DENVER—While other U.S. markets were getting back on their feet last year after the downturn, Denver was showing off its stability as a market with a solid number of transactions.
Denver and two of its surrounding markets, Aurora and Englewood, saw 10 hotel sales in 2011, according to data from STR Analytics, sister company of the Hotel Investment Barometer. At least five of those transactions were priced at more than $40 million.
Transactions priced at more than $40 million included:
| Hotel | City | Rooms | Price | Date |
| Marriott Denver Airport | Aurora | 238 | $46 million | 18 January 2011 |
| Hilton Garden Inn Denver Downtown | Denver | 221 | $58.5 million | 4 March 2011 |
| JW Marriott Denver Cherry Creek | Denver | 196 | $72.6 million | 19 May 2011 |
| Courtyard Denver Downtown | Denver | 188 | $46 million | 22 July 2011 |
| Marriott Denver City Center | Denver | 613 | $119 million | 3 October 2011 |
The transactions the market has seen so far during 2012 are few compared to what the market has seen in the past, said Brett Russell, senior VP and director of business development with HVS.
Many hotel owners are just starting to get back on their feet, and because they feel the worst is over, many want to hold on to their properties for a bit longer to feel out the market before selling, Russell said.
So far in 2012, there have been three transactions in metro Denver, according to Mark Darrington, senior VP of CBRE Hotels. Two of the properties were bank-owned or bankruptcy deals: the 161-room Comfort Inn Central and the 68-room Days Inn Englewood Denver Tech Center. The third transaction was the sale of The Curtis, a DoubleTree by Hilton property.
There are approximately a half dozen assets in the market being marketed right now, said Geoff Davis, president at HREC Advisors. “A lot of those properties are being sold for lower replacement costs. There are distressed assets out there, and the market is still looking at buying distressed assets.”
CBRE’s Darrington expects activity will increase for the remainder of the year and will probably be on par with the amount of the transactions the market saw last year.
Hotel development ramping up
Development already is picking up in the market, which certainly will have an impact on transactions, Russell said. “(The new properties) might not be out of the ground yet, but they’re not speculative anymore.”
As of April, Denver had 29 properties, comprising 3,259 rooms, in its pipeline in the in construction, final planning and planning stages, according to data from STR, parent company of the Hotel Investment Barometer.
If plans for the much-awaited Gaylord Entertainment Company property in Aurora actually come to fruition, it could put many deals at risk by lowering the value of surrounding properties, Russell said. “I think it’s going to cause the transaction market to be somewhat depressed.”
The approximately $800-million Gaylord property would add 1,500 rooms to the market’s supply. Gaylord was approved 18 May for an $81.4-million incentive package over 30 years by the Colorado Economic Development Commission. The company requested $153.4 million, and Gaylord officials said they would not move forward with the development without the entire amount. But in a statement Friday, Gaylord president and CEO Colin Reed said he is looking forward to negotiating a deal with the state during the next four months.
A stable market
Denver has a diverse economy, which draws investors in, Darrington said. The market gets its share of corporate demand in the market from defense contracting, communications, technology and alternative energy and research companies.
In addition, Denver makes sense for groups from both the East and West Coasts, Darrington said.
“The market didn’t fall as hard as other markets in 2008 and 2009,” Davis said. “(It) didn’t crash, but it’s not really on fire … It can offer some consistency that other markets lack.”
During the month of April, occupancy was 62.5% in Denver, a 1.7% increase from April 2011. Average daily rate was up 8% to $100.79 and revenue per available room jumped 9.7% to $62.95, according to data from STR.
Denver has modest growth potential, Davis said. “(It) seems to be a location national investors have targeted, so we expect a lot of activity going forward.”