canadian hotel investment report_2012

7/31/2019 Canadian Hotel Investment Report_2012

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Colliers International Hotels

2012 Canadian Hotel Investment Report


2/16

A summary o transaction market highlights are presented below:

Increased demand by investors or strong perorming assets led to resilient pricing rom previous

years, particularly in the ull service and select service segments, where high-quality institutional

grade product was brought to market.

Sales o ull service hotels reached $619 million, a 25% increase in volume rom 2010.

Sales slowed modestly in the second hal; partially the result o hesitance in the market given

the global economic and political worries that became apparent mid-year.

Although only one third o all trades were over the $10 million threshold, over three quarters o

the years volume was attributed to these deals.

Saskatchewan and Manitoba witnessed the largest gains in transaction volume due to product

availability combined with solid economic strength. Ontario, British Columbia and Alberta were

the most active provinces based on the number o sales.

Cross-border sellers accounted or 40% o transaction volume. These sellers were primarily

US-based private equity unds that disposed assets to redeploy capital in other opportunistic

ventures.

Three portolio deals totaling $302 million in transaction value were completed during the year,

the highest year or portolio transactions since the approximate $500 million in 2008.

Lender-driven sales only comprised about $70 million o volume (6% o total volume) in the

overall market, down rom $86 million (12% o total volume) in 2010.

We begin this years Report with a special eature on the historical hotel debt market in Canada.

Given the reliance on the availability o debt or the majorit y o investors, our piece ocuses on

providing an overview o the variety o nanciers that have been active over the years - and some o

the dynamics that impacted the market, or better or worse.

The balance o the Report provides a complete review o hotel transaction market results rom 2011,ocusing on buyer/seller composition and pricing metrics.

We hope you enjoy the Report and as always, we welcome your eedback.

Canadian hotel investment report

In 2011 the Canadian hotel real estate market experienced a second year o transaction

market improvement, with total dollar volume rising 54% rom 2010 and 167% rom

2009. The year ended as the fth highest year or hotel transaction volume, asmeasured over the past 25 years, with $1.107 billion recorded across the country.

40% of transaction

volume was driven by

non-Canadian based

sellers.


2 Colliers International Hotels


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historiCal perspeCtive of the hotel debt market in Canada

Conditions in the hotel fnancing market have a direct impact on the liquidity o hotel assets in a given year,

with the availability, source and terms o fnancing all aecting the level o investment activity. Colliers

begins the 2012 Canadian Hotel Investment Report with a retrospective review o the hotel debt market inCanada and how it has shaped the investment market over the years.

Given perceived risks associated with the hotel sector, not

surprisingly the appetite or hotel lending is considerably

smaller than other commercial sectors, with loan programs,

guidelines, and pricing varying widely among lenders. Overall,

hotels are considered a riskier proposition given their signicant

operating component requiring specialization, unlike the

relatively straightorward nature o other commercial real

estate.

The ebbs and fows o the macro-economic environment are

highly sensitive or hotel operations. Better economic times

drive liquidity to the market and in turn create a higher appetite

or less traditional hotel lenders. Over the years there have

been distinct lending cycles which are tied to market conditions,

resulting in a variety o debt players entering the market. In

reviewing the last three decades we have witnessed a wide

spectrum o lenders enter the hotel space, with the shit in

debt sources ultimately impacting not only the level o activity

in each period, but the prole o buyers.

In the mid to late 1980s, the Canadian hotel industry was in a

period o rapid development. International fows o investment

capital were particularly robust in this timerame, against a

backdrop o tax incentivized deal structures primarily through

Limited Partnerships which saw unsophisticated investors

enter the hotel investment arena. The market was uelled

by a prosperous global economic environment as well as the

availability o large hotel assets in major urban and resort

markets across the country. Roughly $1.3 billion in hotel

volume transacted between 1985 and 1989, o which about

45% represented oreign capital. Dominant lenders, comprising

Canadian Schedule A Banks, Trust Companies and Insurance

Companies, were lured to the hotel market by the positive

economic outlook and potential returns o a growing industry.

By virtue o the ease at which investors and developers were

able to obtain attractive debt terms, the market became very

competitive and over development ensued.

Despite low interest rates, loan-to-values (LTV) were high, in

the 75% to 85% range, which inevitably created severe debt-

servicing diculties in the early 1990s, as the economy began

to deteriorate. Signicant declines in revenue and considerable

supply increases created overhang. For example, the Toronto

Airport market experienced an approximate 50% increase in

supply between 1986 and 1989 - and while this was primarily

due to the augmented growth o businesses with corporate,

industrial and manuacturing companies seeking to relocate to

this area it proved very dicult to absorb as the recession hit

and overleveraged assets were unable to service their debt.

By the time the recession and the eects o the Gul War took

hold in the early 1990s, the highly sensitive and relatively highly

levered lodging market was headed or decline, and resulted

in a sustained period o receivership and lender-driven sales

through the early to mid 1990s. As a result, Canadian Schedule

A Banks, Trust Companies and Insurance Companies liquidated

their portolios through debt portolio sales or individual

executions as owners by deault. Other lender groups were

also reluctant to provide nancing and the transaction market

was signicantly impacted, with most o the transactions sold

under receivership and acquired at discounted levels in all-cash

transactions or through Vender Take Back (V TB) mortgages

by reluctant lenders in possession.

The turn o the next up-cycle took hold by late 1994, bringing

with it a new group o debt and equity players. Established

and experienced Canadian and US hotel investment companies

and private investors purchased distressed assets, in many

cases with VTB nancing. Growing sophistication in the

industry resulted in knowledgeable management companies

that provided turn-around experience who partnered with

opportunity unds and were met by relationship-based US and

international lenders that were actively lling the lending void.

