A rising tide floats all boats, as the saying goes, but that's not always a good thing. Rising interest rates place upward pressure on capitalization rates, as Sellers are presented with lower offers from buyers paying more for capital. The situation presents an opportunity for cash buyers, but not only for REITs and other institutional players, as the article below suggests. As we see in Miami, foreign HNWIs and family offices, who have already been using US hotel investment as a safe place to park capital, are well positioned to take advantage of this delta to achieve larger than usual returns.
Our firm specializes in structuring these cross border transactions.
All-in borrowing costs are in the 5.5% to 8% range (depending on leverage), wrote R.W. Baird analyst Michael Bellisario in June. “Simply put, the math doesn’t pencil well for buyers; all-cash and/or unlevered buyers (e.g., Hotel REITs) have a relative advantage today, but they do not appear overly motivated to ‘lean in’ just yet,” he said.