US Hotel Sales Reach $35.3 Billion

Third Consecutive Year of Record Growth

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. October 14, 2008

MARCH 19, 2007. Jones Lang LaSalle Hotels announced today that the volume of U.S. hotel sales for 2006 set a record for the third consecutive year at $35.3 billion, surpassing the 2005 volume by 68%, and nearly tripling the volume of 2004. According to Jones Lang LaSalle Hotels' proprietary database, which tracks transactions $10 million and above, more than 260 transactions closed in 2006.

"The finite availability of high quality product on the market, combined with the mass amount of both debt and equity capital pursuing lodging investments generated intense competition among lenders and investors. Accordingly, pricing continued to remain aggressive," said Arthur Adler, managing director and CEO-Americas for Jones Lang LaSalle Hotels. "In particular, private equity firms have capitalized on this opportune time to invest in hotels, adopting a combined income and capital growth strategy and public REITs continue to be active investors due to their strong earnings multiples."

"Hotels have made another leap toward becoming a more mainstream asset class. The last five years of strong growth, coupled with the industry's ability to manage revenues and costs more effectively, as well as the greater transparency of operating results and increased visibility about the future, has resulted in the ability to better forecast results and reduce the perceived volatility of the business. This, in turn, means a higher confidence level for investors," said Kristina Paider, senior vice president of marketing and research for Jones Lang LaSalle Hotels. "As hotels are considered more mainstream, they will attract an increasing pool of new investors, particularly institutional investors and pension funds."

A host of new players have already aligned to pool capital and pursue large hotel real estate portfolios. Such players include private equity firms, off-shore capital, institutional buyers, pension fund advisors and high net worth groups. In targeting significantly larger transaction, these buyers are able to circumvent much of the competition due to the large sums of capital required. As a result, portfolio transaction volume reached a massive $19 billion in the U.S. last year, almost double that of 2005.

With an abundance of lenders eager to access the lodging industry due to the strong returns that this asset class delivers relative to other property types and continued upside potential, competition among lenders remains fierce. This has triggered a more favorable lending environment with tighter spreads, more relaxed structural provisions and greater loan-to-value ratios, particularly with the accessibility of mezzanine financing. Favorable lending terms are largely attributable to the additional liquidity supplied by the continued surge in CMBS.

"As the hotel market cycle continues to mature, we anticipate that the transaction volume for the coming year will remain consistent with last year's record high to total a volume of $35 billion," said Adler. "Private equity firms will continue to play a key role on both the buy and sell side, as many will seek to exit their investments during 2007, measuring returns on not just an IRR basis, but also on a 'multiple of equity' basis."

To receive a copy of Jones Lang LaSalle Hotels' full research report, Hotel Investment Highlights - U.S. Transactions 2006, visit the research area of www.joneslanglasallehotels.com or www.jllhss.com.