canadian hotel investment trends

Q2.2014
CANADIAN
HOTEL INVESTMENT TRENDS
CENT
RA
L5
1
8%
%
WE
ST
4
YTD TRANSACTION ACTIVITY
$374M
TOTAL VOLUME
Number of Trades:
Transaction Volume:
Price Per Room:
EAST 1%
45
$374M
$67,000
INTEREST RATES &
FINANCIAL INDICATORS
Prime (Canada)
Prime (U.S.)
5 Yr Gov. Bond
10 Yr Gov. Bond
LIBOR 3-month
S&P/TSX Composite
2014 GDP Forecast
3.00%
3.25%
1.46%
2.11%
0.23%
15,188
2.4%
As of August 6, 2014
Sources: Bloomberg, Bank of Canada, TMX,
Confrence Board of Canada
TRANSACTION REPORT
Canadian hotel transaction volume in
Q2 2014 is reported at approximately
$170 million, although this excludes the
sale of the Fairmont Empress in Victoria,
BC as pricing is confidential. With this
significant sale excluded, year-to-date
(“YTD”) transaction volume has reached
approximately $374 million, less than half
the volume reported at the same time last
year. Further, approximately 20 fewer deals
were completed during this time in 2014
versus 2013.
•
The majority of hotels sold were
in tertiary markets although these
accounted for just over a third of
total volume and contributed to a
fall in per room pricing. At this time
last year, transactions were more
evenly distributed between tertiary
and primary markets, with the latter
generally commanding a pricing
premium.
•
Private
Investors
dominated,
representing approximately 43% of
total transaction volume, although
Real Estate Companies/Developers
were not far behind at 34%.
•
The number of court-ordered and
lender driven sales is somewhat higher
with four in the first half of 2014 versus
only one YTD Q2 2013.
Other notable trends include:
•
•
•
CONTACT INFORMATION
National per room pricing was
reported at $67,000, well below
$92,000 as reported in the first half of
2013. Eleven trades were reported at
over $100,000 per room versus 16 at
this time last year.
Only one hotel has sold for over $50
million, compared to four above this
threshold at this time last year.
Transaction volume in the first six
months of 2014 was highest in Central
Canada, with 51% of the national total,
or $189 million in volume split equally
A full list of YTD Q2 2014 transactions is
included as an Appendix.
CANADIAN QUARTERLY HOTEL TRANSACTION VOLUME
416.815.2371
416.815.2347
604.662.5192
416.815.2313
403.750.0514
VALUATION & ADVISORY:
Brian Flood
416.874.7272
Cindy Schoenauer
778.372.3935
Kimberly Dickey
416.815.2348
Karina Toome
416.847.3243
$800
$700
$600
MILLIONS ($)
BROKERAGE:
Bill Stone
Deborah Borotsik
Mark Sparrow
Luke Scheer
Greg Kwong
between Ontario and Quebec. Only
one hotel sold in Eastern Canada,
accounting for 1% of total volume,
with the balance (48%) transacting in
Western Canada.
$500
$400
$300
$200
$100
Q2 Q3 Q4
Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4
Q1 Q2
2010
2011
2012
2013
2014
Source: CBRE Hotels Canada
Q2.2014
CANADIAN HOTEL INVESTMENT TRENDS
Q2 CAP RATE TRENDS
Interest rates are back below where they
were a year ago, and up only slightly from
the lows seen in early 2013, prompting a
‘mild reset’ in the psyche of investors.
Concern over higher interest rates has
temporarily retreated and investors are
refocusing on operating fundamentals,
especially in sectors with increasing supply.
Hotel cap rates remain unchanged from
the previous quarter.
Calgary’s robust economy has meant that
both retail and multi residential cap rates
have been compressed due to the stability
of cash flows and future rental rate growth.
HOTEL PERFORMANCE
Year-to-date (“YTD”) Q2 2014 Smith
Travel Research (“STR”) results indicate
national hotel occupancy is 61.7%, up from
60.0% for the same period in 2013. Room
demand grew by 3.3% with supply growth
of just 0.3%. ADR for YTD June 2014 is up
2.9%, pushing RevPAR up 5.9%.