By the late 1990s, Real Estate Investment Trusts (REITs)

emerged as acquirers, with the creation o the rst hotel

REITs in Canada - CHIP REIT, Legacy REIT and Royal Host in

1997/1998, which initially accessed $1.2 billion o equity through


Colliers International Hotels 3


4/164 Colliers International Hotels


85 - 1989

1994 - 1999

2000 - 2004 2005 - 2007 2008 - 2011

Total Transaction

1990 - 1993

the public markets. These public vehicles were generally

restricted to 50% debt by their trust indentures and were

able to source this rom a variety o lenders given their

conservative structure.

For the most part, traditional hotel transactions were beingnanced at 55% to 65% LTV with qualied sponsors and

management teams. US and international lenders continued

to be the dominant lender or hotels or a wide variety o

single asset sales in primary markets across the country.

The Canadian lodging industry slowed by mid-1998 when

the capital markets collapsed and there was speculation o a

North American economic recession.

Commercial Mortgage Backed Securities (CMBS) rst

started lending in Canada in late 1998, and soon became a

dominant lender, with the likes o Merrill Lynch and CSFB/

Column Financial bringing much needed liquidity to the hotel

sector with LTVs in the 60% range.

Limited and costly debt and equity nancing slowed hotel

transactions in 1999 and 2000 as Canadian public companies

could not raise equity in the public markets. In addition, the

cost o capital increased due to a larger spread in Canadian

bonds with commercial lending rates, and lenders retreated

by limiting LTVs to 50% to 55%.

Entering the new millennium, relationship lending played

a larger role as debt nancing continued to be limited with

LTV ratios in the 50% to 60% range. Due to unpredictable

and somewhat volatile cash fows during this period, CMBS

lenders were more constrained as their underwriting criteriawere largely based on consistent cash fow. Beginning in

2002, US lenders such as Capmark (ormerly GMAC) and GE

Franchise Finance (GE) brought liquidity to the market with

a ocus on top tier branded hotels and new developments

providing higher leverage up to 70%. Liquidity during this

period was also provided by larger U.S. and European lenders

who nanced urban institutional quality single assets or

portolios or sponsors with strong covenants.

By 2005 the hotel investment market showed increased

momentum, ueled by portolio transactions that in thethree years ended 2007comprised 70% o the total volume.

Entities such as REITs and pension unds were able to acquire

on an all-cash basis, providing a signicant competitive

advantage in the market. GEs book or hotels reached

a staggering $1.1 billion, with approximately 40% being

new-build hotels as they oered creative structures or

development nancing. CMBS lenders were also active, with

Merrill Lynch originating $550 million worth o loans rom

1998 to 2007.

debt Capital: a look at the ebbs and flows


4 Colliers International Hotels




The up-cycle continued until mid-2008 when the rapid

deterioration o the global credit markets took hold.

Consequently, only balance sheet lenders were able to provide

nancing at even more conservative underwriting levels,

dropping LTVs to 50% to 55%. Private institutional sourceso capital such as ROI Capital, as well as quasi government

lenders (Business Development Bank o Canada and ATB

Financial) and local credit unions, were major debt providers.

In the latter part of 2010 and 2011, we saw diverse

competitors vie or nancing opportunities with improved

pricing and terms.

Credit Unions and regional banks lent on a variety o

asset types in both primary and secondary markets.

We saw signicant single asset and portolio

transactions being nanced by credit unions in club deals

with other lenders.

There was a continued increase in nancing by private

institutional sources and government sponsored lenders.

GEs commitment to the market remained strong, with

exposure in primary, secondary and tertiary markets.

Unlike the US where domestic banks are large

participants, Canadian Schedule A banks never returned

as active lenders to the lodging industry.

As we enter 2012, the market is optimistic that nancing will

continue to improve. US and international lenders should

return to the market and are seeking good quality urban

assets as entry points back into Canada, relying on the debt

yield metric as a central part o their underwriting. The debtmarket remains avourable with a variety o lenders looking

or opportunities, with a ocus on quality sponsorship, good

asset quality and strong markets.

Schedule A Banks, Trust Companies,

Insurance Companies 1985-1989

VTBs, By Default

1990-1993

US-Based, International, CMBS

1994-1999

Unprecedented growth in Canadashotel industry was due in part toreadily available fnancing andattractive tax incentives primarily

through limited partnerships.

These fnanciers never returned asactive hotel lenders ater this period.

Boom turned to bust as the marketwas slammed with lender-drivensales.

Lenders were reluctant to provide

fnancing, but in many cases had nooption.

American and Internationalrelationship lenders und proessionalturn-around management andownership groups.

Period o resiliency and growth markedby growing average deal size and a lowCanadian dollar that was attractive tooreign capital.

First o Canadas three REITs wereormed in 1997.

CMBS, Private Institutional, US-Based

2000-2004

CMBS, Public Equity, US-Based, Private

Institutional 2005-2007

Credit Unions, Regional Banks, Private

Institutional 2008-2011

CMBS lenders provide a liquid sourceo fnancing.

Yield-driven private institutional

lenders fll the void.

Pension unds enter the marketacquiring large portolios primarily inall-cash transactions.

CMBS lenders remain as a logicalfnancing source or many, as seeminglyunlimited amounts o capital areavailable.

Private institutional sources alsoprevailed as a debt capital source.

Deteriorating levels o interest romlenders occurred throughout 2008 asthe Global Financial Crisis set in.

Credit Unions and Regional Banksprovided the vast majority o hotelfnancing in 2009 and 2010 withPrivate Institutional unds ully activeby 2011.


Colliers International Hotels 5

A Case for Debt Yield

Lenders, mainly in the US, are ocusing on anew threshold or lending the Debt Yield. Thismeasures NOI as a percentage o the loan amount,and is emerging as the main tool because it is

viewed as the most direct method or calculatingrisk. Minimum debt yields are set by each lender(typically 10-12%), which in turn sets a ormula orthe maximum to lend on a given property.

