Fewer large-volume portfolio transactions - Hotel investment market above long-term average in 2018

Fewer large-volume portfolio transactions - Hotel investment market above long-term average in 2018

October 10, 2018

FRANKFURT, 9th October 2018 – Investments in German hotels amounted to a total of €2.82 billion from 75 transactions in the first three quarters of 2018. About 63% of the volume was generated by German players, while buyers from the UK and France were the most active foreign players with €470 million invested in 11 transactions. More than half of the transaction volume can be credited to institutional investors. Hotel operators, real estate firms/developers, private equity/REITs and private individuals accounted for about £1.1 billion. 
The nine-month result fell slightly by 8% compared to the previous year, but exceeded the five-year and 10-year averages by 12% and 85% respectively. The top 5 transactions, all of which took place in the three-digit million range, accounted for just under €950 million, corresponding to a third of the total volume. 
“Interest in hotels remains at a high level. Current investment activity is characterised by a highly diversified group of buyers both in terms of origin and investor type. The ongoing loose monetary policy, steadily rising number of overnight stays in most cities and continuing good performance of many hotels are all helping to prop up demand,” said Stefan Giesemann, Executive Vice President of the JLL Hotels & Hospitality GroupGiesemann added: “Given the fact that the last three months of the year are generally very active, with the realisation of numerous transactions currently under negotiation, the five-year average of €3.6 billion will be exceeded by some margin. Whether it will again be possible to surpass €4 billion by the end of the year depends on how many transactions in the pipeline will actually be successfully executed by 31 December.”
Between January and end-September a total of 65 individual hotel transactions were completed with a volume of €2.2 billion. This was 20% above the previous year’s result (Q1- Q3 2017: €1.8 billion with 61 transactions). The average transaction size therefore increased slightly to €34 million.
The largest individual transactions in the third quarter included: 

  • The sale of the Renaissance Hamburg (205 rooms) as part of the “Hanseviertel” to CBRE Global Investors. The seller Allianz Real Estate was advised by JLL.
  • The purchase of 260 serviced apartments under the Myhome brand in Munich-Moosach by Corestate. The building provides over 8,300 sqm of rental space including communal areas and a fitness studio as well as a 1,800-sqm training and conference centre. The property was sold by Deutsche Real Estate Funds.
  • The disposal of the 218-room Ruby hotel development as part of the mixed-use property Junghof Plaza to Patrizia subsidiary Triuva. The forward deal with a total volume of €400 million achieved a purchase price factor of almost 30. The seller is a joint venture between a fund managed by PGIM Real Estate and Frankfurter Gewerbeimmobilien GmbH (FGI). 
  • The sale of niu Air-Hotel currently under construction in Frankfurt with 344 rooms to the Dubai-based Select Group. It was the group’s first hotel purchase in Germany. The seller was the project developer GBI. 
  • The sale of the Urban Loft project development by Althoff Group to Patrizia. Althoff will continue to operate the establishment under a long-term lease contract. The 3-star hotel with 212 rooms is currently being built on the site of the former Gaffel brewery at Cologne railway station and benefits from its close proximity to the old town. JLL acted as adviser to the seller.

In the portfolio segment, ten hotels with a total value of €644 million changed hands in the first nine months of the year (Q1-Q3 2017: 13, for €1.3 billion). The significant 50% decrease compared to the previous year was primarily due to the absence of a large-volume portfolio transaction. A year ago, the Interconti portfolio (with 11 hotels in Germany alone) changed hands for almost half a billion euros, boosting the overall result. Transactions of this size have not yet been evident in 2018. 
The sale of three Ibis hotels in Munich to BNP Paribas REIM took place in the upper double-digit million range. Two of these hotels were acquired for the French open real estate fund OPCI BNP Paribas Diversipierre and one for the fund SCPI Opus Real. As part of the transaction, the leases were extended by 20 years. Another example is the purchase of a portfolio comprising four hotel development projects (675 rooms in total) by Union Investment. The seller of the “Super 8 Hotels” in Dresden and Oberhausen as well as two long stay concepts in Eschborn (Hyatt House) and Freiburg im Breisgau (Adagio Access) was Benchmark.

*The Hotels & Hospitality Group of JLL Germany includes individual transactions with an investment volume of at least €5m as well as portfolio transactions with properties exclusively in Germany. Also included are German hotels that are sold as part of cross-border portfolio sales.