According to STR, lead markets for
occupancy growth were Windsor (19.4%),
Toronto North/East (11.2%), and Ontario
Central and Mississauga (10.5%), while
the strongest ADR increases were reported
in Vancouver North Area and Banff (6.4%),
and Vancouver Downtown (6.0%). For
RevPAR, Windsor led all markets with growth
of 21.5%, almost entirely attributable to
significant recovery in occupancy.
MARKET SPOTLIGHT VANCOUVER, BC
According to STR, the Vancouver lodging
market is divided into five submarkets;
Downtown, Vancouver North, Vancouver
Airport, Vancouver South/Surrey, and
Abbotsford/Chilliwack.
Vancouver has
reported the strongest RevPAR growth
of all major metropolitan areas for YTD
June 2014, at 12.9%. The Downtown
Vancouver submarket has seen healthy
progress in 2014 due to city-wide
events that pushed occupancy rates up,
specifically in the months of March and
April, contributing to double-digit growth
in RevPAR performance. There were more
city-wide events held in Vancouver this past
spring than in 2013, including the new
annual TED Conferences event, the NHL
Heritage Classic and the North American
Urban Land Institute Spring Meeting, which
was held outside of the United States for
the first time. Vancouver will also host the
102nd Grey Cup in November. The start
of the tourist season which began in May
is showing strength in both occupancy and
ADR, reflecting increases of approximately
8.0-9.0% in RevPAR for each of May
and June 2014, over 2013 results. With
continued strength in cruise ship passenger
volume, a good convention year, and
sustained economic growth, the overall
outlook for 2014 is bright.
Since 2010, 13 hotel properties have
closed in Greater Vancouver, mostly for
conversion to seniors’ or social housing. In
terms of new supply, the 75-room boutique
Hotel Blu opened downtown on May 30th
and the luxury Trump and Marriott-branded
hotels are slated to enter the market in
the short to medium term. The 169-room
Element Hotel in Burnaby is anticipated to
open in January 2015.
To the end of Q2 2014, one property in
downtown Vancouver has transacted. The
Best Western Sands Hotel sold in May
2014 for $30.3 million and at a yield of
2.8%. An alternative use is anticipated.
OTHER COMMERCIAL
REAL ESTATE
HOTEL
Q2 2014 CAP RATE SURVEY
Vancouver
Calgary
Edmonton
Winnipeg
LondonWindsor
KitchenerWaterloo
Toronto
Ottawa
Montreal
Halifax
Downtown
Full-Service
6.50-7.50
7.00-8.00
7.25-8.25
8.00-9.00
9.00-10.00
9.00-9.50
6.75-7.75
7.50-8.50
7.75-8.75
8.75-9.75
Suburban
Limited-Service
7.50-8.50
8.00-9.00
9.25-9.75
9.50-10.50
9.00-10.50
9.00-9.50
8.00-9.00
8.75-9.25
9.50-10.50
9.50-10.50
Focused
Service
7.00-8.00
7.50-8.50
8.25-9.25
8.00-9.00
8.50-9.50
8.00-9.00
8.00-8.50
8.00-9.00
8.25-9.00
8.25-9.50
Downtown
Office (AA)
4.50-5.00
5.00-5.50
5.25-5.75
N/A
N/A
N/A
4.75-5.25
5.00-5.75
5.00-5.50
N/A
Suburban
Office (A)
5.75-6.25
5.75-6.25
6.25-6.75
6.75-7.25
7.50-8.00
6.50-7.00
6.00-6.75
6.25-7.00
6.50-7.50
7.00-7.50
Industrial (A)
5.50-6.00
5.50-6.00
5.50-6.00
6.50-7.00
8.25-8.75
6.50-7.50
5.75-6.25
6.00-6.25
6.25-7.00
6.50-7.00
Retail
(Regional)
5.00-5.50
5.00-5.50
5.00-5.50
5.75-6.25
6.25-6.75
5.50-6.00
4.50-5.50
5.00-6.00
5.50-6.25
5.50-6.00
Apartment
High Rise (A)
3.50-4.00
4.00-4.50
4.50-5.00
N/A
5.00-5.50
4.75-5.25
3.50-4.25
4.25-4.75
4.75-5.25
5.25-5.75
Source: CBRE Limited
Note:
decline from previous quarter;
increase from previous quarter.; no arrow reflects no change from previous quarter.
