France’s FdR makes big push into German budget hotel sector

One group making a big push into the German hotel sector is French REIT/SIIC Foncière des Régions (FdR), which is taking a very bullish view on particularly the budget segment, where chains have so far failed to gain major traction.

The group has forged a partnership with the German Motel One chain, which currently operates 48 hotels with nearly 13,000 rooms. The bulk of its hotels are in Germany, but it also operates in Belgium, Austria and the UK, and plans a stronger European presence. FdR’s first deal was a recent €34m sale-and-leaseback transaction with Motel One for two hotels – one in Berlin Mitte and the other at Frankfurt Airport. The two properties have a total of 450 rooms and are covered by 20-year leases.

Along with its partner FDM Management, it has since bought a further nine Motel One properties. In a strategic partnership deal signed earlier this year, FdR and Motel One plan to team up to drive the group’s German and European expansion, with FdR developing hotel projects for Motel One to operate. FdR manages real estate assets of €16bn, of which more than €1bn or 8% is now in hotels.

According to Gael Le Lay, FdR’s deputy CEO for the hotels and services sector,  “Foncière des Régions intends, with this initial transaction, to support Motel One in its development, as we have done with our other hotel partners over the past ten years, such as Accor, Louvre Hotels Group, B&B Hôtels, and more recently, Meininger.” The partnership with Meininger, signed last year, is expected to lead to €400m of new hotel investments.

Just this week, FdR’s subsidiary Foncière des Murs bought a portfolio of 22 B&B hotels in Germany from the hotel group’s majority owner Carlyle Group for €128m. The hotels, numbering 2,271 rooms are located throughout Germany, but mainly in the west, in large cities including Düsseldorf, Stuttgart and Berlin, but also in secondary cities of Würzburg, Nürnberg, Lübeck, Kiel, Mönchengladbach and Braunschweig. Nearly all the hotels are less than two years old, and as such have lengthy operative lease agreements of 17-18 years, according to Ursula Krigl, the head of Hotels & Hospitality at JLL Germany, who advised Carlyle.

FdR, through its German subsidiary Immeo, also has a major commitment to the German residential market as an attractive counterweight to its focus on French office property in its €10bn holdings. It recently paid €221m for a portfolio of Berlin residential property, at an entry yield of 5.2%.

The latest assets were acquired by FdR’s German residential subsidiary Immeo, and include a €184m portfolio of homes in prime locations in the Charlottenburg, Mitte and Friedrichshain districts of Berlin generating average monthly rents of €9.10 per sqm, and a €37m portfolio in Dresden and Leipzig.

“These operations have the potential to create value by increasing rental income and forward sales margins,” FdR said in a release. The acquisitions were made at an average price of around €1,710 per sq.m. and offer an immediate yield of 5.2% and average potential reversion of 25%. “Foncière des Régions is thus continuing its strategy by bolstering its position in these three flourishing and attractive cities,” it said.