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2017 will be a further dynamic year for German hotels, with no shortage of demand, but the lack of sizeable portfolios the main braking factor.
The German hotel investment market had a record year in 2016 at a volume of nearly €5.2bn, helped by a record fourth quarter which saw more than €2bn in volume across 60 transactions, as well a several larger portfolio deals. This was against a background which saw total European hotel investments fall by 7% to €20.4bn, according to CBRE – albeit still the second-highest volume ever.
The Brexit fallout led to volume on the UK market more than halving to €4.37bn, although interest, particularly from foreigners (mainly Asians) attracted by the weaker sterling, was gathering pace again by year-end. As a result, Germany overtook the UK to become Europe's largest hotel investment market.
According to the latest Business Outlook study from hospitality brokers Christie & Co., the prospects for the German market are again very bright for this year based on the fundamentals of room occupancy, net room rates and RevPar. The main demand is coming from domestic institutionals and foreigners (particularly Chinese).
Brokers JLL, Colliers and CBRE all agree that 2017 will be a further dynamic year for German hotels, with no shortage of demand, but the lack of sizeable portfolios the main braking factor. Foreign investors in particular are looking for high-value core assets, particularly resort hotels, and are prepared to pay high prices, while project developments will continue to play a dominant role.
There have already been a number of notable deals since the beginning of the year.
Augsburg-based Patrizia bought six hotel properties with about 600 rooms under construction for an undisclosed sum in Berlin, Dortmund, Heidelberg, Krefeld, Stuttgart and Wuppertal and which have been rented to hotel operators for 20 years.
The Heidelberg property, a budget hotel featuring 100 rooms due for completion in 2018, was purchased from Hirotani Projektgesellschaft and has been let for 20 years to the hotel chain Meininger Holding. The other five hotels, with a total gross floor space of around 18,000 sqm, were purchased from LIST Retail Development. They have been let to the B&B hotel group for 20 years and should be completed later this year. Patrizia now has hotel assets valued at about €600m.
Munich-based fund manager Real I.S. bought a hotel and office space that are part of Stuttgart’s "Milaneo" complex from Bayerische Hausbau, for an estimated €65m. The Aloft designer hotel with 165 rooms and suites, conference rooms, and a fitness area is being housed in Real I.S.'s Themenfonds Deutschland.
Austrian hotel group Arcotel is bringing its Moons hotel concept to Germany, which it views as a very attractive market for further expansion "in terms of property as well as operationally," according to an Arcotel spokeswoman. For Moons hotels, the company is looking at large cities upward of 500,000 residents.
The hotels should have at least 120 to 150 rooms or about 4,000 sqm GFA. Hotels with as few as 100 rooms would also be considered in "outstanding central locations", says the prospectus. The first Moons Hotel with 170 rooms will be opening its doors in Vienna in the spring of 2019. Behind Moons Immobilien, as owner, investor and project developer, is developer Bridge Group and Vienna’s Moser Architects.
Meanwhile, Offenbach-based Quadoro Doric has bought the "Innside Hotel" on Düsseldorf’s Seestern for its open-ended Spezial AIF Vontobel Sustainable Real Estate Europe, expanding the fund by a further asset class. The seller is a fund managed by Europa Capital and close local partner PBG Frankfurt, which bought it in 2013, along with the adjacent Cubus office building. The purchase price was €14.4mn, which corresponds to a yield of 6.25 %.
The four-star hotel was built in 2001. It has 126 rooms on six floors and is leased to the Spanish hotel group Melia until 2026. According to Europa Capital, it has the highest occupancy rate among its competitors on Seestern.
And, among other new arrivals, the British hotel management company Redefine BDL Hotels (RBH) is also aiming to get into the German market and has appointed hotel expert Tom Goldscheider to the position of Director of Business Development for Germany. Working in Frankfurt, his task is to establish leases and management contracts for hotels in Germany and the Polish market and to close 40 contracts for existing hotels by 2022. Developments will also be considered, and RBH is approaching investors and developers. RBH is currently managing a portfolio of 57 brand and private label hotel properties with around 9,000 rooms in the UK and one in Africa. Among others, RBH works with the IHG, Hilton, Accor, Marriott, Best Western, and Wyndham chains.