This particular measure is useul because thereis no cap rate or LTV argument. When the valueis subjective, a debt yield policy is an objectivecalculation. Canadian mortgage lenders will likelyadopt this metric, particularly where a marketdownturn has clouded property valuations.




In all, 99 hotels sold across the country as

measured by non-arms length transactions

that occurred over the $1 million threshold.

There were three strategic transactions

worth over $300 million, or about 27% o

overall activity (see table on page 7). When

strategic acquisitions are excluded, traditional

transaction volume totaled $786 million, a

year-over-year increase o 58%.

Overall strength in the marketplace was

urther demonstrated by muted distressed

sales, which in 2011 comprised only 6% o total

volume, down rom 12% o activity in 2010. In

comparison, distressed sales in the US were

estimated at 28% o total volume in 2011,

down rom 42% in 2010, according to Real

Capital Analytics.

Total price per room came in at $108,000,

a strong 30% improvement over 2010 and

65% above 2009. Traditional price per room

registered at $87,000, 26% above 2010 and

33% above 2009.

The 96 traditional trades were the largest

number o hotels sold in a given year since

2007, and represent an increase over the

10-year average o 80 hotels that sold. The

improved sentiment in the market can be

attributed to a variety o actors, namely

improved access to debt and the relatively

high-quality product that was available or sale

and met by willing purchasers. Cross-border

sellers also aided the increase in activity in the

market, bringing rarely oered high-quality

product to market, incentivized by the high

Canadian dollar and their desire to recycle

capital or reinvestment.

Volume in the rst hal comprised 54% othe years total activity, and this was largely

completed in the second quarter with $441

million over 31 deals closed. With the third

Volume

($ millions)

number of

hotels

PriCe Per room

($)

AVerAGe DeAl siZe

($ millions)

AVerAGe number

of keysAVerAGe CAP rAte

Full Service $619 21 $139,000 $29.5 222 7.1

Select Service $188 10 $133,000 $18.8 141 8.2

Limited Service $300 68 $66,000 $4.4 61 10.0

Total $1,107 99 $108,000 $11.2 103 8.9

The majority o trades (69%) were limitedservice, although comprised just 27% othe years total transaction volume.

The average size o a ull service hotel tradeincreased 26% year-over-year, up rom $23.5million in 2010 and 270% rom the $8.0million or ull service hotels in 2009.

transaCtion analYsis

The transaction market continued its upward trend with over $1.1 billion in volume

during the year, making it the fth strongest year since we began tracking hotel

transactions in 1985, and the highest since the all-time record o $4.6 billion in 2007.

2011 Transaction Analysis by Market Segment

Transaction

Volume by Quarter

Q4Q3Q1 Q2

$441M

$159M

22

31

25

21

$273M

$234M

Transaction Volume

Number o Hotels




quarter adding a urther $273 million to the

years total, ourth quarter perormance came

in somewhat weaker than expected with $234

million. The high velocity o transactions in

the rst hal o 2011 slowed dramatically in

the summer, largely a result o decit concerns

in the United States, the European debt crisis

and greater global economic ears.

Three portolio transactions were completed

in 2011, including the Sutton Place Hotels

in Vancouver and Edmonton, our Marriott

select service hotels in the Toronto area andthree limited service Country Inn & Suites

in the Prairie Provinces. All were acquired

by Canadian hotel investment companies,

signiying the overall dominance and

competition o domestic capital sources.

The average hotel trade was $11.2 million,

shy o the 10-year average o approximately

$13.0 million. The ull service segment

led perormance with average pricing at

approximately $30 million per deal, about triple

the overall average. This compares to select

service ($18.8 million) and limited service ($4.4

million). Again, all categories strengthened

rom 2010 levels.

Capitalization Rates

Transactions that reported cap rates averaged

8.9% nationally, in line with our orecast. Full

service properties were roughly 180 basis

points lower than the overall total and 110

basis points higher or limited service hotels.

Cap rates continued their broad compression

downward, lower than the 10% to 12% band

experienced in the overall traditional hotel

market in 2008-2009 and 10% to 13% range

that was seen between 2005 and 2007.

1 Sold as part o a larger transaction, including a 13-storey class A 265,000 SF oce tower and an interest in the Metro Toronto Convention Centre complex.2 Situated on 800 acres and includes signicant development potential. Price per room not applicable.3 Two property portolio including hotels in Vancouver and Edmonton. The Vancouver property includes 397 guest rooms and 164 strata units branded as La Gr ande Residences.4 Includes properties in Mississauga, Vaughan and Hamilton. Sale price condential.5 Includes properties in Winnipeg, Saskatoon and Regina. Sale price condential.

* Strategic transaction - see denition on page 11.

ProPerty buyer PriCe ($)PriCe Per

room ($)buyer oriGin CAP rAte (%)

sinGle assets

InterContinental Toronto Centre 1 * Oxord Properties n/a n/a Canadian n/a

Delta Vancouver Airport Inspire Group $55,000,000 $132,900 Canadian 4.5

Courtyard & Residence Inn by Marriott Montreal Artery Group & Urgo Hotels $39,000,000 $118,500 American 8.2

Stonebridge Hotel Fort McMurray Shelbra International $27,500,000 $203,700 Canadian 11.5

Courtyard by Marriott Edmonton Downtown MIG Real Estate n/a n/a American n/a

Deerhurst Resort Huntsville 2 Skyline Investments $26,000,000 n/a Canadian n/a

Hilton Suites Winnipeg Airport Fortis Properties Corporation $25,000,000 $156,300 Canadian 9.1

Holiday Inn Calgary Airport 905753 Alberta Ltd. $23,500,000 $140,000 Canadian 10.0

Best Western Village Park Inn Calgary Calgary Hotels Ltd. $23,000,000 $144,700 Canadian n/a

