Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/82355
T is activity has turned Milwaukee into a hotbed of hotel devel- opment, unusual for a secondary Midwestern market. Although the city's occupancy rates have returned to pre-recession levels, ADRs and RevPARs have not. In fact, current hotel operators are wondering whether the city can support the burgeoning pipeline of new rooms. Along with these two projects, a turn-of-the-century offi ce building is being converted into a new Hilton Garden Inn; together the three projects will add more than 400 rooms to down- town Milwaukee. Meanwhile, 60 miles west in Madison, Wis., "As far as new devel- opment goes, there is none — yet," says Rob Zache, CCIM, president of Central Place Real Estate in Madison. Wisconsin's state capital has 4 percent unemployment, with jobs fueled by a Big Ten univer- sity as well as the state government. He says a top-notch develop- ment site in a prime submarket was put under contract a year ago by a preferred national developer. "T e developer was fi nancially qualifi ed to do the deal and had the franchise secured but ultimately decided to let its contract terminate because of the uncertainty of the general national and local economy and the continued weakness in the state and local submarket," Zache says. "While Madison has been called one of the 10 best markets in the country, the developer's lenders said that the two most toxic things a lender can consider are vacant land and hotels." But Zache adds that Madison's occupancy rates and ADRs are close to pre-crash levels. "T e area is really in a state of the strong becoming stable again, and the weak still suff ering," he explains. "Outside companies are just now coming into the area looking for existing properties to take over, or for new-build development deals for the fi rst time since the crash." T e good news is that private equity fi rms are building up their cash reserves and starting to look in secondary and even tertiary markets for hotel assets, according to reports from the annual New York University International Hospitality Investment Conference. Six new private equity funds ranging from $500 million to $2 bil- lion closed last quarter and, to avoid competition with real estate investment trusts in major markets, they are turning their attention to solid assets in smaller markets. In addition, regional portfolio operators, foreign investors, and single-asset buyers are continuing to look for product in solid but less-competitive locales. Conference panelists said the current lull in deals is due to lack of properties on the market, as owners take advantage of improving fundamentals. But more assets are expected to come to market in the second half of the year, creating more opportunities for deals to be made. Sara Drummond is executive editor of Commercial Investment Real Estate. Log on for the latest CCIM member benefit National Virtual Deal Making Session JOIN US ON: CCIM Designees present property listings to CCIM members and prospective buyers in a free webinar. TUEOCTOBER 2ND TUENOVEMBER 6TH AT: 12:00 - 1:00 PMCentral Visit ccimdealmaking.com for more information. CCIM.com September | October | 2012 25