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Budget Property Transactions Seeing a Surge

Financing, though, remains a problem.

Friday, September 16, 2011
Jo McIntyre
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The recently completed sale of Microtel Inn & Suites in Green Bay, Wisc., could be another sign of an improving market for budget properties.

"The smaller hotels in a tertiary market seem to be selling, where more expensive, larger hotels in larger metropolitan areas aren’t transacting as quickly," said Jeff Schrader, director of business development with hotel management company Kinseth Hospitality of North Liberty, Iowa.

"It seems the smaller the property, the more likely to sell,” he said. “That’s in the Midwest in this particular economic climate.” He added, though, that it still seems to be difficult to consummate financing on these smaller dollar amount transactions.

Seth Glickman, who with Steve Marx, handled the sale for Hotel Source, Inc., of Chicago, views each sale on a case-by-case basis. "We work on bigger and smaller deals," he said. “Most properties take a little longer [these days], because of challenges in the financing area.”

The 68-room, limited-service hotel was purchased by Batra Hospitality Group, Inc. and was previously owned by MI of Green Bay, LLC. MI is a group of local investors, while Batra is a group of private entrepreneurs from the Southeastern U.S. in Arkansas.

The sale price is confidential, Glickman said, but described the hotel as a “mid-scale, limited-service business that is an average size for a hotel property.”

The hotel was sold at a 3.7 percent capitalization rate and was achieving about a 43 percent occupancy at the time of sale, according to Hotel Source. The new owners will make minor upgrades on the property, which was built in 1999.

The three-story hotel is easily visible from Lambeau Field, home to the NFL’s Green Bay Packers, and has an indoor pool with water features.

The market as a whole seems to be improving, Glickman said. "We’ve seen more transactions this year across all sectors than 2009 or 2010. Generally, there has been more optimism in 2011, though recently there has been some economic data that has caused some questions."

Hotel Source is a hotel real estate brokerage and advisory services firm that has experience as a hotel owner and receiver, so understands the challenges of buying, owning and selling hotels, the company said.
Hotel Source advises their clients to remember that hotels are a case by case, deal by deal, brick by brick industry. Down payments and finance risk are not the only important factors for buyers to consider, in any economy. Franchises, room count and operator all have significant influence on how a property performs, Glickman said.

"Generally, there’s been an uptick in occupancy across the country, though there are still markets and properties that are not experiencing that,” he said. “That sometimes relates to one or more of the above. Investors have come to the realization that these are deal by deal and you need experienced people working on it.”

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Jo McIntyre
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Hotel Interactive® Editorial Division
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