Holiday Inn Yorkdale Toronto Easton's Group o Companies $22,850,000 $61,800 Canadian 8.9

portfolio deals

# of rms # of hotels

Sutton Place Hotel Portolio 3 * Northland Properties Group $197,500,000 $226,000 874 2

Toronto-Area Marriott Select Service Portolio 4 Genesis Hospitality n/a n/a 495 4

Country Inn & Suites Portolio 5 Airline Hotels & Resorts n/a n/a 229 3

Top Hotel Transactions - 2011 (By Volume)

Cap Rates Trends

or Hotels

2012F 8% - 9%

2010 - 2011 8% - 9%

2008 - 2009 10% - 12%

2005 - 2007 10% - 13%

2003 - 2004 12% - 14%




Regional Analysis

Regional transaction volume was relatively

balanced or the year. For the rst time since

2008, volume in the west came in higher than

the east, registering at 55% o total transaction

activity. The most active provinces were Ontario

(78% o the easts volume, 35% o the national

total), British Columbia (51% o the wests volume,

28% o the national total) and Alberta (32%,

18%). Activity in Saskatchewan jumped 510%rom last year and Manitoba saw a 135% increase,

largely refective o product availability and solid

economic strength in these markets, resulting in

signicant investor interest. Quebec was the only

province to experience a decline in transaction

activity, down 14% year-over-year. For the rst

time since 2008, Nova Scotia saw two hotels

trade. There were no transactions reported in

other eastern provinces.

Buyer Profle

Buyer groups included hotel investment companies

(representing 45% o the total transaction

market); private investors (29%), institutional

(15%), real estate companies (8%) and REITs (3%)

comprised the balance o the buyers. REITs were

largely inactive as they were net sellers, divesting

just under $100 million in assets. While private

investors were the most active in terms o the

number o completed transactions, they were

dwared by institutional and hotel investment

companies who averaged deal sizes over $25

million. Only 8% o total transaction volume

was completed by real estate companies or

redevelopment to alternate uses in 2011, compared

to 17% and 14% in 2010 and 2009, respectively.

Economic and Financing Environment

The economic picture in Canada was strong and

stable throughout the year, notwithstanding the

choppy indicators impacting the US and global

markets. By the summer, almost our years

ater the last recession began, worries about a

sovereign debt crisis in Europe and political decit

concerns in the US caused consumer and business

condence to drop. Global equity indices declined

in response and large investors o all types,

including real estate owners, took a wait-and-

see approach to their acquisition and disposition

strategies.

In an attempt to stabilize markets, many central

bankers committed to continued low interest rate

environments over the medium-term with the

US, or instance, pledging a stable 1.0% overnight

rate until at least 2013. This assisted investor

sentiment by late year and nancing continued to

50M

00M

50M

00M

50M

00M

50M

er of

otels

ume

$388 Million

Transaction Volume and Price Per Room by Province

British Columbia Saskatchewan QuebecAlberta Manitoba Ontario Nova Scotia

No.18 No.17 No.5 No.4 No.42 No.2No.9

$ Price Per Room

$ Transaction Volume




become more accessible vis--vis 2009 and 2010.

Yields on Government o Canada 5-year bonds

trended downwards throughout the year,averaging between 2.0% and 2.5% in the rst

hal, retreating to 1.25% by the end o the

year. As a result, the cost o nancing was

relatively attractive, particularly or those with

relationships and a proven track record.

Operating Environment & Supply Growth

Overall, hotel owners contended with a fat

operating environment in 2011. Data provided

by STR and HVS reported that average daily

rates declined nationally by 0.6% or the year

with occupancies increasing 1.7%, resulting in

year-over-year RevPAR growth o 1.1%. The

strongest provinces or RevPAR growth were

Newoundland (6.1%), Alberta (5.5%) and Quebec

(4.2%). British Columbia saw a 5.8% decline

due to the year-over-year comparison rom

the Winter Olympics. New Brunswick (-1.1%)

also experienced a decline as rising uel costs

and a strong Canadian dollar kept traditional

US rubber-tire travellers at home, in addition

to lacklustre provincial economic perormance.

Ontario (1.5%) and Saskatchewan (1.3%) were

both fat. The balance o provinces experienced

low growth, not exceeding 1.0%.

National supply levels grew at approximately

1.5% on an annualized basis in 2011 and based

on our data this gure will grow modestly in

2012 and 2013, but is not anticipated to surpass

2.0% per annum. Overall supply growth has

been contained given diculty in obtaining

construction nancing.

Low barrier to entry airport markets, which

witnessed rapid supply growth over the past ew

years, including Vancouver Airport/Richmond,

Toronto Airport and Montreal Airport were at

or near zero annualized supply growth in 2011,

and these markets are expected to see minimal

supply growth over the short term. Edmonton,

Regina/Saskatoon and Toronto North/East

saw the most growth at 4.1%, 3.3% and 3.2%,

respectively, in 2011.

The strongest provinces

for RevPAR growth were

Newfoundland (6.1%),

Alberta (5.5%) and

Quebec (4.2%).

Similar to 2011, we anticipate hotel

investment companies and private

investors to be the most active players.

Given the signicant capital accumulated

by private equity unds, we could see an

emergence o this buyer group i large

urban assets become available.

Overall cap rates will remain in the range

o 7% to 9%, supported by the low interest

rate environment.

The recycling o hotel assets to alternate

uses will likely continue, particularly

in large urban markets as older assets

become obsolete. Developments such

as residential condominiums continue to

be avoured by developers, particularly

in primary markets such as Vancouver,

Calgary, Toronto, Ottawa and Montreal.

Lender-driven sales are not expected to

increase and should again comprise a small

percentage o the overall market.

A continued low interest rate environment

will bode well or borrowers and improving

industry perormance will provide

condence to the lending community.

