With CMBS debt delivering quasi-equity returns and interest rates unchanged, Jan Freitag’s point rings true: “If you don’t have to sell, you won’t.” For hospitality allocators, the bigger question is not when deal flow will return — it’s how to extract alpha in a market where most owners are waiting it out.

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Quantamental Breakdown: A Hold Regime, Not a Crash

Bay Street’s Phase 13 Regime Detection confirms a “Hold Regime” in U.S. hospitality, driven by three macro factors:

1. Debt Yield Advantage: Existing owners can hold assets profitably with structured debt that mimics equity-like returns.
2. PE Trophy Bias: Private equity’s “biggest checkbook” is still active, but only for iconic or redevelopment plays, as seen with Terra Group’s $205M Silver Sands Beach Resort acquisition — effectively a land bank for future condos.
3. Sub-$10M Deal Velocity: Nearly 500 of the 600 Q2 deals were in the sub-$10M range, emphasizing that opportunistic select-service trades are the only active tier.

Bay Street’s Bay Score volatility band for U.S. assets has widened by +60 basis points YoY, reflecting pricing uncertainty rather than operational weakness.

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Art Families and Trophy Properties: Who’s Really Buying?

Interestingly, the current trophy-property bias mirrors conversations we’ve had this quarter with several art families from Palm Beach, Aspen, and New York. These families — many sitting on generational wealth and substantial art collections — are increasingly viewing luxury hotels as long-duration cultural capital plays, not just yield assets.

One collector with holdings in American post-war sculpture noted:

“We don’t need the cash flow this year. We need an operator who can hold the story for 20 years.”

This is the same logic PE firms apply when paying premium pricing for high-profile hotels with redevelopment potential. As Art Collecting Today puts it:

“Value is a patience game. The right venue is an archive as much as an asset.”

The Stanley Hotel in Colorado ($841K per key) and Hotel Boulderado ($637K per key) are cases in point — both historic, independent properties trading at premiums because they can support narrative-driven redevelopment, including potential art and cultural programming.

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Quantamental Tilt: Where to Play in a Frozen Market

Bay Street’s AHA (Alpha Harvest Adjusted) scoring for the U.S. in 2025 recommends three strategic tilts:

1. Redevelopment as Cultural IP

Assets like Silver Sands Beach Resort (being razed for luxury condos) show that the highest IRR scenarios aren’t from running existing operations — they’re from repositioning. Cultural licensing, including art partnerships, enhances exit multiples, particularly in urban boutique markets.

2. Sub-$10M Select-Service Trades

This space remains the only liquid tier. Bay Street’s models show 7–8% IRRs with limited downside if paired with low-debt structures and ESG or wellness upgrades.

3. Trophy Properties with Long-Term Cultural Plays

Historic hotels with narrative equity (think Boulder, Charleston, Aspen) offer LSD scores 20–30% higher when coupled with art licensing. As Management of Art Galleries reminds us:

“Sustainability of cultural venues lies in the story they keep alive, not the one they start.”

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Final Takeaway: Waiting Is Not a Strategy — Positioning Is

The muted U.S. deal flow shouldn’t push allocators to sit idle. The market is bifurcated: patient capital is buying trophies; nimble capital is trading sub-$10M select-service assets.

For Bay Street, the best plays are where cultural programming intersects with long-duration holds — creating experiential IP that compounds loyalty and valuation even in a frozen macro environment.

As we often remind LPs:

In a hold regime, the question isn’t “Who’s selling?” — it’s “Who’s quietly compounding?”

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