The Real Deal New York

Offshore investors’ NYC hotel deals to hit $3B in 2015: report

Qataris, Malaysians and others poised to scoop up long-term trophy buildings: JLL
By Mark Maurer | March 16, 2015 04:10PM

UPDATED, March 16, 4:10 p.m.: Offshore investors are breaking into the hotel market at a rapid rate, and despite what it may seem like from recent headlines, not all are arriving from China. The buyers – many of them hailing from Qatar, Kuwait, Malaysia and Singapore – were involved in 50 percent of all New York City hotel investment sales in 2014, according to new data from JLL provided to The Real Deal.

These investors put $1.9 billion into the city’s hotel market in 2014, a year-over-year increase of 12 percent according to JLL data. But this year, that number is expected to touch $3 billion, according to JLL.

Their strategy: Buy and hold the crème de la crème — regardless of the direction the U.S. market takes — and also look for deals with bigger upsides.

“Investors across the globe are ready to compete for New York hotels of all types,” JLL’s Gilda Perez-Alvarado said in a statement. “They’re targeting large conversion and repositioning opportunities, relatively new mid-market assets and well-established large hotels.”

Last year alone, investors from Qatar, Bahrain, Malaysia, Singapore and Kuwait bought seven hotels in the city with a total value of $1.5 billion, according to JLL. The Keck Seng Group, based in Malaysia and Hong Kong, acquired the 19-story SpringHill Suites New York Midtown Manhattan/Fifth Avenue for $82 million, for example.

Meanwhile, prices in the hotel market are climbing and capitalization rates are falling. The average 2014 cap rate for the city’s hotels was 5.5 percent, down from 6 percent in 2013.

“Confidence in the economy, an increased number of players in the market and strong operating fundamentals are driving intense competition for the top hotel assets,” JLL’s Jeffrey Davis said.

The Chinese have become a dominant force in the city as late. Last year, Anbang Insurance Company bought the Waldorf Astoria for nearly $2 billion and Sunshine Insurance Group agreed to buy the Baccarat Hotel for a record $2 million per room.