 per dollar by the end of the year.  While this will certainly have some negative repercussions on us Westerners, aka having to pay more for our Nikes, we stand to gain from an influx of Chinese tourists. Read the rest of this entry »

Sorry James Dolan, but while we wait to see if LeBron James will give hope to your New York Knickerbockers, the trade for the Knickerbocker Hotel has given great hope to the commercial real estate industry. Its not the fact that something of significance traded hands, but more so the pricing at which it traded hands.  The competitive bidding environment for this property, at this point in the cycle, may indicate a paradigm shift in investment strategy for those rich with capital to deploy.  Let’s examine further. Read the rest of this entry »

The temperatures are warming up, and summer is right around the corner. After this terrible winter, the last thing most of you want to think about is snow. Be warned, this post is going to take us to the snow-capped peaks of the Wasatch Range in Utah. Over the mountains, on the California coast, Alan J. Fuerstman sits in his office at Montage Hotels & Resorts corporate headquarters. Mr. Fuerstman started Montage in 2002 to cater to wealthy travelers. Currently Montage has two properties open, one in Laguna Beach, and one in Beverly Hills. But the real reason Mr. Fuerstman is our Mensch of the Week is because of the hotel that Montage is opening in December of this year.

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Desperate times call for desperate hoteliers?

There is no doubt that the hotel sector has been the hardest hit amongst the various real estate property types over the last 2 years.  While cap rates have risen steadily across the board in every asset class to the tune of 50-250 basis points, hotels have seen a meteoric rise between 400-800 basis points, mostly depending on the flag and location. I was perusing the daily periodicals the other day when I came upon one of the most ridiculous, fascinating and shocking real estate related stories I have ever read. Read the rest of this entry »

The Burj Khalifa, known for much of its (seemingly decade long) construction period as the Burj Dubai, opened January 4th 2010 to much fanfare and fireworks, which were televised around the globe. It is the tallest tower the world has ever seen. It was supposed to serve as a metaphor for the grandiose and burgeoning man-made (and oil-financed) structures of the city of Dubai itself….a “Mecca” not just for the Arab world, but rather to for the industrialized world as well. It was supposed to attract tourists, all by itself, to a region that was lacking them desperately. But the name change it recently underwent at its grand opening turned out to be a metaphor for something else… Read the rest of this entry »

It wasn’t all that long ago that most hotels operated solely with the intent of accommodating leisure travelers. But for the last several decades, major hotel chains have been trying to lure business travelers by offering “business centers” and “meeting rooms” as part of their hotel. Yet, according to data from the International Association of Conference Centers (IACC), these attempts are continually compromised by the leisure minded nature of their business platform.  Conference centers have always been considered an amenity, not a core competency for hotels.  Sentry Centers, a subsidiary of Sentry Hospitality, is trying to fill this void. Sentry Centers leases dedicated corporate conference centers in urban cores.  Their flagship property, Sentry Centers Midtown East, has been a huge success since opening just six weeks ago.

We are contstantly keeping our eye out for creative real estate plays, and so we decided to dig deeper into Sentry Centers, and figure out why such a business model has led Sentry Centers to become a leading national provider of non-residential conference and executive center services. Let’s look at some of the basics:

1.  Its not a hotel - The operations of Sentry Centers are only focused on business meetings, so there are no “hotel-like” hassles, distractions or compromises. If however, overnight accommodations are necessary, Sentry Centers are strategically located and partnered with world class hotels nearby. Read the rest of this entry »

Mr. Sillerman’s Luxury Resort in Anguilla, which he has lost $180 million on to date

“If your lifeguard duties were as good as your swimming, a lot of people would be drowning”:

-Simon Cowell

Simon Cowell said that on American Idol about a contestant’s stage performance. The quote should be used to describe the real estate investments of Robert Sillerman, who owns American Idol.

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Bloomberg published an interesting article yesterday commenting on the peculiarity of the hospitality industry in Brazil’s capital city, Rio de Janeiro.  As occupancy and average daily rates have plummeted across the globe since we entered this period of economic recession, demand for hotel rooms in Rio has been on the rise.  Occupancy has risen 5.6% and room rates have gone up 12% in the first half of 2009.  Here in the States, in contrast, occupancy has sunk 11% and rates have fallen 8.7% over the same period.

What is the reason for Rio bucking the trend in the bleeding hospitality industry?  Read the rest of this entry »

Jan A. deRoos, Ph.D.,
HVS International Professor of Hotel Finance and Real Estate, Cornell University Hotel School

Dr. deRoos, on the faculty of the Cornell University Hotel School since 1988, has devoted his career to hospitality real estate; with a focus on the valuation, financing, development, and operation of lodging, timeshare, and restaurant assets. He holds B.S., M.S., and Ph.D. degrees from Cornell University, all with majors in Hotel Administration.

Dr. deRoos is director of the Hotel School’s Center for Real Estate Finance. A frequent speaker on these topics, Dr. deRoos regularly contributes to lodging industry conferences in the Americas, Europe, and Asia. Prof. deRoos’ current research is focused on three themes; the design and implementation of hotel management contracts and hotel leases, investment returns to lodging properties and supply/demand dynamics of lodging markets.

Prior to his teaching career at Cornell, Prof. deRoos worked extensively in the hospitality industry. Industry experience includes work for the Sheraton Corporation in New York City, an engineering professional. He worked for Remington Hotel Corporation as Director of Engineering, responsible for the engineering operations and renovation planning of the firm’s owned and managed hotel portfolio, and as Senior Project Manager, responsible for the construction of new properties and renovation of existing hotels. During this period, Prof. deRoos was responsible for the construction of Marriott Hotels, Hilton Hotels, and Hampton Inns.

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The Week of July 4-10

-Apparently CBRE does want you to think about the environment before printing those emails.  They have submitted 225 buildings for LEED certification.

- Deutsche Bank is selling 825 Eight Avenue after all.

- A bankrupt lender has accepted funding that will pull them from the icy grip of Chapter 11.

- A mixed use property in London has fetched a 122 million Euro price tag.  What’s the conversion rate again? Read the rest of this entry »