Hotel properties are a special part of the commercial real estate sector. The overnight stay business is booming – especially in large cities and conurbations that are developing dynamically. Here, staying “overnight” is in high demand as business people, transients, trade fair attendees, event visitors, and tourists ensure good occupancy rates.
Nevertheless, location counts. With good to excellent locations, hotel properties often offer above-average returns and are attractive for investors. The situation is different with second- to third-class locations. Basically, the hotel concept must match the location. If this is not the case, it can be difficult – even for five-star hotels. In this article, we will introduce three companies that purchase hotels, all of which are part of our list of the largest European hotel investors.
1. Commerz Real AG – Hotels for Special Funds
Commerz Real AG in Wiesbaden is part of the Commerzbank Group and has been active in the real estate business for more than four decades. The company, which has several subsidiaries, deals in real estate investments and real estate funds. The open-ended fund hausInvest is aimed at a broad investor audience; various special funds with different focuses are primarily intended for institutional investors. Commerz Real also purchases hotels for its funds.
In cooperation with Deutsche Hospitality, the umbrella brand of Steigenberger Hotels AG, a special hotel fund was created: the “Commerz Real European Hotel Fund”. Launched in late 2018, the fund aims to build a portfolio of up to eight hotels that are part of the Deutsche Hospitality brand. Another hotel fund is the “Commerz Real Institutional Hotel Fund”. It invests in hotel properties with a global focus on major cities and tourism centres. The fund seeks high-yield hotels in the Core and Core+ risk classes with established hotel operators that have strong credit ratings, many years of experience and excellent quality. One current hotel investment by Commerz Real is the acquisition of the Hotel Maritim in Düsseldorf’s Airport City – a sale-and-lease-back transaction worth 162 million euros.
2. VICUS Group AG – Hotels for Restructuring and Revitalisation
The VICUS Group in Leipzig has existed for more than 25 years and invests in hotels and other commercial real estate. In addition to Core and Core+ properties, the focus is on value-added properties. These are often aging properties that can be redeveloped into profitable properties with a higher resale value through renovation, restructuring, conversion and new use. In 2019, VICUS aims to achieve a transaction volume of around EUR 2 billion; by 2018, the figure had already reached EUR 1.6 billion.
The acquisition profile for hotels also corresponds with the corporate strategy. They are interested in hotels within the top 8 cities and in regional centres nationwide. The hotels should have central locations and/or excellent public transport connections and the risk classes Core and Core+ are sought after. The property should either not currently have an operator or the operator relationship should end in three years at the latest. Preference is given to transactions with a volume of EUR 10 to 35 million. One example is the acquisition of the “Hotel im Wasserturm” in Cologne in 2018.
3. Foremost Hospitality GmbH & Co. KG – Hotel Operation and Hotel Development
The Foremost Hospitality Group in Berlin, founded in 2002, develops hotel projects and operates business and leisure hotels itself – preferably as a partner of InterContinental Hotels Group (IHG) and Hilton Worldwide. Currently (as of December 2019), 21 hotels are managed in Germany and one is in Great Britain.
As a project developer, Foremost Hospitality is primarily interested in sites suitable for new hotel construction – preferably in the vicinity of central transport infrastructure in major German cities and metropolitan areas. Examples are:
- A recently completed 165-room Munich Airport hotel project in Munich-Hallbergmoos;
- In Stuttgart’s Europaviertel district, Foremost Hospitality is currently developing two hotels in the immediate vicinity of the main train station with 157 and 144 rooms respectively, scheduled for completion in October 2020;
- Another project is the Hampton by Hilton Dusseldorf City Centre, on the site of the former railway car transfer station with 219 rooms, which is planned to open May 2021.
The Holiday Inn Express Hotel at Leipzig Central Station was recently acquired by Strabag Real Estate (SRE), with whom the property was previously developed jointly.
Picture source: Tony Yakovlenko
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