In my year-end missive following 2023, I reviewed the resort transaction market dynamics evaluating contrarian patrons to downhill skiers who do not need to comply with in different’s tracks and «wanna-be’s» to cross nation skiers who predominantly comply with the chief’s tracks. I merely couldn’t perceive why extra buyers weren’t putting bets on the inefficiency created by market noise when market stakeholders intuitively know that you need to all the time purchase when others usually are not. Nicely, apart from one big investor out there, SQ Capital, Inc., 2024 logged in one other down transaction 12 months, as resort transaction quantity fell greater than 10% after final 12 months’s calamitous 40% decline. For the second 12 months in a row, SQ Capital was by far the most important investor out there.

General, for these of us within the transaction market, this 12 months was one other difficult 12 months. As I look again to 2024, a number of of the foundational points that had been inflicting the risk-off sentiment have modified whereas others stay. Let’s first assessment the standing of a confluence of nagging pressures that triggered the risk-off conduct that created 2023’s huge transaction decline and 2024’s additional decline:

1. Legacy Investments – Identical – Since there have been fewer transactions this 12 months than final, the nagging legacy funding points nonetheless prevail.
2. Actual Property Business Turmoil – Identical – The stress on actual property portfolio steadiness sheets attributable to the unprecedented will increase in rates of interest in 2022 and 2023 nonetheless exists. Whereas a mixed 100 bps decline in short-term charges ought to assist, this has been offset by will increase in long-term charges.
3. Two Wars – Totally different – Whereas the tip is just not but in sight for Ukraine, a long-awaited cease-fire in Gaza was introduced in early January 2025. Fingers crossed!
4. The Menace of Recession – Totally different – A recession by no means materialized in 2023 nor 2024 regardless of the excessive chance positioned by market prognosticators.
5. Presidential Election – Cut up Resolution – The election is now within the rear-view mirror because the outcomes pointed towards a transparent presidential mandate that resulted in an orderly switch of energy. Nevertheless, uncertainties stay about insurance policies that could be applied by the incoming administration, corresponding to tariffs, financial austerity of future authorities spending and immigration.
6. Debt-driven Friction – Totally different – The resort debt markets this 12 months had been considerably extra liquid than in 2023 as our Lodge Debt and Structured Finance crew (the very best within the enterprise) transacted a report quantity of debt placements this 12 months.

Now let’s discuss in regards to the prime resort purchaser for 2 years working – SQ Capital, Inc. The legendary actual property investor Sam Zell as soon as mentioned that «Any time you do not promote, you purchase» referencing the truth that when you select to not promote for a sure worth, you’re in essence making the choice to purchase the asset at that worth. And that’s precisely what SQ Capital has carried out for the final two years, as roughly $20 billion of motels had been taken to market however not offered. In essence, Standing Quo (SQ / legacy possession) bought every of those motels on the worth at which they might have cleared the market. The dearth of visibility into true market worth is a part of the reason for this dynamic, and we suspect that except the funding inputs change this 12 months, SQ Capital will proceed to prevail as the highest purchaser out there.