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CANADIAN HOTEL INVESTMENT TRENDS
Q2.2014
TRANSACTION HIGHLIGHT
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TRANSACTION HIGHLIGHT: Radisson Plaza Hotel Saskatchewan
Regina, SK
TRANSACTION HIGHLIGHT
Address:
2125 Victoria Ave, Regina, SK
Guest Rooms:
224
Year Opened:
1927
F&B:
Cortlandt Dining Room
Victoria Tea Room
Monarch Lounge
Meeting Space:
13,900 sq. ft.
Other Amenities:
Fitness Centre
Spa
Business Centre
Sale Date:
April 2014
Purchase Price:
$32,800,000
Price Per Room:
$146,400
Cap Rate:
11.6%
The Radisson Plaza Hotel Saskatchewan is located in
downtown Regina, overlooking Victoria Park. The historic Hotel
Saskatchewan was part of the chain of hotels constructed and
owned by the Canadian Pacific Railway in key cities and resort
destination across Canada, including the iconic Château
Frontenac in Quebec City, the Chateau Lake Louise and Royal
York Hotel in Toronto.
The Hotel features 224 guest rooms, a restaurant, lounge, tea
room, 13,900 sq. ft. of meeting space, indoor whirlpool, steam
room, exercise facilities, business centre, member’s club, leased
barbershop, leased salon/spa and leased bakery.
The Hotel was purchased by Temple Hotels Inc. in April
2014 for $32,800,000 or $146,400 per room. Temple has
announced plans for a $6 million capital program to be
completed over three years. This is Temple’s second acquisition
of 2014, following an active 2013 with six acquisitions for a
total consideration of approximately $176 million.
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TORONTO
145 King St. West, Suite 600
Toronto, ON M5H 1J8
CALGARY
530 8th Ave. SW, Suite 500
Calgary, AB T2P 3S8
VANCOUVER
1111 West Georgia St., Suite 600
Vancouver, BC V6E 4M3
Q2.2014
TRANSACTION REPORT
JANUARY
The following pages provide a summary of YTD Q2 2014 Canadian hotel and resort transactions over $1 million.
Property Name
City
Province
Rms
Purchase Price
Price/Rm
Cap Rate
Microtel Inn & Suites by Wyndham
Blackfalds/Red Deer
Blackfalds
AB
63
$8,325,000
$132,100
N/A
Coquitlam Sleepy Lodge
Coquitlam
BC
17
$2,730,000
$160,600
N/A
Comfort Inn Dartmouth
Dartmouth
NS
80
$3,475,000
$43,400
N/A
Yellowknife
NWT
106
$21,680,000
$204,500
5.4
Brampton
ON
145
$11,800,000
$81,400
N/A
Seven & Seven Motel
Brampton
ON
29
$2,750,000
$94,800
N/A
Motel 6
Huntsville
ON
85
$3,296,000
$38,800
10.4
Vaughan
ON
85
$4,800,000
$56,500
N/A
Montreal
QC
488
$65,000,000
$133,200
6.9
Bow River Inn
Cochrane
AB
44
$4,550,000
$103,400
N/A
Super 8 Cochrane
Cochrane
AB
48
$5,400,000
$112,500
N/A
Quality Inn Maple Ridge
Maple Ridge
BC
61
$3,200,000
$52,500
N/A
Howard Johnson Inn
Vernon
BC
29
$1,725,000
$59,500
N/A
Travelodge Chatham
Chatham
ON
103
$1,875,000
$18,200
4.7
Travelodge London South
London
ON
126
$2,600,000
$20,600
N/A
The Parlour Inn
Stratford
ON
28
$5,725,000
$204,000
N/A
Comfort Inn Levis
Levis
QC
98
$4,100,000
$41,800
5.3
Motel Adam
Gatineau
QC
125
$3,550,000
$28,400
N/A
Best Western Plus Chelsea Inn
Coquitlam
BC
61
$5,000,000
$82,000
2.6
Super 8 West Kelowna*
Kelowna
BC
81
$3,000,000
$37,000
0.9
Travelodge Parksville
Parksville
BC
84
$3,230,000
$38,500
N/A
Comfort Inn Huntsville
