Eddie Yu, Senior Managing Director, Investments, talks about the current market and why lower interest rates could open up the supply of deals in the coming year.
AUSTIN, Tex. (Dec. 29. 2024)—Last week, Austin, Texas-based Ohana Real Estate Investors acquired the 357-key Hyatt Regency Lake Washington in the Seattle suburb of Renton, Washington.
Hotel Investment Today talked to Eddie Yu, managing director of investments at Ohana, about the acquisition and why it fits perfectly with the company’s strategy. HIT also asked Yu about the current market for hotel refinances and acquisitions (the company also provides credit for the hospitality industry) and what his outlook is for 2025.
Hotel Investment Today: Looking back a year ago, how is the M&A market different now?
Eddie Yu: It was a very difficult market environment [at the end of 2023] and one of the most challenging because rates were still on their way up and real estate is such a levered asset class. Hotels actually fared a bit better than those other asset classes… The dealmaking environment was very hard because anytime owners are under pressure, and it’s a sudden pressure that’s broad-based, that means the transaction market kind of shuts down because they don’t behave normally and they’re in defense mode.
HIT: What do you think will happen in 2025?
Yu: There’s just a lot of pent-up transaction activity. I’m a big believer in mean reversion… People delay selling things out of their funds and returning capital to investors; that means, at some point, all of that pent-up deal supply will be released, and we’ll be there to catch it.
HIT: How have lower interest rates affected dealmaking?
Yu: Lower interest rates certainly help make deals pencil. The biggest change for us is that lower interest rates relieve some of the pressure between sellers and buyers. A lot of sellers were waiting for the cuts to happen before they came to market… From our perspective, it doesn’t necessarily change our thesis on what we like and have been buying. But it makes us more bullish that in 2025 the sellers will come meet us, the buyers in the market, and have a valuation that I think we can both agree on.
HIT: Is the deal environment more competitive now than a year ago?
Yu: We are seeing more competition, but it’s still quite limited. It’s lower than 2019, for sure. So, very much off-peak. But these other competitors can come back quickly, so we’re also on the watch for that. But it still feels like a buyer’s environment.
About Ohana Real Estate Investors
Ohana Real Estate Investors (Ohana) is a vertically integrated real estate investment firm with expertise in the hospitality and residential sectors, focusing on urban and resort markets throughout North America. Founded in 2009, Ohana invests across the capital structure through dedicated equity and credit fund strategies and currently manages approximately $3 billion on behalf of a global investor base, including university endowments, foundations, and family offices. For more information, please visit ohanare.com.