2012 Industry Forecast


10/16

45%

15%

8%3%

2%

2%34%

34%

13%

17%

60%

11%

29%

Sizing up the Shit in the Buyer Universe

The movement in the transaction market since the lows o 2009 has resulted in a shule in

the prole o buyers. Hotel investment companies and institutional investors emerged as the

dominant buyer groups, while traditional private sources, REITs and real estate companies

shited rom year-to-year.

Hotel investment companies

and institutional investors

took advantage o higher-

quality cash fowing assets

in 2011, participating in

competitive bid processes in

order to win deals in an eort

to expand their portolios.

A trend in previous years wa

the activity by real estate

companies buying hotel

assets that reached the end o

their useul lie. This theme

slowed in 2011.

Private investors grew theiraverage deal size to $5.0

million in 2011, about 15%

higher than in 2009. Despite

trading the largest share

by number o properties,

other well capitalized buyers

dwared private investor

capital in 2011 by volume.

Like 2011 and 2009, REITs took a backseat on acquisitions

and instead ocused on improving their liquidity by selling

assets and ocusing on existing operations.

Hotel Investment Companies

Rings indicate the relative

size of the transaction

market for the given year.

Private Investors

Real Estate Companies

REITs

Institutional & Other

2011Volume: $1.1 billion

2010Volume: $717 million

2009Volume: $414 millio




The value o hotel real estate grew an estimated

4.8% in 2011, ollowing the 3.0% growth seen in

2010. While all markets experienced positive

results in 2011, the most notable markets orrising values included downtown urban markets

such as Vancouver Downtown (8.8%), Toronto

Downtown (8.3%) and Montreal Downtown

(7.0%), with Regina/Saskatoon (6.0%), Winnipeg

(5.6%) and Ottawa (5.4%) also showing strong

growth.

Continued improvements in the overall economy

and industry perormance as well as fuid debt

markets are expected to continue the upward

increase in overall values by 4.4% in 2012.

For 2012, the value index demonstrates strength

in markets such as Ottawa (6.7%), Haliax/

Dartmouth (6.2%), Toronto Downtown (5.7%)

and Calgary (5.4%), as these strong local

economies oer relatively balanced supply and

demand trends, which orm the basis to which

our Hotel Value Index is derived. Weaker results

are orecasted in Niagara Falls (1.3%), Vancouver

Airport (1.8%) and Whistler (2.3%), primarily

impacted by sluggish demand prospects.

Colliers hotel valUe indeX

The Colliers Hotel Value Index monitors the annual rate o change in hotel values,

based on the operating perormance o a market and industry trends, as well as the

return expectations o investors.

The Index illustrate

volatility in hotel va

due to shifts in supp

and demand, top-lin

operating performanand investor attitud

* Strategic transactions typically involve at least two o the ollowing conditions: 1) a pricing premium is paid; 2) the asset is located in a high barrier to entry market or within a geogrhub o an owners principal business; or 3) the opportunity allows or an extension o the companys brand or portolio.

Note: Transaction volume is comprised o hotel transactions o at least $1 million, and excludes non-arms length transactions.

Source: Colliers International Hotels

yeArVolume

($ millions)

PerCent

ChAnGe

number

of hotels

PerCent

ChAnGe

PriCe Per

room ($)

PerCent

ChAnGe

total transaCtion volUme

2011 $1,107 54.3% 99 15.1% $108,000 30.1%

2010 717 73.3 86 16.2 83,000 26.7

2009 414 -61.4 74 -19.6 65,500 -43.8

2008 1,072 -76.6 92 -45.2 116,500 -24.4

2007 4,580 55.3 168 19.1 154,200 -4.8

2006 2,950 72.9 141 35.6 162,000 48.9

2005 1,706 373.9 104 108 108,800 62.4

2004 360 -23.2 50 -2 67,000 7.7

2003 469 -13.1 51 4.1 62,200 -24

2002 540 -15.9 49 16.7 81,800 -26.5

2001 642 - 42 - 111,300 -

transaCtion volUme eXClUdinG strateGiC sales*

2011 $786 58.0% 96 17.1% $87,000 26.1%

2010 498 20.2 82 10.8 $69,000 5.3

2009 414 -27.5 74 -8.6 65,500 -22.3

2008 571 -42.1 81 -19 84,300 -13.1

2007 986 -9.7 100 -23.7 97,000 26

2006 1,092 58.7 131 44 77,000 9.7

2005 688 100.6 91 85.7 70,200 9.9

2004 343 - 49 - 63,900 -

Canadian Hotel Investment Trends




MARkET AREA 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F

Base Year 1992=100

CPI Index1

Annual % Change 2.2% 2.8% 1.8% 2.2% 2.0% 2.1% 2.4% 0.3% 2.2% 2.8% 2.0%

Canadian National Avg. 196.0 183.4 193.3 214.4 240.8 271.4 267.7 248.1 255.6 267.8 281.2

% Change -1.7% -6.4% 5.4% 11.0% 12.3% 12.7% -1.4% -7.3% 3.0% 4.8% 4.4%

Victoria 140.5 141.6 148.0 159.5 172.9 188.9 178.7 156.7 159.8 164.9 171.4

% Change 3.2% 0.8% 4.5% 7.8% 8.4% 9.2% -5.4% -12.3% 2.0% 3.2% 3.9%

Vancouver Downtown 147.0 149.9 161.6 184.6 218.2 263.3 268.3 246.3 255.7 278.2 293.0

% Change 1.6% 2.0% 7.8% 14.2% 18.2% 20.7% 1.9% -8.2% 3.8% 8.8% 5.3%

Vancouver Airport 80.6 78.2 81.0 87.0 95.2 104.8 105.8 98.2 100.1 102.8 104.6

% Change -3.4% -3.0% 3.6% 7.4% 9.4% 10.1% 1.0% -7.2% 1.9% 2.7% 1.8%

Whistler 148.1 149.7 153.8 164.2 177.7 191.9 184.2 166.9 167.2 167.8 174.3% Change 3.1% 1.1% 2.7% 6.8% 8.2% 8.0% -4.0% -9.4% 0.2% 0.3% 2.3%

