Current research by HREC – Hospitality Real Estate Counselors (www.hrec.com) indicates that the volume of 2015 Atlanta hotel transactions will likely exceed all previous years, while existing and new investors in the greater Atlanta lodging industry are reaping record returns.
Key Indicators: Hotel Investor Sales Occurring at Record Setting Pace
- Recently announced high profile transactions include the purchase of the newly-built 228-room Hilton Garden Inn and Homewood Suites dual-branded hotel in Midtown by Carey Watermark Investors; and the upcoming sale to Apple Hospitality REIT of the 128-room Home2 Suites by Hilton – upon its completion in downtown Atlanta this September.
- Currently, multiple downtown hotels are reportedly far along in the sales process including, the 1,200-room Hilton Atlanta, W Atlanta-Midtown, W Atlanta-Downtown, Twelve Hotel Centennial Park and the Twelve Hotel Atlantic Station. If these deals close, 2015 could be a truly record breaking year for hotel sales.
- The HREC Atlanta office brokered the sale of five major hotels in metro Atlanta in the past 18 months including the Embassy Suites Airport and Sheraton Gateway Atlanta hotels.
- In the twelve months ending March, 2015, over 50 hotels transacted in metro Atlanta, over 25% more than the previous year.
- The total dollar value of properties sold in the past twelve months nearly reached $750 million, representing an 85% increase over the previous year.
- HREC’s brokers throughout the country continue to receive increased requests for hotel assets to purchase in Atlanta.
- Consultants with HREC encountering national developers looking for hotel development sites, especially downtown and in the Central Perimeter submarkets.
Why Investors Want to Buy a Hotel in Atlanta?
U.S. based investors and equity capital:
On a macro level, we believe metro Atlanta is a highly desirable market for achieving strong returns from lodging investments:
- New large scale commercial developments are underway catalyzing job creation; the tourism infrastructure and leisure demand generators are expanding; and the pace of new housing starts is accelerating.
- Highlights include:
- Mercedes-Benz USA relocating its headquarters to Atlanta this summer — a move that will create about 1,000 jobs; and
- Currently under construction in Dunwoody, a 2.2-million-square-foot mixed-use project anchored by State Farm Insurance is one of the largest corporate office developments in metro Atlanta’s history. State Farm will add 3,000 employees over the next 10 years to the campus, eventually housing about 8,000 workers.
- $1.5 billion in new hospitality products, including new attractions, hotel development and improved services for visitors opened in 2014 and beyond.
- Highlighted projects include SunTrust Park in Cobb County, the future home of the Atlanta Braves baseball team opening in time for the 2017 season; and the New Atlanta Stadium for the Falcons football team, also opening in 2017.
- Overall, the metropolitan Atlanta lodging market is thriving. According to STR (www.str.com), in 2014 metro Atlanta ranked No. 1 for the highest growth rate in hotel occupancy among the top 25 U.S. markets jumping more than 8 percentage points last year, and eclipsing top performing cities including Nashville, Dallas, Houston, Boston, Chicago and New York City.
- From 2009 through 2014, RevPAR for the Atlanta market registered compound annual growth of 7.4%, compared to the national RevPAR compound annual growth of 6.8% over the same period. Looking forward, STR forecasts RevPAR growth of over 5% in 2015.
- Hotel investment stability from the presence of state government; Fortune 500 corporation headquarters; the world’s busiest airport; and nationally recognized major colleges and universities;Diversified hotel demand, ranging from growing commercial businesses, leading convention and group demand location and leisure demand/vacationers.
International investors:
- Since 2012, there has been nearly $380 million in cross border investment in the Atlanta lodging market, including the purchase of five hotels by international investors in 2014;
- Still not a premium MSA on radar screens, but improving dramatically relative to currently preferred coastal gateway U.S. cities, Atlanta is assisted by the ease of access for investors provided by Hartsfield–Jackson Atlanta International Airport.
According to Jeffrey S. Brown, Senior Vice President & East Coast Valuation Practice Leader at HREC, “Average Cap Rates (Yield) reflected by Atlanta hotel sales have declined by over 100 basis points in the past 12 months falling to 7.8%. This is a level below the US hotel market as a whole and reflects both the desirability of the Atlanta market from an investor stand point as well as the expectation by buyers of continued improvements in Atlanta hotel’s operating performance.”
