liic top 10 for 2010

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Debt and Equity Financing for Hotels

Meet The Money®Meet The Money®

The LIIC Top Ten

Special Presentation

y Michael Cahill

CEO and Founder HREC ± Hospitality Real Estate Counselorswww.hrec.com

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y 78% of surveyed investors predict that averageoccupancy levels will increase moderately in the next

year y 64% of responders believe overall room rates will be

up 1% to 5 % over the coming 12 months

10 Occupancy & ADR Expected to Increase:

The LIIC TOP 10

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y Bucking a trend from our 200 8 and 2009 surveys, themajority (50 %) of respondents believe that unlevered equity rates will decrease over the next 12 months

y 39% of respondents believe equity rates will bestable (remain the same )

9 Equity Return Rates Decreasing:

The LIIC TOP 10

Occupancy & ADR Expected to Increase10

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y 47% of the LIIC think tank believes hotel interest rates (senior debt ) will increase over the next twelvemonths; while 33% believe interest rates are stable

y Hand-in-hand, 53% of respondents believeloan/value ratios will remain level with (38%) believing banks will loosen and increase ratios

8 Interest Rates to Increase?

The LIIC TOP 10

Equity Return Rates DecreasingOccupancy & ADR Expected to Increase10

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y 53% of respondents believe that over the next 12 months, less than half of all hotels acquired will be purchased on an all cash basis.

y Interestingly, respondents also consistently cited thelack of suitable acquisition debt financing

7 Are All Cash Buyers King?

The LIIC TOP 10

Interest Rates to Increase?


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y 56 % of survey participants believe it is a good timeto buy lodging assets but caution to be extremely selective

y 2 8% say now is definitely a good time to acquire

6 Investors Still Cautious

The LIIC TOP 10

Are All Cash Buyers King?



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y T he majority of those surveyed believe that the highest percentage of hotels they buy will come from traditional sources (equity principal to equity principal )

y An equal percentage of buyers believe they will get their deals from traditional balance sheet lenders via REO¶s/short sales or buy through acquiring the notes (loan to own )

y Unexpectedly, in fourth place, is acquiring REO¶s fromspecial servicers.

5 Where to Find Hotels to Buy?:

The LIIC TOP 10

Investors Still Cautious Are All Cash Buyers King?



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y 95 % of surveyed Hotel Investors responded that available product is ³below average´ and ³low´ in terms of volume

y Investors are further frustrated by the lack of quality (desirable ) of assets on the market with 64% believingthat current market product is below average quality

y 31% believe that hotels on the market are of average

quality

4 Quality & Volume of Product to Buy?:

The LIIC TOP 10

Where to Find Hotels to BuyInvestors Still Cautious Are All Cash Buyers King?



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y Interestingly, only 53% (down slightly from 61% last year ) believe we are in the first inning of a new hotel real estate investment cycle

y A substantial 39% think we are still in market limbo,with the new cycle not yet started

3 New Investment Cycle?

The LIIC TOP 10

Quality & Volume of Product to BuyWhere to Find Hotels to BuyInvestors Still Cautious Are All Cash Buyers King?



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y 7 5 % of respondents believe that hotel real estate values will increase over the next 12 months with 42 % of total responders predicting a significant increase of over 5 %

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his is in sharp contrast to last year¶s survey when 8 1% believed values were decreasing

2 Lodging Real Estate Values Rebounding:

The LIIC TOP 10

New Investment Cycle?




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y Hotel investment market participants believe the worst is over, both fromthe perspectives of operating fundamental and investment risk perception

y T ransaction activity (property sales volume ) is forecasted to increasesignificantly with higher values for sellers

y Uncertainty over macroeconomic issues still loom, producing an overall mood best characterized as ³cautious optimism´

1 Hotel Investment Market Bottoms Out, But Caution Abounds:

The LIIC TOP 10

Lodging Real Estate Values ReboundingNew Investment Cycle?




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The LIIC TOP 10

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1Hotel Investment Market Bottoms Out, ButCaution Abounds

Lodging Real Estate Values Rebounding

New Investment Cycle?

Quality & Volume of Product to Buy

Where to Find Hotels to Buy

Investors Still Cautious

Are All Cash Buyers King?Interest Rates to Increase?

Equity Return Rates Decreasing

Occupancy & ADR Expected to Increase

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The 2010 LIIC Top Ten

For a copy of this survey presentation, please send an email to:

Mike Cahill

[email protected]

For more information on LIIC, please see our website:

www.liic.ws

liic top 10 for 2010

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