Calgary 169.7 168.0 176.9 201.7 234.3 274.2 282.7 259.2 261.3 273.1 287.8

% Change 1.3% -1.0% 5.3% 14.0% 16.2% 17.0% 3.1% -8.3% 0.8% 4.5% 5.4%

Edmonton 151.7 147.1 152.0 165.5 186.9 209.3 213.1 198.4 204.7 211.5 218.3

% Change 4.2% -3.0% 3.3% 8.9% 12.9% 12.0% 1.8% -6.9% 3.2% 3.3% 3.2%

Alberta Mountain Resorts 197.5 197.5 201.5 220.0 247.0 284.6 277.8 252.5 250.0 254.2 263.9

% Change 5.1% 0.0% 2.0% 9.2% 12.3% 15.2% -2.4% -9.1% -1.0% 1.7% 3.5%

Regina/Saskatoon 149.1 154.2 156.8 166.5 178.3 193.3 205.3 212.5 224.0 237.4 247.1

% Change -0.1% 3.4% 1.7% 6.2% 7.1% 8.4% 6.2% 3.5% 5.4% 6.0% 4.1%

Winnipeg 127.0 122.2 123.9 128.6 134.3 141.7 146.3 148.7 154.6 163.3 170.1

% Change -5.0% -3.8% 1.4% 3.8% 4.4% 5.5% 3.3% 1.6% 4.0% 5.6% 4.2%

Toronto North/East 223.1 183.8 199.5 225.8 258.1 289.0 282.1 257.0 263.2 273.2 280.5

% Change -12.4% -17.6% 8.5% 13.2% 14.3% 12.0% -2.4% -8.9% 2.4% 3.8% 2.7%

Toronto Downtown 305.3 274.8 309.4 367.2 437.4 536.2 530.9 476.7 506.8 548.8 580.1

% Change -2.2% -10.0% 12.6% 18.7% 19.1% 22.6% -1.0% -10.2% 6.3% 8.3% 5.7%

Toronto Airport West 221.6 181.7 196.6 228.3 267.8 316.0 310.6 264.9 276.8 284.6 306.3

% Change -13.1% -18.0% 8.2% 16.1% 17.3% 18.0% -1.7% -14.7% 4.5% 2.8% 4.0%

Niagara Falls 202.7 168.8 189.3 214.8 245.3 280.4 274.0 254.5 256.8 261.2 264.6

% Change 2.1% -16.7% 12.1% 13.5% 14.2% 14.3% -2.3% -7.1% 0.9% 1.7% 1.3%

Ottawa 197.8 198.0 202.2 219.7 242.8 267.1 270.8 265.4 274.7 290.1 309.5

% Change -6.2% 0.1% 2.1% 8.7% 10.5% 10.0% 1.4% -2.0% 3.5% 5.4% 6.7%

Montral Downtown 324.2 328.1 345.5 392.8 450.2 504.2 477.0 450.2 473.7 506.8 533.2

% Change 5.3% 1.2% 5.3% 13.7% 14.6% 12.0% -5.4% -5.6% 5.2% 7.0% 5.2%

Montral Airport 266.3 266.8 275.1 293.8 307.0 319.3 293.1 267.6 271.4 283.0 296.6

% Change 1.8% 0.2% 3.1% 6.8% 4.5% 4.0% -8.2% -8.7% 1.4% 4.3% 4.8%

Haliax/Dartmouth 201.7 208.0 212.5 225.1 239.7 249.3 249.8 242.5 245.2 252.6 268.2

% Change 1.7% 3.1% 2.2% 5.9% 6.5% 4.0% 0.2% -2.9% 1.1% 3.0% 6.2%

The Hotel Value Index measures the rate o change in hotel values on a year over year basis. Rates o change are infuenced by investor yield expectations, market perormance,changes to supply and the overall economic health o the market.2011E = Estimate2012F = Forecast1 CPI Index: Conerence Board o Canada


Colliers Hotel Value Index 2002-2012F

Footnotes:




nAme loCAtion rooms DAte PriCe ($) PriCe/

room ($)

CAP rAte

(%)

Howard Johnson Express Inn Calgary, AB 48 Jan $3,136,200 $65,300 n/a

HV Hidden Valley

Huntsville, ON 94 Jan $2,500,000 $27,000 3.5Econo Lodge Inn & Suites Edmonton, AB 37 Feb $3,600,000 $97,300 9.6

Holiday Inn Pointe Claire 1 Pointe-Claire, QC 308 Feb $12,200,000 $39,600 n/a

Howard Johnson Express Inn Winnipeg West 2 Winnipeg, MB 48 Feb $4,500,000 $93,800 n/a

Lotus Motel Cobourg, ON 24 Feb $1,241,000 $51,700 n/a

Motel White House Beauport, QC 32 Feb $1,400,000 $43,800 n/a

Traveller's Inn Victoria Victoria, BC 48 Feb $2,300,000 $47,900 n/a

Avenue Inn Niagara Falls, ON 66 Mar $1,265,000 $19,200 n/a

Courtyard by Marriott Edmonton Downtown Edmonton, AB 177 Mar n/a n/a n/a

Deerhurst Resort 3 Huntsville, ON 400 Mar $26,000,000 n/a 2.5

Hotel Port-Royal Limoilou, QC 47 Mar $3,200,000 $68,100 n/a

Kamloops Towne Lodge Kamloops, BC 202 Mar $15,000,000 $74,300 9.0

Lake Simcoe Motel Simcoe County, ON 20 Mar $1,260,000 $63,000 n/a

Lloydminster Motor Inn 4 Lloydminster, AB 64 Mar $2,100,000 $32,800 n/a

Ramada Inn London London, ON 124 Mar $3,900,000 $31,500 n/a

River Garden Inn 5 Stratord, ON 115 Mar $6,500,000 $56,500 n/a

Stonebridge Hotel Fort McMurray Fort McMurray, AB 135 Mar $27,500,000 $203,700 11.5

