In the latest episode of the NAREIT Podcast, Lukas Hartwich, a senior analyst with Green Street Advisors, discussed the recent transaction activity in the hotel sector.
Since the middle of August, Strategic Hotels & Resorts, Inc. (NYSE: BEE) announced a sale agreement with private equity firm Blackstone and Ashford Hospitality Prime Inc. (NYSE: AHP) said it is exploring strategic alternatives. Hartwich attributed the interest in lodging sector to discounted asset values in the public markets. The hotel sector is currently trading at a rate of roughly 20 percent below net asset value (NAV), according to Hartwich, which he described as a “pretty wide gap” relative to historical data.
“You’ve got a bunch of hotel companies now where the value of their underlying real estate trades for a higher price in the private market than it does in the public market, so I think that disconnect is the main reason why you’re seeing some activity in terms of take-outs and rumors around other corporate events,” he said.
Hartwich noted that interest in hotel REIT assets is zeroed in on the luxury and limited-service segments. Looking ahead, Hartwich said the driver in lodging M&A will continue to be assets trading at discounts.
Hartwich speculated that more deals in the hotel sector are on the way. “I think we’re just getting started,” he said.