International Investors Target U.S. Hotel Properties
Foreign investments in the U.S. continue to increase. This last year marks one of the largest foreign investment influxes in real estate investments. U.S. real estate is a very attractive investment to international investors, as U.S. real estate is viewed as a safe haven investment option. These investors are willing to put their money and pay a premium in price to hold an investment in a relatively stable market compared to their home countries. Foreign capital has been one of the main drivers in the rise of price escalation in the NYC real estate market. Demand remains high and supply limited.
International investors have shown an increased appetite in investing in hotel properties. Here are some of the deals that took place recently.
- On February 6, 2015, Chinese insurer Sunshine Insurance Group agreed to buy the Baccarat Hotel from Starwood Hotels & Resorts Worldwide for more than $230 million. The sale of the 114-room hotel at 20 West 53rd Street would tie or potentially exceed that of the Plaza Hotel in 2014 as the priciest ever for a U.S. hotel based on per-room cost – at more than $2 million per room.
- Beijing-based Anabang Insurance Group agreed to purchase the Waldorf Astoria New York for $1.95 billion in October 2014.
- In January 2014, the Al Rayyan Tourism and Investment Company acquired The St. Regis Bal Harbour Resort in Miami, FL from Starwood Hotels and Resorts Worldwide Inc.
- In November 2014, Kuwait based investment group KFH Capital Investment Co. purchased the Hampton Inn United Nations and Holiday Inn Express Manhattan Times Square South.
- In December 2014, Rockpoint Group sold its investment in The Manhattan at Times Square Hotel, also to the Al Rayyan Tourism and Investment Company.
Foreigners are also expanding their investments to the outer boroughs; Brooklyn, Long Island City, Queens. Recently, U.K.-based Ennismore Capital purchased a development site in Williamsburg for its Hoxton hotel brand.
According to a recently released Jones Lang LaSalle cross-border study, Japanese investors were the top foreign investors in U.S. hotels during the first nine months of 2014, investing $1.94 billion. Chinese investors were at the top of foreign capital sources for development projects investing $1.34 billion. Chinese inflow into the U.S. is growing largely because of a recent change in the Chinese Ministry of Commerce allowing Chinese companies to invest overseas without preapproval from the Ministry. Chinese investors are also enticed by the EB-5 immigrant investor program, which grants foreign investors green cards in exchange for job-creating investments.
Hotel investors remain optimistic about the future outlook on hotel investments and sector growth. The hospitality industry continues to see large increases in rates and revenues across the country. Core cities with high tourism such as Miami, Orlando, New York, and San Francisco should continue to attract international investors. Even markets like Dallas, Houston, Atlanta, Chicago, and Philadelphia are gaining traction in attracting foreign funds. International investors are not only considering luxury, full-service assets but are also investing in portfolios of select-service hotels. EisnerAmper expects foreign investments in U.S. hotels will continue in 2015 as the geopolitical climate remains unstable in many areas of the world.