Super 8 Langley Aldergrove 6 Langley, BC 41 Mar $3,000,000 $73,200 8.5

Tally Ho Motor Hotel Victoria, BC 51 Mar $4,200,000 $82,400 4.0

The Inn at Manitou 7 McKellar, ON 34 Mar $1,450,000 $42,600 n/a

Travelodge Nanaimo Nanaimo, BC 78 Mar $6,500,000 $83,300 8.5

Best Western o Olds Olds, AB 41 Apr $5,200,000 $126,800 n/a

Holiday Inn Express & Suites Squamish (now Sandman Inn) Squamish, BC 95 Apr $5,810,000 $61,200 n/a

Le Manoir d'Youville Chteauguay, QC 117 Apr $5,050,000 $43,200 n/a

Lonsdale Quay Hotel North Vancouver, BC 70 Apr n/a n/a n/a

Niagara Family Inn & Restaurant Niagara Falls, ON 36 Apr $1,835,000 $51,000 n/a

Travelodge Kamloops City Centre Kamloops, BC 67 Apr $5,000,000 $74,600 n/a

Anchorage Motel 8 Niagara-on-the-Lake, ON 22 May $4,507,000 n/a n/a

Athabasca Lodge Motel Athabasca, AB 32 May $1,860,000 $58,100 n/a

Benmiller Inn & Spa Goderich, ON 57 May $1,550,000 $27,200 n/a

Delta Toronto East Toronto, ON 371 May $21,275,000 $57,300 n/a

Jasper House Bungalows 9 Jasper, AB 56 May $7,500,000 $133,900 9.0

Navigator Inn 10 Iqaluit, NWT 45 May $3,800,000 n/a n/a

Nova Inn Iqaluit (Hotel Arctic) 11 Iqaluit, NWT 75 May $17,000,000 n/a n/a

Parkview Motel Guelph, ON 36 May $2,200,000 $61,100 n/a

Perth Manor Boutique Hotel 12 Perth, ON 6 May $1,350,000 n/a n/a

Royal Inn Spruce Grove Spruce Grove, AB 48 May $4,250,000 $88,500 n/a

Traveller's Inn Downtown Victoria, BC 81 May $6,325,000 $78,100 8.4

Beach Grove Motel 13 Ladner (Delta), BC 15 Jun $1,350,000 n/a n/a

Best Western Tumbler Ridge Tumbler Ridge, BC 102 Jun $7,015,000 $68,800 n/a

Comort Inn Vancouver Airport Richmond, BC 129 Jun $12,000,000 $93,000 7.2

Courtyard & Residence Inn by Marriott Montreal Airport Montreal, QC 329 Jun $39,000,000 $118,500 8.2Delta Vancouver Airport 14 Richmond, BC 414 Jun $55,000,000 $132,900 4.5

Hill Island Resort Lansdowne, ON 51 Jun $1,199,000 $23,500 n/a

Htel Val-des-Neiges Mont-Sainte-Anne, QC 111 Jun $2,500,000 $22,500 n/a

Radisson Suite Hotel Haliax Haliax, NS 104 Jun $12,324,000 $118,500 6.2

Ramada Inn & Suites Pitt Meadows Pitt Meadows, BC 78 Jun $9,550,000 $122,400 8.4

Shamrock Motel Midland, ON 24 Jun $1,210,000 $50,400 n/a

Stock Exchange Hotel Winnipeg, MB 14 Jun $2,200,000 n/a 16.0

Sunset Inn North Bay, ON 26 Jun $1,377,000 $53,000 n/a

The Sutton Place Hotel Edmonton* 15 Edmonton, AB 313 Jun $33,875,000 $108,200 4.7

The Sutton Place Hotel Vancouver* 15 Vancouver, BC 561 Jun $163,625,000 $291,700 5.6

Days Inn Chilliwack 16 Chilliwack, BC 29 Jul $1,900,000 $65,500 n/a

Idlewyld Inn London, ON 23 Jul $1,100,000 $47,800 n/a

Knight's Inn Lundys Lane Niagara Falls, ON 93 Jul $2,450,000 $26,300 n/a

2011 Canadian Hotel Transactions




Motel 6 Estevan Estevan, SK 68 Jul $6,775,000 $99,600 12.9

Super 8 Regina Regina, SK 61 Jul n/a n/a n/aTravellers Inn Camrose, AB 40 Jul $2,030,000 $50,800 16.2

Baymont Inn & Suites by the Falls Niagara Falls, ON 59 Aug $1,285,000 $21,800 n/a

Best Western White House Inn Brockville, ON 57 Aug $2,800,000 $49,100 n/a

Country Inn & Suites by Carlson Regina 17 Regina, SK 77 Aug n/a n/a n/a

Country Inn & Suites by Carlson Saskatoon 17 Saskatoon, SK 76 Aug n/a n/a n/a

Country Inn & Suites by Carlson Winnipeg 17 Winnipeg, MB 76 Aug n/a n/a n/a

Holiday Inn Calgary Airport Calgary, AB 168 Aug $23,500,000 $140,000 10.0

Hotel L'Urbania Quebec Trois-Rivires, QC 102 Aug $1,900,000 $18,600 n/a

Howard Johnson Toronto Yorkville 18 Toronto, ON 71 Aug $12,250,000 n/a n/a

The Rosseau, a JW Marriott Resort & Spa 19 Minnett, ON 132 Aug n/a n/a n/a

Tulip Inn Woodstock, ON 21 Aug $1,199,900 $57,100 n/a

Best Western Premier Freeport Inn & Suites 20 Calgary, AB 97 Sep $15,500,000 $158,000 n/a

