The other is — and this one is a little harder to pinpoint is the hotel for us is reaching the end of our investment horizon for the hotel. Typically, especially the better hotels, the more city center, the luxury that have hotel lodging REITs like to hang on to those because they look good on covers. They have high RevPARs. Those hotels may over time, when you look at your return on invested capital, the capital you’re putting into those assets at certain — at some point in time, will switch from being more offensive to more defensive. And then you get into the point where your return starts to decline and you’re putting in more defensive dollars. And so what we try to do now is look at each hotel, look at its life cycle, try to look out over the future and say, okay, our investment here is going to come to an end in the next couple of years.
There’s no more for us to really do or the risk-adjusted return of that investment is maybe not for us, maybe it’s for someone else. And so let’s go see if we can monetize that. Once — and we’re in the starting phases of that, once that becomes more regular, the matching up of acquisition targets becomes easier and more — just more natural. And so we do have some large assets and sometimes it’s hard to match up a large asset. And sometimes you have to take one asset and put it into 2 different assets. And that’s more work and more takes more time to find those assets than it does for just one. So we will continue to try to make this more of a regular process for us. In the near term, if we divest of something, well, we stop that transaction because it’s the right investment decision, but we don’t have anything to match it.
No, we have ways to — while it creates some lumpiness in earnings, we have ways with some NOLs and other things to shield gains and give us the time to make the right next investment. But in a — ideally for our earnings, for our investments, for our value creation, it’s best to line things up as close as possible, but knowing that’s not always possible.
Operator: Our next question comes from David Katz from Jefferies.
David Katz: I’m not sure if you’ve sort of talked about where the credit markets sit and how supportive they are for the M&A market? And just how important that will be or how pivotal that will be and you’re getting something done, say, this year?
Bryan Giglia: Yes. I mean, David, the credit markets are important. The majority of hotel transactions, especially on the private side are levered deals, which means that there has to be debt. And so if you went back a couple of months ago, those markets were not functioning really well and the spreads were wide, which led to, I think, our commentary and others commentary, there’s probably not a lot happening in the fourth quarter or even maybe the first quarter of the year. I think as we’ve got into the first quarter, there have been more transactions, debt transactions that are happening. The debt markets are becoming more functioning, but not to where they need to be for to have things really start to move. But I think they’re moving in the right direction.
And once that there — you need a couple of things. When you need price discovery and validation on asset values and then you need to know where the debt markets and that’s going to be important to figure out what LTVs are and what type of debt yields you can get. So I think we’re moving in the right direction. It is more challenging than it was, call it, 12, 18 months ago though.
Operator: Our next question comes from Floris Van Dijkum from Compass Point.
