Hotel Investment Decisions Today

[Music] welcome back to America's commercial real estate show I'm Michael Ball thanks for being with us the segment's brought to you by our bure crowd institutional quality crowdfunding check them out at harbor crab comm today we're talking about hospitality about the hotel industry and have a special guest for you next it's Tom France and Thomas president of the hospitality group with Ball real T's headquartered in Atlanta Tom thanks for being with us always a pleasure we know it's interesting to hear the consultants the advisors the economists and analysts but it's also interesting to see it from the desk of people actually in the business right and Tom you're helping people buy and sell hotels all over the country and a lot in the southeast so if someone is looking to buy or sell hotels right now especially if they're looking to sell where are we in the hotel cycle it seems like this economic cycles being great and the hotels have done well as a lot of real estate but some people getting concerned the cycles a little long in the tooth what about in hotels what are the buyers and sellers saying that you talk to every day about that what I think everybody is concerned similar to the rest of the real estate market it is long and they're looking at and they're going is this bubble really gonna burst we're looking where occupancy rates are continuing to chug along they're they're steady they continue to go up a little bit here and a little bit there most of all that every surprised about is is that the ADR everybody's rate continues to go up at 2 or 3% a year surprisingly enough rev Park continues to outpace the average daily rate whether you're in the full service sector or if you're in the limited service sector so for if you're an owner that is that's really good so that's what people are looking for and if you're an investor looking to come into the hospitality sector that's what you want to look for so if you're looking for or thinking about disposing of your property now's the time to do that because the market is steady and looks like it will be through 2018 that's what all the market and projects they're looking towards for this year yeah and I guess if you want to sell in 2018 you you better be starting now to really get it done and closed by the end of the year so what about financing you know it seems like the lenders can really impact the cycle and and property values so what do you seem for financing for it tells today of far as underwriting and rates lenders like hotels interesting the question you know for years if you wanted to go to to go to the bank and get financing it was like you had a big black mark on your forehead because nobody wanted to finance a hotel it was the forbidden piece that you didn't didn't handle today there are banks that are out there that are welcoming and back into the diversity of their portfolio we do know that there are lenders such as JP Morgan and Morgan Stanley who have large tranches of cash and that are looking for diversity across that portfolio that are willing and looking and welcoming hospitality investments into that the SBA if you have a CMBS property that's ready to roll out of that program and your individual owner the SBA program is the best outlet for you for from that standpoint so if you're from that one if you're if you're just a middle-sized investor that is out here and you've got multiple properties conditional financing has turned out to be the best there are a lot of lenders that are in here there are regional lenders that are looking to to finance and bring your property into the fold so financing is it's much easier than it was 18 to 24 months ago okay well we're talking with Tom Franklin hotel broker with the Hospitality Group at bull Realty so Tom let's say that someone is in another sector and they're looking to diversify a little bit is there such thing to bind a property a hotel but have a little cookie cutter kind of a situation or I guess a coupon clipper I think the interesting thing is is that you know we've got two types of ownership when it comes to property you've got that type of owner who likes to go out and buy the property who likes the value at her who likes the ground up type of construction and then you've got the person who likes the coupon clipping and we're finding more and more investors today that are rolling out of properties that just one are looking for that steady seven eight nine ten percent return and they just want to say would you send me the check every month or every single quarter they are not operators all they want is we just send it to the hotels or kind of like businesses right is that exist in the hotel of us but absolutely it does and what we've got is we have sellers that are more than willing to sit down and say okay we know that in most cases that if you have a franchise property there's always a change of ownership pip and there's OP and you need an operator and a lot of the owners are willing to stay in is the operator and in most cases they work very well with with the franchise rep and they will do your pip for you on the change of ownership pip and they will either stay in and operate the property for you or they will help you find and operate it for the property and they will be more than happy to send you your investment check or your return every single month or every single quarter so do you have one now that a Wester could buy absolutely we have we have two of those that are on there right now we have owners that are willing to sit down and do it we have a couple of properties that are you know we have one in just under six million dollars and we have one that sits in the mid 7s or the owner will sit here and work with you through the pip and we'll continue