Transaction volume expected to match previous year's level
Press release including chart [PDF]
FRANKFURT, 12th July 2018 – Individual transactions, especially hotel development sales, continued to dominate investment activity on the German hotel investment market in the second quarter of 2018. Total transactions by German and foreign investors in the first half of the year amounted to €1.86 billion. This result is therefore slightly above last year’s result (€1.83 billion) and almost a third higher than the five-year average for the first half years, while the ten-year-average has doubled. “There were substantial increases in both the number of deals and especially the transaction volume in the second quarter (€1.22 billion and 29 deals), which more than compensated for the weak first quarter (€640 million and 24 deals). In particular, high-volume sales such as the Hilton Berlin and Leonardo Royal Munich with a total volume of more than €450 million (25% of the overall volume) were responsible for restoring the balance,” said Stefan Giesemann, Senior Vice President of the JLL Hotels & Hospitality Group.
Individual transactions (47) in the first six months amounted to €1.51 billion in total. This corresponds to a year-on-year increase of about 16% (H1 2017: €1.30 billion with 43 transactions). Over this period, the average size of a transaction increased by about €2 million to €32 million. “Owing to the shortage of high-quality properties on the market, many institutional investors again focused on turn-key development sales, which accounted for almost 30% of all individual asset sales,” said Giesemann.
The largest individual deals in the second quarter included:
- the sale of the Hilton Berlin for approx. €297 million by a joint venture of Park Hotels & Resorts and Abu Dhabi Investment Authority (ADIA) to Aroundtown. The 601-room hotel is situated on the Gendarmenmarkt, and the sale represents the largest hotel transaction to have ever taken place in Germany.
- the sale of the Leonardo Royal Hotel Munich to Invesco for €157 million. The seller is the Israel-based Fattal Group, which immediately leased back the 424-room hotel on a long-term basis.
- the purchase of the Courtyard by Marriott in Hamburg in a forward deal by Zurich Gruppe Deutschland. In addition to the seven-storey hotel building near the central station, a tower almost 60m in height and with 113 rental units was sold. Completion is scheduled for 2019.
- the sale of the new Intercity Hotel with 220 rooms near Hanover central station for about €37 million to an institutional investor. The seller is project developer Bauwo, which is aiming to complete the project by March 2020.
Only seven portfolios with a total volume of approx. €357 million changed hands, which was a considerable decrease compared to the same period of the previous year (H1 2017: €530 million with 11 transactions). The explanation is simple: little is available on the market, and large-volume portfolios in particular have become a rare commodity. Notable transactions in the second quarter included:
- the sale of a portfolio comprising seven properties to Swedish investor Fastighets AB Balder for approx. €58 million. The hotels are located in Berlin, Leipzig, Erfurt, Gelsenkirchen, Dresden, Bad Oldesloe and Bad Malente. The buyer signed a 20-year lease contract with the Ligula Hospitality Group from Sweden. The seller is the Thai Fico Group.
- the sale of the Vienna House Easy Berlin and Generator Hostel as part of the "Forum Landsberger Allee" in Berlin to Patrizia. According to sources, the purchase price for the total complex was about €100 million. The seller was Peakside Capital, which bought the building out of insolvency in 2015.
- the purchase of two projects near Munich with around 500 serviced apartments by an association of private investors for about €90 million. The project includes two buildings with a combined gross floor area of approx. 17,000 sqm in Aschheim and Trudering.
German buyers again accounted for the majority of investors with an investment volume of €1.17 billion and 65% of the total hotel transaction volume. Foreign investors were increasingly present in the case of transactions worth more than €50 million, led by the UK with a volume of some €300 million and followed by France and Sweden with almost €60 million apiece.
Institutional investors proved to be the most active group with a market share of over 40%, corresponding to around €800 million with 23 transactions. Hotel operators (13 transactions), private equity/REITs (9), property companies/developers (5) and private individuals (4) invested a total of around €1.06 billion.
Stefan Giesemann concluded: “In Germany, we see a growing number of international buyers from countries where management contracts are common practice. In addition, there are signs of a general increase in flexibility among institutional investors. In a market like Germany, which historically has been dominated by lease contracts, management contracts are becoming more acceptable, with institutional investors cooperating with joint venture partners and designing a lease contract construct around the management contract. The focus here is on the leading German hotel markets and excellent micro locations in order to secure entry to the German market with properties such as the Hilton Berlin. Well-capitalised private equity investors, wealthy private capital, institutions and REITs all face intense competition for adequate and high-quality hotel properties. We expect the market to remain buoyant in the next six months, which will result in a transaction volume for the whole of 2018 at the previous year’s level.”
*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.