Hotels keep hitting the auction block
September 02, 2010 | Dan Rafter | Print Article | Email this Article
Gordon Greene
Gordon Green, principal with Cleveland’s Chartwell Group/TCN Worldwide, is busy these days. He runs the company’s TCN Auction Group. The commercial real estate auction business is a hectic one today.
A growing number of commercial brokers are turning to the auction format to sell their properties. And one type of commercial asset, in particular, is hitting the auction block more frequently: hotels.
There’s a reason for this: Hotels are a traditionally volatile commercial asset.
“You are seeing more hotel auctions than any other category of auctions, because the valuation on hotels can go up and down faster than with other assets,” Greene said. “If you have an office, you have a three-year lease. With an apartment you have a one-year or a six-month lease. If you have a hotel, you have one-day leases. Occupancy can go up and down relatively quickly. That’s why the hotel business has seen a numer of foreclosures.”
Greene said that his company has recently held hotel foreclosures in Ohio, South Carolina and Virginia.
Hotels have always been a bit of a roller coast, Greene said.
When the commercial real estate market is up or on the way up, occupancy rates increase rapidly at hotels. Owners can then raise their rates quickly. If the market is going down, though, and occupancy rates are falling, owners have to drop their rates.
“If you have an office building and you’re in a market where rates are going down, you can think of how grateful you are that you have a tenant at $20 a square foot when the going rates are $18 a square foot,” Greene said. “There is just more stability in other segments of commercial real estate than there is the hotel business.”
Tags | Auction, Chartwell Group/TCN Worldwide, Cleveland, hospitality, hotel, Ohio, TCN Auction
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