Hotel Deals Are Picking Up, But Closing Them Requires Creativity

Glenn: [00:00:01] Hey, everybody. It’s your hospitality friend Glenn here. And if there’s elevators like this in my background, it must be NY. You got Ryan Bosch of Arriba Capital. But before we speak to our great friend Ryan, I want to thank our friends over at Actabl. Actabl, they give you the power to profit. Please check them out at actabl.com. All right. I already said it. We got these the elevators over here at the NYU IHIF conference. Morning. Right. So you’ll probably see this after the conference is wrapped up, but I’m curious as to how you’re seeing the general hospitality market from a dollar and cents point of view, since that’s the theme of this.

Ryan: [00:00:38] Yeah. No, absolutely. We it’s funny, I saw someone this morning, first person I saw, we started talking. How’s business and the common theme? I think with everyone on the financing side, deals are happening. But deals are very tough right now, right? To get across the finish line. And part of what’s driving that today is this divide on asset performance in the same markets. You’ve got so many hotels out there that deferred CapEx and are kind of just chugging along. And we’re really starting to see the divide on new hotels that didn’t defer CapEx, really pull away from the rest of the comp set.

Glenn: [00:01:11] Okay. Which makes a lot of sense. So let’s break that down for a second. So hotels that were fully invested throughout the the dark days of the, you know, 2020 onward, we’re in a much better position, particularly coming out of it because their hotels were in better state. Now, the ones that didn’t do it, they’ve fallen far behind in rate and probably occupancy as well. Now, what does that realistically mean? How does that change the dynamic of what’s going on there from an investment point of view?

Ryan: [00:01:40] Well, I think what we’re starting to see is forced decisions for people who own those assets, right? Whether those assets are going to market for sale, they’re going they’re going for that refinance and finding cash flow being a little short. Okay.

Glenn: [00:01:50] All right. Hold on one second there because some of the recent coverage I’ve been doing has been talking about how deals seem to be coming more towards the to the market. Things are happening. And I think I might have made the assumption that maybe the buy and ask has finally come together, but it’s looking like the sell side is getting much more serious about the need to sell as opposed to the desire to sell. So please now continue from there. I think that’s an important benchmark.

Ryan: [00:02:15] Absolutely. I would say I don’t see a wave of distress, but we’re starting to see more and more assets where.

Glenn: [00:02:21] I don’t see it as the asset is distressed. I’m seeing the owners are being distressed by the asset and they’re getting to the point like, oh, enough already. Right.

Ryan: [00:02:30] Exactly. Yeah, exactly. And I think for a lot of owners, when they’re going to that refinance point and they find, hey, we’ve got to put right, I have five, $10 million check and do a cash in. They’re saying, you know what, maybe let’s take the chips off the table and move on to the next project.

Glenn: [00:02:44] And that’s one of the things that’s great about the hospitality industry that buyers typically don’t want the property fresh and brand new condition. They want to be able to do what they want to be able to do.

Ryan: [00:02:54] Exactly. There’s got to be some meat on the bone for a new buyer, right?

Glenn: [00:02:57] All right. So it’s all kind of coming together to favor the to the buyer side. So what does that mean where we are? If it’s getting tougher to actually close the deals, then what are you really seeing in the future?

Ryan: [00:03:09] Look, I think.

Glenn: [00:03:10] And remember we’re recording this, so we’re going to either praise you or shame you in six months.

Ryan: [00:03:14] Sale sales volume is already up for the year compared to last year. I think that trend continues to the balance of the year for a lot of the reasons we just spoke about. I don’t see it being a gangbusters investment sales year by any means, especially with interest rates just popping a little bit. But I think there’s going to be a lot of transaction activity out there, and there’s going to be a lot of good purchases out there.

Glenn: [00:03:33] Excellent. So every obviously everyone wants to make a good purchase. What are people Typically doing and thinking because is it still a lot of off market deals? How is it all coming together? How is it being things come to fruition?

Ryan: [00:03:45] I think there’s off market deals. I think what we’re seeing is a lot of creative capital stacks on getting deals done right now. So I think if you have some creativity, there’s a lot of interesting transactions out there.

Glenn: [00:03:55] That’s kind of where you come in.

Ryan: [00:03:56] Exactly. Yeah.

Glenn: [00:03:57] So what are some of the solutions then that you’re putting together that’s helping get those deals over the finish line.

Ryan: [00:04:04] You name it. I mean, we’re seeing all different types of alternative financing right now, whether that be space, people getting creative. You know, we have a deal we were talking to last week, they’re doing a $75 million USD deal. Yeah, that’s unheard of five years ago. So all sorts of ways to skin a cat. I’m getting a deal done today.

Glenn: [00:04:22] Well, if someone wants some alternative financing, I got a lot of rolls of pennies at home. You know, maybe we could just roll them in right there.

Ryan: [00:04:29] Whatever it takes.

Glenn: [00:04:30] Knock off 12, 15 bucks off asking price. That might just help. I like it, right?

Ryan: [00:04:33] I gotta get you on the investments.

Glenn: [00:04:35] Yeah. All right, check him out at Ariba Capital a RRIBA. I’ll just put it down over here. Right there. Look, you see it? All right? He’s. Ryan. Glenn, thanks so much for watching. I hope this was a great conference for future Glenn will know by.