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Westin Grand Vancouver
Suite owners disappointed with investments
Unhappy investors in local strata hotels
are keen to sell, but the market so far has been slow
The September 11 terrorist attack in New
York and a slowing economy have prompted holders of strata units in
Vancouver hotels to seek buyers for their once-promising properties.
Only a handful of strata hotel units have
sold in Vancouver so far this year, but Vancouver hotel broker Angus
Wilkinson says ongoing discussions with suite owners at the 207-room Westin
Grand hotel could boost that figure to more than 100.
He and a North Vancouver realtor are
trying to cobble together a deal thatwill see one buyer purchase 100 suites
in the development. So far, 76 suite owners have indicated they will sell
their units. Wilkinson would only say the potential buyer is foreign, but
not Asian, and that the hotel would continue to operate under the Westin
flag.
"The hotel is performing not badly,
given the state of the economy and the competition in the city," he
said. "But the problem is, the investors paid far too much money for
the suites, so in relation to their investment their return is very
low."
While observers feel the hotel, which
opened in April 1999, has outperformed similar properties in the city and is
posting a 68-per-cent occupancy rate, Wilkinson said it still hadn't met
investors' expectations.
General manager Stephen Darling said
suite holders would probably receive a three-per-cent dividend on their
suites this year, down from expectations earlier this year of a 5.7-per-cent
return, or about $11,628 on the average suite. Wilkinson noted that both
were well below the expected return of more than 10 per cent.
Darling said the decline is due to the
turndown in the tech sector and,more recently, in general travelling
following the events of September 11.
Other local strata hotels -- including
the Hilton Vancouver Airport, Vancouver Airport Marriott, Sheraton Suites Le
Soleil and Delta Pinnacle -- were unwilling to comment on their performance
or did not return calls.
But Wilkinson, who tracks occupancy rates
at about 60 Lower Mainland hotels, said investors in the airport hotels and
the Pinnacle are also experiencing declining returns on investment.
"The Richmond properties are really
taking a hit since September 11," he said. "However, [investors]
didn't pay nearly as much out there as people paid in downtown
Vancouver."
Who would buy the suites from owners who
consider them bad investments is another question, especially with market
conditions showing little hope for near-term recovery. Many of the original
purchasers at hotels such as the Westin Grand and the troubled Sheraton
Suites Le Soleil were from Asia and bought the suites under vastly different
economic conditions.
"The market's been hit. We had the
strike, we had a 10-per-cent increase in supply, then September 11 didn't
help us whatsoever. And not having the convention centre is another big
factor," said Betsy MacDonald, managing director of HVS Int'l
(Vancouver). "We need that convention centre. It was going to bring
guests in, and bring in their spouses, and then hopefully bring return
guests for tourism. None of that reached fruition. So some of these things
were built on projections based on things that were supposed to happen that
never did."
That has killed the market for individual
unit sales, a point Wilkinson highlighted.
"There's no secondary market for the
sale of strata hotel units, unless you can find a bulk buyer who's in the
hotel business who would buy a majority share," he said.
Meanwhile, Darling said that the values
of suites at the Westin Grand have been appreciating against their original
sale prices.
"We've had only three sales since
January 2000, when the original ones were all completed. The first unit, in
January of this year, sold at a 37-per-cent discount from the original
purchase price. The second suite, that sold in March, sold at a 27-per-cent
discount. And the third suite, that sold in May, sold at a 20-per-cent
discount. From my standpoint that definitely shows progress in the
marketplace," he said.
Sources close to the Delta Pinnacle note
that approximately a quarter of the hotel's 434 units are still held by the
developer nearly two years after the hotel opened in February 2000.
Vancouver continues to show potential,
however. The Westin Grand's developer, Trilogy Development Corp., is
constructing the Opus Hotel Vancouver in Yaletown. Unlike the Westin Grand,
Trilogy is securing financing for the 97-room boutique hotel through
conventional means rather than stratifying the property or by other means.
The hotel is expected to have a $30-million value on completion in May 2002.
- by Peter Mitham Business
in Vancouver December 2001
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