Savills Studley launches US hotel investment banking platform as financing for asset class grows tighter

Cara Leonard will lead the group as a senior managing director in LA

Cara Leonard
Cara Leonard

From the Los Angeles website: Savills Studley is building a new U.S.-based hotel investment banking platform with a focus on securing financing for hotel projects in gateway markets such as New York, Los Angeles and Miami.

The company has tapped Cara Leonard, an alumnus of real estate advisory firm Lowe Enterprise Investors, to lead the group as a senior managing director in L.A. She will report to George Nicholas, the London-based global head of the company’s hotels platform. Nicholas was recruited last November from JLL.

Savills’ move to bulk out its hotel financing services offerings comes amid a tight market for hotel financing in the U.S.

“A lot of lenders went out at the beginning of 2015 and made a lot of hotel secured loans and are now looking at their portfolios and hoping to moderate their hotel investments to some degree,” Leonard told The Real Deal. “They’re being more conservative in their overwriting. There are still some very active lenders in the marketplace but a handful have backed out completely.”

The top brass at Savills Studley believes the company is well positioned to help hotel developers find alternate sources of financing as traditional lenders tighten their purse strings, Leonard said. She declined to comment on any specific deals currently in the pipeline.

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“Certainly, with a smaller universe of lenders here in the US, we’re going to be looking overseas, which is frankly why this opportunity was so appealing to me,” she said. “Savills has an incredible network of clients overseas looking to invest in the U.S. and is seeing very aggressive investments coming out of China and the Far East. We’re well positioned to bring that money here.”

It’s easy to see why investors may be struggling to come to terms with hotel pricing. Shares of U.S. hotel operators, owners and timeshare companies dropped by more than 22 percent last year, while the performance of the overall stock market remained relatively flat, according to a recent report. Nationally, the industry predicts 4 percent growth in revenue per available room (RevPAR) this year, which is less than the 5 to 8 percent growth rates seen over the last several years.

The lack of confidence from investors has spilled over into the investment sales market, stymying sales.

“Buyers being a little more conservative in their underwriting that they were six months ago,” Leonard said. “Sellers are still focused on where the markets were, so there is a disconnect between where buyers and sellers are.”

Leonard said Savills Studley plans to hire more finance brokers with experience in the hospitality business to bulk out its teams in both New York and Los Angeles. She said no particularly hiring targets have been set out, but the company may turn to acquisitions in order to grow.

Leonard served as the strategic head of the structured finance platform at Lowe, where she oversaw the sourcing, underwriting, structuring and negotiating of debt and preferred equity investments in hotels.