Weak dollar, strong fundamentals drive overseas capital to U.S.
 |
NATIONAL REPORT–The lack of available debt continues to slow buyers and sellers in the U.S. hotel real-estate market, but there's one source of capital that is pouring in: foreign money.
Overseas investment into the U.S. lodging industry appears to be increasing steadily, and foreign capital is beginning to catch the eye of brokers and developers here. Many attribute this increasing trend of foreign investment to the weak dollar.
"The premise is real simple and it makes perfect sense," said Ed James, principal at The Mumford Co. "People are looking for places to put investments and U.S. equities have always been a favorite. When you can come into the hotel market at a favorable exchange rate, you're ahead of the game to start."
 Cahill HREC |
At press time, the exchange rate from euros to dollars was about 1.54. This means the euro can go a long way when investing in real-estate in the U.S. Simply put, overseas investors are seeing their purchase power grow.
 Apodaca PKF CAPITAL |
"Over the last few years, the dollar [value] has been going down," said Bobby Bowers, senior v.p. of operations at Smith Travel Research. "If you're an investor headquartered in London, it takes less of your currency to come over and buy. When companies are looking to buy other companies ... it would be a good time to take a look at that."
In addition, many foreign economies are not experiencing the strict lending policies U.S. banks were forced to enact, meaning debt is easier to acquire in some foreign countries.
Mike Cahill, president and founder of Hospitality Real Estate Counselors, said he is seeing an increase in overseas investment, so much so that, for the first time, his company sent a representative this year to the International Hotel Investment Forum in Berlin. There, Cahill's team could meet with foreign investors on their turf.
But Cahill said the weak dollar is only part of the formula that is driving capital into the U.S.
"U.S. real-estate is considered a secure investment to the rest of the world," he said. "There is a stable economy and a stable government. "
 More bang for your euro |
Rod Apodaca, managing director with PKF Capital, said although the U.S. debt market is soft, the economic incentive is the same as before the credit crunch hit.
"The hotel industry from an asset operations standpoint is still strong," he said. "We haven't seen huge drops in [revenue per available room]. Even if you see an increase in [capitalization] rates, you should continue to see stable valuation for the hotel market."
Cahill noted several ways overseas companies are taking advantage of the U.S. lodging environment.
Individuals or firms can purchase single assets, such as the landmark Ritz-Carlton Huntington Hotel & Spa in Pasadena, Calif., which sold for $170 million to a Hong Kong real-estate investment firm, Great Eagle Holdings, late last year.