to operate it there they are they are really willing to do that and they're relatively good operators okay well good and it's Michael salad way that does also sells hotels with your group these are not Roach Motels on the side of the road right these are nice properties these are very nice properties these are you know IHG properties they're flagged and the owner has done a great job maintaining them and and the change of ownership pips are not huge they sold and the other things is they they know that they've got a good reputation and they can help you negotiate the change of ownership tips so it's it's great yeah and you mentioned the change of ownership yep tell the audience what pip stands for and if you will give them some tips related if you are a seller and you're going to be selling your property what should you think about related to the hip a pip is property improvement plan and every franchisee has when we need when you change ownership every franchisee comes in and says when I go from one owner to the other owner this is there one single time that they can come back and say I need all of these things done this we've improved this is their wish list okay they're gonna then they they go from top to bottom stem to stern and they're saying this is everything that we want done and you you can sit down and you can negotiate some of the things out but this is their one shot and they work through it and and sometimes they can be absolutely staggering when you look at it and if you're a new owner you come in here and it'll take your breath away and even if you're the seller it will take your breath away so what you have to do is some of the sellers that are in here if you're selling the property we suggest that you talk to your franchisor up before you take it to market so you have a really good understanding of what that buyer is gonna face when you sell the property because it's gonna affect you know whether I'm doing a multiple of my rooms revenue or whether I'm doing a cap rate it's gonna affect both of those and it's gonna affect my purchase price and you want to know where I'm gonna be in that marketplace because you don't want to be surprised and you certainly don't need the buyer surprised yeah yeah that makes a lot of sense so what would you leave our audience with Tom related to the hotel industry especially some of our audience that maybe they're not in the hotel industry you know one of the things that jumps out to me is it seems like it's it's a lot more of a business than the typical real estate sectors that we invest in it's still real estate and it is a business and they are there they are married together without a doubt one of the things is still out there is is you know it is just like any other business today there tons of technologists in there but I need everybody to understand that it is still an operating business and it's service-oriented in if the the the difference being is if you're not savvy at service and you can't deliver the service and that all affects the bottom line one of the nice things that we do is is we've got a lot of experience doing hotels and having the ability to go in and look at them and say this is a good property this is a bad property here are some of the improvements that can be made so that we can get the buyer into the property and say here's your returns and here's what you can expect or not expect so that we can match the buyer with the property in the returns that they are expecting yeah I mean that's important I think as a seller you want a broker who can come in and say hey to a buyer hey maybe if you do this and this and this and this you can improve values and it helps sell a property and obviously it helps a buyer get a good return right absolutely yeah and it's interesting because it seems like because it's such a service business I mean it's in a state in a hotel recently where I'm sawing a larger property in another state and an estate of this hotel and I won't go back I mean it was okay but you know the food could have been better at breakfast that it could have been a little cleaner and the lobby's so I mean things like that if those problems hadn't have been there I'm going back to that city I would stay there again so it does seem like there's a lot of opportunity there is what and I think one of the things that people walk into today is it's not when it's it's not the lobby that you walk into and you for you you say a little bit about the food I still think that the thing that sets the pace is I walk into the bathroom if the bathroom isn't clean I'm not staying yeah yeah well your bath I like good bacon you know I won't really from the South you know there you go Tom thanks for joining us good information you're welcome and thank you for joining us there around the country wherever you're watching or listening iTunes one of the podcast sites or our YouTube to be sure and visit our site commercial real estate show comm and comment and share and know what you think until next week be sure that you always lead learn and laugh and join us for America's commercial real estate [Music]

Channel: America's Commercial Real Estate Show

Views: 5,351

Rating: 4.7647057 out of 5

Keywords: agent, akb media, america's commercial real estate show, broker, bull realty, commercial real estate, commercial real estate agent, commercial real estate show, commercial real estate training, cre show, forecast, guide, industrial, industry, investing, landlord, leasing, marketing, michael bull, multifamily, office, real estate, strategies, success, tenant, tips, training, video, youtube, youtube video, zoning, Tom French, The Hospitality Group, Hospitality, Hotel, RevPar, PIP, Bull Realty

Id: Aog1iVJ0IaA

Length: 11min 49sec (709 seconds)

Published: Thu May 17 2018