Schwab Network: 'New Game' with High-Interest Rates
Greg Friedman discussed on the Schwab network how the high rate environment is reshaping valuations and refinancing, with 90% of office vacancies concentrated in just 30% of buildings.
Hotel Investment Opportunities: Navigating Today's Dislocated Market
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The hotel investment landscape is experiencing unprecedented dislocation, creating unique opportunities for savvy commercial real estate investors. In a recent episode of Peachtree Point of View, Greg Friedman sat down with Bennett Webster, Principal and Founder of Alchemy Real Estate Advisors, to explore how hotel investment strategies are evolving in this turbulent market environment.
Current Hotel Investment Market: Distress Creates Opportunity
Today's hotel investment market is characterized by significant distress, but this dislocation is creating unprecedented opportunities. Webster's firm has closed 21 transactions in under a year, with another 19 under contract—demonstrating the active nature of the distressed hotel investment sector. "There's no shortage of ample opportunity out there," Webster notes, citing everything from note sales in Manhattan to receiver sales in Seattle.
The distress isn't limited to traditional foreclosures. Many hotel investment owners are facing mandatory exits due to brand renovation requirements, capital partner pressures, or late-cycle investment timelines,creating a robust pipeline of motivated sellers.
Hotel Investment Transaction Trends: Follow the Smart Money
Market data reveals compelling hotel investment trends:roughly 50% of hotel transaction volume in the first half of 2024 involved properties under $50 million, with most deals likely under $25 million. These smaller hotel investment opportunities maintain strong liquidity and price integrity, often selling at negative leverage to regional buyers focused on operational value creation.
Interestingly, previously distressed markets are attracting renewed hotel investment interest. As Webster observes, "I've seen more bullish activity, more bullish sentiment on San Francisco in the past couple of weeks than we have in past couple of years." This shift suggests that patient hotel investment capital is beginning to identify bottom-fishing opportunities in formerly challenged markets.
Strategic Hotel Investment Approaches
Successful hotel investment in today's market requires a refined approach. Webster recommends three key hotel investment strategies:
Diversification drives hotel investment success. Target markets where you have operational scale and established lender relationships. Rather than concentrating capital in a single trophy asset,multiple smaller hotel investment opportunities can provide superior risk-adjusted returns.
Creative financing enhances hotel investment returns. With traditional financing constrained, successful hotel investment buyers are leveraging CMBS loan assumptions, negotiating interest-only periods during stabilization, and structuring deals that address both buyer and seller liquidity requirements.
Long-term thinking maximizes hotel investment value. As Webster emphasizes, "Capital structure is temporary, but purchase price is permanent." For committed hotel investment professionals with operational capacity, current pricing dislocation presents generational buying opportunities—despite temporarily elevated financing costs.
Hotel Investment Catalysts: The Renovation Factor
A critical catalyst driving current hotel investment opportunities is deferred maintenance and brand-mandated renovations. Many hotel investment owners who delayed capital improvements during COVID are now facing ultimatums from hotel brands: renovate or lose the flag. This dynamic creates forced selling situations that benefit well-capitalized hotel investment buyers ready to commit the necessary capital for property improvements.
The current hotel investment environment strongly favors patient, well-capitalized investors who can move decisively when opportunities arise. For those positioned to execute, today's dislocated hotel investment market offers compelling entry points that may not exist once capital markets normalize and competition intensifies.
Ready to explore advanced hotel investment strategies and market insights? Listen to the full Peachtree Point of View podcast episode featuring Bennett Webster's complete analysis of today's hotel investment opportunities and market dynamics.
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Schwab Network – Greg Friedman joins Nicole Petallides at the NYSE site with a deep-dive into the high rate environment facing investors right now. When looking at the 10-year Treasury rate which is "more than double pre-2022 average," Greg believes its reshaping valuations and refinancing dynamics. In the real estate realm, he sees uneven performance saying "90% of office vacancies are in just 30% of office buildings."
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CNBC: Fed Rate Cuts: A Game-Changer for Commercial Real Estate Investors or a Head Fake?
Peachtree CEO Greg Friedman was on CNBC's Fast Money discussing the effect of the Fed's recent rate cuts on the Commercial Real Estate market.
The Federal Reserve's 50 basis points cut to the Fed funds rate in September has sparked fresh conversations about its impact on commercial real estate (CRE) investments. While there's optimism in some corners about a return to a lower rate environment, the bond market signals a different story, with long-term rates remaining high and inflation risks persisting. This is a good reminder that short-term rates, set by the Fed, and long-term rates, like the 10-yearTreasury, often move independently.