Hotel Clarion Gatineau Gatineau, QC 116 Sep $7,400,000 $63,800 n/a

Indigo Inn Cornwall, ON 67 Sep $1,200,000 $17,900 n/a

Inn on Somerset Ottawa, ON 12 Sep $1,400,000 $116,700 n/a

InterContinental Toronto Centre* 21 Toronto, ON 586 Sep n/a n/a n/a

Monterey Inn Resort Ottawa, ON 88 Sep $4,300,000 $48,900 n/a

Super 8 Medicine Hat Medicine Hat, AB 70 Sep $4,604,000 $65,800 11.3

The Oasis Hotel 22 Surrey, BC 40 Sep $5,600,000 $140,000 n/a

Travelodge Trenton Quinte West, ON 43 Sep $3,020,000 $70,200 n/a

Aerie Resort 23 Malahat, BC 35 Oct $3,100,000 $88,600 n/a

Best Western Plus Governor's Inn Kincardine, ON 59 Oct $5,000,000 $84,700 n/a

Best Western Village Park Inn Calgary, AB 159 Oct $23,000,000 $144,700 n/a

Courtyard Hamilton 24 Hamilton, ON 136 Oct n/a n/a n/a

Courtyard Mississauga Airport Corporate Centre West 24 Mississauga, ON 94 Oct n/a n/a n/a

Residence Inn Mississauga Airport Corporate Centre West 24 Mississauga, ON 133 Oct n/a n/a n/a

Residence Inn Toronto Vaughan 24 Vaughan, ON 132 Oct n/a n/a n/a

Garden City Inn & Suites St. Catharines, ON 52 Oct $2,425,000 $46,600 n/a

Hilton Suites Winnipeg Airport Winnipeg, MB 160 Oct $25,000,000 $156,300 9.1

Holiday Inn Express Haliax-Bedord Haliax, NS 98 Oct $6,500,000 $66,300 4.3

Michael's Inn Niagara Falls 25 Niagara Falls, ON 130 Oct $6,000,000 $46,200 7.3

Palace Motel 26 Grimsby, ON 24 Oct $1,215,000 $50,600 n/a

Super 8 Barrie 27 Barrie, ON 82 Oct $7,950,000 $97,000 7.0

Super 8 Vermillion Vermillion, AB 66 Oct $8,100,000 $122,700 10.7

Thritlodge Lethbridge Lethbridge, AB 91 Oct $2,300,000 $25,300 n/a

Hotel Clarendon Quebec City, QC 143 Nov $15,200,000 $106,300 n/a

The Grange Hotel Toronto, ON 77 Nov $6,650,000 $86,400 n/a

Code's Mill Inn & Spa Perth, ON 58 Dec $2,900,000 $50,000 n/a

Elephant Lake Lodge Haliburton, ON 32 Dec $1,080,000 $33,750 n/a

Holiday Inn Yorkdale Toronto, ON 370 Dec $22,850,000 $61,800 8.9

Regina Wingate Inn Regina, SK 118 Dec $16,150,000 $136,900 10.0

1 Includes excess land or uture development.2 Share sale.3 Situated on 800 acres and includes signicant develop-

ment potential. Price per room not applicable.4 Includes a tavern, lounge and video lottery operations.5 The purchaser plans to convert the property to a retire-

ment residence.6 50% interest transerred. The Hotel has 81 rooms.7 The property closed operations in April 2010. Includes

approximately 70 acres o land. Property sold underreceivership.

8 Includes two houses and a 10,000 SF vacant restaurant.The new owner plans to redevelop the property.

9 Purchase o leasehold interest.10 Purchased to eventually redevelop the site into alternate

uses. Part o a larger property transaction valued at $71million, which included other commercial and res identialuses.

11 Part o a larger property transaction valued at $71 million,which included other commercial and residential uses.

12 Includes ood and beverage and banquet operations andowners residence. Price per room not applicable.

13 Purchased or redevelopment to alternate use.14 Share Sale.15 Part o a two property portolio. Vancouver includes 397

guest rooms and 164 strata units branded as La GrandeResidences.

16 Purchased or redevelopment to alternate use.17 Part o a three property portolio transaction.18 Purchased or redevelopment to alternate use. Price per

room not applicable.19 Sold under receivership. The property purchased includes

60% o the resorts condominium units, 13,800 SF omeeting space, ood and beverage outlets and associatedlands, which may be developed in the uture.

20 New build with no operating history.

21 Sold as part o a larger transaction, including a 13-storeyclass A 265,000 SF oce tower and an interest in theMetro Toronto Convention Centre complex.

22 Purchased or redevelopment to alternate use. Theproperty was vacant at the time o sale.

23 The property was closed at the time o sale.24 Part o a our property portolio transaction.25 Purchased or redevelopment to alternate use.26 The purchaser intends to convert the property to a retire-

ment residence.27 Includes a 7,300 SF reestanding leased restaurant.

Distress sale sold under power o sale or receivership.* Strategic sale.


nAme loCAtion rooms DAte PriCe ($) PriCe/

room ($)

CAP rAte

(%)

Footnotes:


15/16


16/16

140 hotel proessionals in over 20 ofces worldwide, including:

AucklandHongKongLondonMexicoCityMiamiMoscowOsloSanFranciscoSanJose

Alam Pirani

+1 416 643 [email protected]

Tom Andrews


Robin McLuskie


Prathmesh Mehta


Hamir Bansal


Russell Beaudry


One Queen Street East

Suite 2200Toronto, ON M5C 2Z2TEL +1 416 777 2200FAX +1 416 777 9232

200 Granville Street

Suite 1900Vancouver, BC V6C 2R6TEL +1 604 681 4111FAX +1 604 661 0849

Colliers International Hotels

www.colliershotels.com

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