Winter 2011 Pacific Northwest Hospitality Real Estate Market Update

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. February 18, 2011

Seattle, WA - February 17, 2011 - REIT's dominated the landscape for hotel investments in the Pacific Northwest during 2010 in terms of total dollar volume. The largest transaction of the year, by far, was Pebblebrook Hotel Trust's purchase of the Skamania Resort overlooking the Columbia River for $55.8 million, or $220,000 per unit. Second in line was Apple REIT's purchase of the Hampton Inn in Boise for $22.4 million, or $120,000 per unit. Chesapeake Lodging Trust, another active REIT, put the Homewood Suites Seattle Convention Center under contract in November for $53.0 million, or $275,000 per room. This transaction has yet to close. Other major REIT transactions in the region are pending.

The only other single property transaction over $10.0 million was the sale of the Marriott SpringHill Suites in Hillsboro, OR for $14.6 million or $138,000 per room. While not strictly lodging assets, Jeld-Wen sold a package of three of its master-planned resorts in Oregon for a reported $25.0 million in November. The sale included Brasada Ranch in Powell Butte, Eagle Crest Resort near Redmond, and Running Y Ranch in Klamath Falls. While the resorts also had significant land holdings, golf courses, and utility company, the price per lodging unit works out to about $95,000. Experts speculate that these same holdings may have fetched upwards of $100.0 million three or four years ago.

In 2010 there were 19 major hotel transactions (over $2.0 million) in the Pacific Northwest totaling $177.5 million in volume, at an average price per room of $88,200. This compares with 14 sales occurring in 2009, which transacted at an average of $53,500 per key. Sales volume increased 273% in 2010, while price per room increased 65%.

Surprisingly, only four of the nineteen 2010 sales appear to have been the direct result of some type of distress (such as a bank sale). Given the continued high level of distressed hotel loans in the marketplace there will likely be more of these transactions in coming months.

In terms of market performance, according to STR Global, lodging demand increased strongly in all of the major metro areas of the region in 2010, with gains ranging from 8% and 10%. While ADR's continued to decline slightly, RevPAR growth was positive, leading to good potential for increasing rates in 2011. What will the remainder of 2011 hold? Look for more transactions, including more REIT purchases, and a likely uptick in distressed properties coming to market.

About HREC: HREC is the nation's leading lodging and gaming real estate advisory firm specializing in property sales, mortgage brokerage, equity/JV structuring, consulting (market studies and appraisals), asset management and litigation support. With fourteen offices throughout North America, HREC is distinguished by unwavering commitment to client service through its team approach, intellectual capital and hotel/casino specialization.

For additional information, visit HREC's website at www.hrec.com

For more information, contact:
Mark Lukens - Senior Vice President
HREC Investment Advisors - Seattle
Phone: 425-985-7595 [email protected]
or
Ashley Hunt - Director of Marketing
Hospitality Real Estate Counselors
Phone: 303-267-0057
[email protected]