Germany’s hotel investment market makes solid start to the year

Glaring supply shortage ensures forward deals are even more desirable

April 16, 2019

FRANKFURT, 11th April 2019 – The German hotel investment market is increasingly characterised by two distinctive trends: the purchase of properties in the development stage due to the scarcity of existing properties for sale; and the absence of large portfolio transactions. In the first quarter of 2019, the transaction volume reached €592 million and was therefore 7% below the previous year’s level. The figure was also 5% lower than the five-year average, although it was still well above the average volume since 2009 (+40%). “At best, the transaction volume for the first three months of the year can be described as solid, limited as it was by a glaring supply shortage. At the same time, the prevailing conditions under which the entire real estate market has to operate have so far left no traces. Even yields have remained unchanged, albeit at a low level,” said Stefan Giesemann, Executive Vice President of the JLL Hotels & Hospitality Group.

Between January and the end of March 2019, a total of 18 single-asset transactions with a volume of approx. €496 million (Q1 2018: 21 with €458 million) were registered. This equates to a slight increase of about 8%. Eight of the sales involved properties that were still in the development phase. The average transaction size of all registered transactions amounted to €29 million, which was 30% higher than the average for 2018 (Q1 2018: approx. €22 million).

The largest single-asset transactions included:

➢ The sale of the Marriott Hotel to World Conference Center Bonn (WCCB) with 336 rooms to Art-Invest Real Estate as part of a sale-and-lease-back arrangement. The purchase was carried out for the “Hotel-Manage to Core-Fonds” managed by Art-Invest. The seller was DevelopVisio Real Estate.

➢ The disposal of Lindner Hotel am Michel in Hamburg to an institutional investor. The property was sold from a closed fund of Lloyd Fonds. The hotel, which was opened in 2008 and provides 260 rooms, is operated by Lindner on the basis of a long-term lease agreement.

➢ The purchase of Westin Bellevue Dresden by Singapore-based First Sponsor Group for about €49.5 million on the basis of a share deal. The 340-room hotel is managed by the Event Hotels group. The seller was Covivio with a majority share of 94.9%. The remaining 5.1% share is still held by Event Hotels.

➢ The sale of the Hilton Garden Inn project at Mannheim railway station to an institutional investor. The seller was the project developer Diringer & Scheidel. The 13-floor hotel with 197 rooms is due to be opened in late autumn.

➢ The sale of Holiday Inn Mannheim as part of a mixed-use project development to a capital management company from Munich. The office and hotel building called “No. 1” was sold via a forward deal for €100 million. The seller was Consus Real Estate, which was advised by JLL.

Only two portfolio transactions with a total volume of €95 million were recorded in the first quarter of 2019 (Q1 2018: three with €115 million):

➢ The sale of Iberotel and Dorfhotel in the Baltic sea resort Boltenhagen to Magna Asset Management. The two hotels will be operated on a long-term basis by TUI under the terms of a management contract. The seller was the 12.18. Investment Management group, which also signed a 20-year lease contract with Magna.

➢ The disposal of a Novotel and Ibis development at Düsseldorf airport to the Austrian investment fund LLB. The seller was Langen Immobilienholding. Aurelis subsidiary Ghotel functions as operator and franchisee.

German investors accounted for almost 70% of the overall transaction volume, which corresponds to a volume of €405 million and 16 transactions. Among the foreign investors, Austrian players were represented twice while investors from Luxembourg and Singapore each took part in one transaction. Institutional investors remained the most active market participants, generating a volume of about €400 million from ten transactions. They were followed by property companies with almost €100 million from five transactions.

“We are optimistic that the hotel investment market in Germany will remain robust in 2019. Numerous transactions are already in the due diligence stage and are likely to be completed in the coming weeks. However, the average volume for the past five years will not be attained this year, based on the projected volume of about €3.5 billion. The trend that has seen many investors funnel their capital into hotel developments will not change in 2019. It should be noted though that on one hand investors have become more cautious in the case of long-term forward deals and/or ideally want to minimise the construction risk through the presence of a building permit and a general contractor agreement. On the other hand, project developers are interested in seeking an exit as soon as possible — which is not an easy task as building costs continue to rise and the price of land remains high,” concluded Giesemann.

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of more than 93,000 as of September 30, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit