More Canadian real estate being scooped up by foreign investors

Foreign investment proved to be one of the main drivers in the hotel sector last year, says a new report.

According to Colliers International, investors from outside the country bought $857-million worth of hotels in 2013 — the highest level for foreign investment in the sector since 2007.

The foreign investment figure was driven by one of the largest transactions of the year, the five-property Westin Canadian hotel portfolio which was responsible for 89% of all foreign purchases in the year. The winning bid was from an affiliate of U.S.-based Starwood Capital Group and backed by Middle East investors.

“This transaction had a significant impact on overall pricing and metrics for the year given its size and scope,” said Colliers, in its report.

Overall, it was a pretty good year for hotel investment with the $2.02-billion activity doubling the annual average of $1-billion over the past five years. There has been $16-billion in activity over the past decade.

“Much of this increased liquidity entering the hotel market is due to the entry of private equity vehicles, bringing with them massive amounts of capital and legitimizing the hotel asset class within the Canadian commercial real estate realm,” Colliers said in its report.

Institutional buyers have been net buyers of $2.9-billion of real estate over the past decade, the largest change in the structure of ownership. Public companies have been net sellers of $2.4-billion in real estate over the same period.

The price of a hotel room also continues to rise. The average hotel room sold for $133,000 last year, a 59% increase from a year earlier. Even removing some of the larger strategic deals, the average price still grew by 28% to $106,900.

G. Marr, Financial Post

Repost by Steven Porter, Broker - RE/MAX Aboutowne Realty Corp., Brokerage