Despite Challenging Times, Firms See Opportunities for Growth
- Feb 06, 2009
While the recession continues to advance, some real estate companies are finding opportunities to do business. Most recently, HEI Hotels & Resorts, identifying some softening in hotel prices, has thrown its hat into the ring, with plans to shell out billion of dollars this year on acquisitions and developments.HEI Hospitality Fund III L.P., a fund of HEI Hotels & Resorts, has approximately $500 million in equity, and in spite of the gloomy economy, plans to purchase and build between $1.5 billion and $2 billion in hotels and resorts over the next two years.Steve Mendell, HEI’s executive vice president of acquisitions and development, pointed out that the firm is now in search of full service upscale hotels in areas with high barriers to new development. He also noted that “for the first time in about 16 months, we are beginning to see hotel prices come in line with market expectations as the expectation gap narrows between buyers and sellers.”Since it isn’t likely for the recession to go away any time soon, He expects price to become even more appealing to buyers and developers as the year progresses. “Cash always is king in this part of the real estate cycle, which we believe will give us a competitive advantage, coupled with our ability to innovatively structure transactions and our track record of closing quickly at an agreed-upon price,” added Mendell.The fund will target hotels and resorts in the United States, Canada and the Caribbean. Desired locations include downtown central business districts in urban, premium suburban and airport sites. In addition, HEI remains focused on complementing its property portfolio with independent upper-upscale and resort properties located in strong markets. The firm is dedicated to buying hotels upon completion of construction from third-party developers.But it’s not just hotel firms planning to get in on the action as of late. Asset Management Consultants Inc. announced earlier this week that it plans to expand the firm’s portfolio by acquiring more than $150 million in commercial real estate investments in 2009. The company is seeking investment opportunities in the Los Angeles, Orange County, San Diego, San Antonio and Austin markets. After making eight acquisitions in the last nine months, the firm now owns and manages more than 3 million square feet of investment real estate, and is looking to continue expansion.In addition, CPN reported last week that a joint venture called Cofinance-RiverOak Realty Partners–the combination of Cofinance Inc. and RiverOak Investment Corp. L.L.C.–was recently formed with a goal of gathering “opportunistic real estate acquisitions” in the Northeast corridor from Boston to Washington, D.C. The new entity is currently exploring potential acquisitions of multi-family, office, retail, industrial and hotel projects, with special emphasis placed on distressed situations requiring intense property and asset management. The venture will target acquisitions that range from single asset deals between $15 million and $50 million, to portfolio purchases in excess of $100 million.Also, last month CPN reported that Place/BV Student Housing Fund L.L.C. will set aside approximately $50 million to acquire pre-distressed, distressed and foreclosed student housing properties. With leverage, the fund will have about $150 million to shop the market under the management of BVP Managers L.LC., a joint venture involving Place Properties L.P. and Blue Vista Capital Management L.L.C.