Today's higher rate environment reshapes the value fundamentals of CRE. The current 10-yearTreasury rate of around 4%—double the pre-2022 average—demands that CRE values recalibrate. Reports of a 20% drop in CRE values since 2022 peak levels require context; those valuations were rooted in a vastly different interest rate environment. Today’s scenario implies a slower growth trajectory, requiring investors to adapt to a "new game" of higher rates for longer.
Across CRE assets, different sectors respond to higher rates in distinct ways. Hotels, for example, benefit from solid demand as travel returns, while multifamily assets continue to show resilience despite refinancing pressures. Office assets, however, face significant stress due to both secular and rate-driven challenges.
Even as the Fed cuts rates, refinancing on previously low-rate debt presents ongoing challenges for CRE assets, especially those with upcoming maturity dates. Higher rates elevate the cost of debt and squeeze cash flows while impacting the overall asset valuations, placing additional stress.
Despite headwinds, the current environment offers unique opportunities to strategic, agile investors. While higher rates may drive down asset values, for those prepared to navigate today's market with moderate leverage and a forward-looking strategy, today's challenges can evolve into future tailwinds. As the Fed's recent moves signal a "higher for longer" era, CRE investors who adapt swiftly may find unprecedented opportunities, making this a prime moment for decisive action in commercial real estate.
See Peachtree Group’s CEO and Managing Principal, Greg Friedman discuss this topic on CNBC’s Fast Money.
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Avoid Political Noise When Investing: A Market Update with Larry Adam, Raymond James
Peachtree Group hosted Larry Adam the Chief Investment Officer of Raymond James for a recent Market Call. Larry talked about the importance of staying invested throughout political cycles like the upcoming US Presidential election.
In our recent market update call, we hear insights from Larry Adam the Chief Investment Officer of Raymond James, alongside Greg Friedman, Managing Principal & CEO of Peachtree Group and Daniel Savage, VP Equity Capital Markets of Peachtree Group. One of the standout moments from the discussion was an intriguing investment takeaway that highlights the importance of consistent investing over trying to time the market based on political cycles.
Investment Insights Through the Decades
Consider this: if you had invested $10,000 in the stock market starting in 1970 and only remained invested during Republican presidencies, your investment would have grown to approximately $133,000 by now. Conversely, if you had only stayed invested during Democratic presidencies, your portfolio would have soared to around $700,000.
Now, here’s where the numbers become even more compelling. If you had stayed fully invested in the market, regardless of which party was in power, that initial $10,000 would have appreciated to an impressive $1.6 million!
The Lesson: Stay the Course
Timing the market based on political affiliation has proven to be less effective than maintaining a consistent investment strategy. As Larry Adam pointed out, “It's more important to be in the market than trying to find the market. I think that's a critical lesson…”
The volatility that comes with political changes can tempt investors to pull back or make hasty decisions. However, history shows that those who remain patient and invested through all market conditions tend to reap the greatest rewards.
The key is to be in the market, not trying to outsmart it.
About Larry Adam
Larry Adam joined Raymond James in 2018 as Chief Investment Officer. With over thirty years of experience in the financial markets, Mr. Adam brings a wealth of knowledge and valuable insights on the markets and economy to advisors and clients. As CIO, Mr. Adam develops the firm’s CIO view, a cohesive and comprehensive macro outlook, using insights and perspectives from the firm’s strategists. Mr. Adam presents at numerous client events and is renowned for his ability to explain complex concepts to investors.
Mr. Adam provides advisors and clients with in-depth guidance regarding the markets, including weekly and monthly commentary and quarterly outlooks. In addition to serving as President of the Investment Strategy Committee, he also sits on the Global Wealth Solutions (GWS) Diversity & Inclusion Campus Recruitment Committee, the GWS Executive Council, and the Alternative and Structured Investments Product Approval Committee.
Prior to joining Raymond James, Mr. Adam held the dual roles of CIO of the Americas and Global Chief Investment Strategist for Deutsche Bank Private Wealth Management. He received a B.B.A. with a concentration in finance from Loyola University Maryland in 1991 and received a master’s degree in business with a concentration in finance from Loyola University Maryland in 1993. Mr. Adam is an adjunct professor at the Sellinger School of Business and Management at Loyola University, teaching classes in International Finance. He received the Chartered Financial Analyst designation in 1996, the Certified Investment Management® certification in 2001 and the Certified Financial Planner® designation in 2004. Mr. Adam is regularly featured on CNBC and Bloomberg and is frequently quoted in well-known publications such as the Wall Street Journal and Barron’s.