Huntsville
ON
71
$2,500,000
$35,200
5.3
Delta Toronto Airport West
Mississauga
ON
297
Comfort Inn Oshawa
Oshawa
ON
79
Quebec City
QC
406
Confidential
Hotel des Seigneurs
Saint Hyacinthe
QC
290
Confidential
The Ambassador Hotel
Kingston
ON
246
$9,800,000
$39,800
N/A
Quality Hotel & Conference Centre*
Niagara Falls
ON
145
$6,730,000
$46,400
N/A
Quality Hotel & Conference Centre
Oshawa
ON
194
$4,680,000
$24,100
N/A
Holiday Inn Express Kamloops
Kamloops
BC
80
$8,900,000
$111,300
7.6
Radisson Plaza Hotel Saskatchewan
Regina
SK
224
$32,800,000
$146,400
11.6
Comfort Inn
Beauport
QC
80
$4,400,000
$55,000
N/A
Pender Island
BC
22
Surrey
BC
76
$11,692,800
Nova Court
1
Holiday Inn and Conference Centre
2
Super 8 Toronto North
MARCH
FEBRUARY
Holiday Inn Montreal Midtown
Loews Hotel Le Concorde
3
4
APRIL
5†
Poets Cove Resort & Spa
6
MAY
Holiday Inn & Suites Surrey*
Confidential
$4,250,000
$53,800
9.7
Confidential
$153,900
N/A
Best Western Plus Sands Hotel
Vancouver
BC
120
$30,345,000
N/A
2.8
Talisman Ski Resort8*
Kimberley
ON
88
$1,800,000
$20,500
N/A
Super 8 Kingston9
Kingston
ON
51
$1,500,000
$29,400
N/A
Z Plaza Hotel
Victoriaville
QC
14
$1,340,000
$95,700
N/A
7
~4~
Q2.2014
JUNE
TRANSACTION REPORT
Property Name
City
Province
Rms
Tunnel Mountain Resort
Banff
AB
95
Radisson Canmore Hotel & Suites
Canmore
AB
164
Purchase Price
Price/Rm
Cap Rate
$14,250,000
$150,000
N/A
Confidential
Days Inn Whitecourt
Whitecourt
AB
79
Hotel Eldorado
Kelowna
BC
53
$7,900,000
$100,000
11.0
Fairmont Empress
Victoria
BC
477
N/A
N/A
N/A
Comfort Inn North York
North York
ON
144
$5,800,000
$40,300
7.0
Best Western Macies
Ottawa
ON
123
$12,250,000
$99,600
8.5
Comfort Inn St. Catharines
St. Catharines
ON
100
$4,100,000
$41,000
7.6
Confidential
Notes:
(1) Temple intends to redevelop 8,300 square feet of unfinished space on the first floor into nine additional hotel rooms and a 750 sq. ft.
breakfast room. The estimated total cost of the new construction and refurbishment is $4.8 million. Cap rate based on based on the 2015
forecasted net income, and total investment in the property of $26.48 million, including new construction and refurbishment.
(2) Hotel was vacant at time of sale and will convert to retirement uses.
(3) Hotel to convert to student residence.
(4) Hotel closed in February 2014, was closed at the time of sale. Hotel will be converted to a seniors’ residence.
(5) Hotel was closed at the time of sale. Purchased for redevelopment.
(6) Fractional resort. Purchaser acquired 19.25 of 22 fractional units, marina, all F&B and amenities.
(7) Will be converted to alternate use.
(8) Resort was shut down in 2011. Purchaser will complete full renovation and open as a hotel, spa and golf course.
Ski runs will close permanently.
(9) Property will be converted to 51-55 unit rental apartment building.
* Receivership/lender driven sale.
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assumptions and estimates obtained from third parties (the “Information”) has not been verified by CBRE, and CBRE does not represent, warrant or guarantee the accuracy, correctness and completeness of the
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~5~