UK Hotel Investment Volumes Continue to Grow
The UK remains one of the most liquid markets with hotel transaction volumes amounting to €1.4 billion in H1 2012, according to Jones Lang LaSalle Hotels. This represents 37% of total EMEA hotel investment volumes, which are expected to exceed €9 billion by end of the year.
The 5-star 256 bedroom InterContinental Westminster, currently under development and expected to open in November 2012, was sold for an undisclosed price to Shiraz Boghani, founder of the Splendid Hotel Group.
UK investment volumes were also backed by a number of portfolio deals. A notable example was the sale of six hotels by property fund AAIM to the Principal Haley hotel group for €242 million. The hotel group immediately resold the freehold to Pramerica on 175 year leases. Furthermore, Britannia Hotels bought two 5-star hotels from the De Vere Group for about €25 million.
London accounted for 59% of UK investment volumes or €796 million.
“Activity in London was primarily driven by the acquisition of 8 upscale hotels in the capital,” explained Jones Lang LaSalle Hotels CEO for Northern Europe, Jon Hubbard.
“This included the 4-star 208 bedroom Hoxton hotel which was sold for €81 million to private equity firm Ennismore Capital and the 5-star 62 bedroom Number 11 Cadogan Gardens that was acquired for €39 million by The Cadogan Estate.”
Strong Growth in EMEA
Hotel investment activity in EMEA slightly weakened in the first 6 months of 2012 when compared to the same period in 2011. Hotel investment volumes totalled €3.7 billion, a 12% decline compared to sales volumes in the first half of 2011. The majority of transactions were single asset sales, accounting for 64% of total EMEA transaction volumes.
Transactions in France
During H1 2012 France remained the second most active market with hotel transaction volumes totalling €401 million, 11% of total EMEA transaction volumes.
Investment activity was strong in Paris and 9 hotels were sold with a total value of €328 million.
A major transaction was the sale of the 4-star 369 bedroom Meliá Paris La Défense development, which is expected to be completed in 2014. The development site was acquired by German fund manager Union Investment from French property company Vinci Immobilier for an undisclosed price.
Another transaction highlight was the sale of the 4-star 617 room Pullman River Gauche which was acquired by Bouygues Immobilier for €77 million.
In addition, the 5-star 60 bedroom Hotel Lancaster in Paris was sold by Spanish operator Hospes Hoteles to French high-net-worth-individual Pierre Esnée for about €61 million.
Transaction in Germany
In Germany, hotel transaction volumes totalled €177 million, 5% of total EMEA transaction volumes. Significant transactions included a portfolio sale of two hotels in Berlin, the 4-star 153 bedroom Hotel Indigo Berlin and the 4-star 242 bedroom Holiday Inn Berlin Centre both located at Alexanderplatz.
Both properties were sold by the Azure Property Group to Invesco Real Estate for €60 million.
Significant transactions include HPI Germany Hotelbesitz GmbH (HPI) purchased three Penta hotels (139-room Pentahotel Braunschweig, the 138-room Pentahotel Eisenach and the 137-room Pentahotel Kassel) from CRE Hotel Immobilien GmbH for an undisclosed sum.
The remaining volumes accounted for small to medium size single asset transactions such as the sale of the Suite Novotel in Hamburg that was acquired by German fund manager Deka Immobilien from iii-investments for about €18 million.
Hotel Investment: A Positive Outlook
Many hotel markets have seen a growth in Revenue-Per-Available Room (RevPAR) in the first 5 months of 2012 including Paris (+7.3%), London (+3.1%), Munich (+3.4%), Barcelona (+5.6%), Copenhagen (+3.7%) and Prague (+13.5%) amongst many others, when compared to the same period in 2011.”
“We observe continued growth in trading fundamentals in many key European hotel markets despite the economic turmoil and uncertainty in the Euro Zone,” explained Jones Lang LaSalle Hotels CEO Central Europe, Christoph Härle.
“Leisure travel remains buoyant and is fuelled by continued growth in inbound tourism from emerging markets in Asia and South America. With demand growing and a decreasing number of hotels in the development pipeline, a further improvement in trading performance can be expected in the short to medium term. This should result in more attractive returns for owners and underlines the attractiveness of hotels as alternative real estate investments.”
Hotel investment activity is expected to pick up in the third and fourth quarters of 2012, as various large European portfolios are likely to close in the coming months.
Investor interest remains strong for hotel assets as equity markets remain volatile and yields on secure government bonds, such as those of Germany are too low. A further driver will be pending debt maturities that will encourage a number hotel real estate owners to put an increasing amount of hotels up for sale in order to free up additional cash flow.
However, one of the major obstacles preventing a major uptick in sales activity are the persistent tight credit conditions, with only a limited number of senior lenders and only a few banks capable of advancing money in large lot sizes.
Overall, Jones Lang LaSalle Hotels anticipates hotel transaction volumes in 2012 to be largely on par with 2011 at roughly €9.4 billion.”