12.09.19

The State of Hotel Real Estate Development

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Peter Berk, who has been president of PMZ Realty Capital LLC for more than 10 years, views the hospitality industry from the “glass three-fourths-full” perspective that he says is typical of developers, in contrast to more conservative financial players. Over the course of his career, he has arranged over $6 billion of debt and equity for hotel owners, comprising over 50,000 hotel rooms and including all the major brands as well as many independent hotels. As he recently told LODGING, 2019 been a good year, and he observes some trends, but no signs of trouble. Although he says a pullback will inevitably occur at one point, for the near term, higher but still historically low interest rates and sufficient demand for the supply—some of which is offset by reduction or needed due to geographical factors—are enabling even “iffy” projects to go forward.

Are you among the many who are “waiting for the other shoe to drop” due to the building that has dramatically increased supply in recent years?

No, for several reasons, including the extent to which the industry pulled back on new development during the recession and that a significant amount of the new supply being generated is actually replacing older, outdated supply leaving the market. New supply is also filling greater demand due to a geographical shift—migration from the North to the South. For that reason, not much new supply is being generated in areas like New England, but it’s a different story as you go to the Southeast. With more people moving to places like Knoxville, Nashville, the Carolinas, Georgia, and Florida, there is a need for new supply.

What are the major hospitality development trends now?

Overall, I’d say transaction volume—buying and selling volume—is up. On the sales side, prices have somewhat stabilized, as sellers have become more realistic; if they are determined to sell their asset, they’re doing it. The people who are selling are transitioning to different types of assets—for example, properties that are larger or in a different market.

How has your own business fared in this environment?

This year has been a strong year for us. We handled more transactions than last year, when people thought prices were going to continue to increase; and 25 percent of our business has been financing hotel acquisitions, something we did far less of in the two years before this. Although interest rates are up generally, they are still low; we’re doing deals from below 4 percent, which is as low as they’ve ever been in my 20 years of doing this. That’s brought in a lot of business too.

Is there anything keeping you up at night?

We are pretty optimistic and are having a great year, but you just can’t always predict what’s coming. While many saw the 2007 recession coming, no one saw 9/11. At this year’s Lodging Conference in September, there were two top economists from two top investment with completely different views. My personal feeling is that if something occurs that makes people pull back on traveling, it will be some geopolitical thing outside of the hotel realm. I don’t think it’s going to be related to our industry.


This article originally appeared in Lodging Magazine on December 12, 2019

PMZ has refinanced a substantial portion of our portfolio: 18 loans for both limited and select service hotels across four states, in excess of $200 million total in-debt financing. I always value PMZ’s insight into the current state of the financing market. They are always responsive, enthusiastic and have in depth knowledge of the financing markets. I am confident that PMZ would add value as financial consultants/brokers from their experience in the hospitality industry.

Hasmukh (H.P.) Rama
Auro Hotels (Formerly JHM Hotels), Chairman of the Board

PMZ has worked with our franchisees for over two decades financing all of the Hilton brands.  They have extensive experience with our brands and in the capital markets and have provided outstanding customer service.  Their business consistently finds creative financing solutions for our licensees, which, in turn, helps the Hilton Franchise Development Team achieve our growth objectives. PMZ brings trust and commitment to our franchisees.  We look forward to continuing our relationship with PMZ and recommending them to our franchisees in the future.

Bill Fortier
Senior Vice President Development, Hilton Worldwide 

We have worked with the PMZ team for many years.  They have done exceptional work for us in securing great financing for our assets in multiple locations.  They are professional and knowledgeable in all aspects of real estate finance.  

Mitch Patel
President & CEO, Vision Hospitality Group

I’ve had the opportunity to complete a dozen debt and equity transactions with Mike and Peter over the past ten years and value their financial and business insight. They bring innovative ideas and fresh thinking to each of their deals, and helped structure both debt and joint venture transactions that exceeded our expectations. Above all, we respect them and their firm as trustworthy advisors who are focused on their clients and their needs.

Ashish Parikh
Chief Financial Officer, Hersha Hospitality Trust

PMZ and their team of experts has been arranging financing for IHG owners for over 20 years. Their deep understanding of the hospitality industry, and the capital markets, has allowed many of our owners to secure the necessary financing to grow and expand their portfolios. PMZ has always and continues to put relationships first by acting with transparency and professionalism throughout their entire process. We appreciate what they do for IHG and the hotel industry as a whole.

Julienne Smith
Chief Development Officer, The Americas IHG Hotels & Resorts

I have worked with PMZ for over 10 years and during that time have had nothing but positive experiences.  They deliver at closing exactly what they promised at the beginning of the project.  PMZ has helped Sun Companies secure over $150 million in financing for such brands as Hilton, Marriott, and IHG.  Their business is relationship-based, therefore, they are the perfect partners for us and essential to our company’s growth.

Bharat Patel
Chairman & CEO, Sun Development Company

I’ve completed a myriad of transactions over the past 10 years with Mike and Peter and their clients. Through the ups and downs of the real estate market cycle, they have consistently presented us with transactions that are attractive based on current market dynamics. Throughout the process from origination to closing they have been a strong advocate for their clients, and on more than one occasion, thought of an innovative solution to structure around significant issues. Their creative thinking has benefited their clients and made me confident that once we begin a transaction, it will lead to a successful closing.

Michael Amoia
Director, NY based insurance company

I initially called Peter and Mike several years ago when I was seeking refinancing of two of our properties in Pennsylvania. The lender we were working with at the time had changed the terms on us several times. I explained the situation to them, and they assured me that they would close at the same exact terms or better than originally quoted. Not only did they close at better terms then originally outlined, but they exhibited a sense of professionalism and integrity that every intermediary should possess. I have since worked with Peter and Mike on several other transactions, and their high level of service is consistent. I would recommend the PMZ without hesitation to anyone seeking financing.

Atul Patel
CEO, HMB Management, Allentown, PA

Our firm currently operates over 75 hotels and restaurants in the upper midwest. When we wanted to arrange financing for eight of our limited and full service hotels in Iowa and Kansas, we started working with Peter after he was highly recommended by several of my peers. He did not disappoint us. He understood our unique local markets and secured $60 million from a national insurance company. We have since engaged his firm several other times to arrange financing for us. There is no doubt in my mind that the professionalism and knowledge of PMZ will benefit anyone looking to finance or refinance hotels.

Bruce Kinseth
Executive Vice President, Kinseth Hospitality Companies

The loan arranged by PMZ allowed us to retire our existing financing and provided a stabilization period for the Embassy Suites now that the renovation is complete. By providing us with multiple financing options, PMZ helped us find the best lender suited to our specific needs.

David Marvin
Founder and President, Legacy Property Group

PMZ has brought us multiple financing quotes and helped us select the one most advantageous to the ownership group. They have consistently helped us navigate the closing process flawlessly.

Danny Patel
CEO Peachstate Hospitality, Former Chairman Asian American Hotel Owners Association (AAHOA)