Thai group enters Europe with German hotels acquisition

It’s not just Asian investment groups from China, Taiwan and Korea that are looking further afield than their home markets for new opportunities. Thai group Fico Corporation is also moving out beyond its traditional roots in Thailand to make its first investment in Europe, investing €80m in a portfolio consisting of eight hotels in Germany and one in Belgium.

The hotel package was sold by Grand City Hotels, whose German-listed associated company Grand City Properties has been more in the headlines (and in the pages of REFIRE) recently. The hotels are: Days Inn Berlin West, Days Inn Dresden, Ibis Hotel Erfurt Ost, Ibis Gelsenkirchen, TRYP by Wyndham Bad Oldesloe, TRYP by Wyndham Berlin City East, TRYP by Wyndham Leipzig North, TRYP Wyndham Garden Bad Malente and TRYP by Wyndham Antwerp.

The FICO Group, owned in the third generation by the Srichawla family, has its origins in the textiles and machinery industry and has recently been branching out into real estate in Thailand, with the emphasis on prestige hotels and serviced apartments.

Sanjay Singh, managing director of Fico Corporation, commented that “This acquisition is a carefully planned diversification move designed to expand our portfolio of hotels to a dynamic German market.” Financing (a two-year bridging loan of €45m) is being provided by Thailand’s Krungthai Bank.

Depending on investment opportunities, said FICO chief executive Krit Srichawla, the group would aim to buy up to 20 more hotels in Europe over the next two years. In a statement, Mr. Scrichawla said that the acquisition of the mid-range hotels is in line with FICO's plan to expand overseas, noting that “even though the euro zone is in a nascent economic recovery, some countries including Germany have solid economic fundamentals.” Revenue from the company's hotel portfolio was small and it wanted to strengthen the portfolio, he said, with the acquisition of hotels in Europe the main focus.

Mr Srichawla said the nine acquired hotels are expected to yield a return of 8-9% per year and the breakeven point is expected in the 10th year. The company plans for its hotel portfolio to represent between 10% and 20% of its total revenue in the next few years. “The supply [of hotels] in Europe is interesting for us and Europe's interest rates are reasonable,” he said.

For Grand City, the deal is the second in as many months after it sold a portfolio of four hotels to DTZ Asset Management on behalf of a French investor. Grand City is one of the biggest hotel investors and operators in Germany, with a broad range of brands and asset types in its portfolio. It specializes in snapping up hotels in financial difficulty and rejuvenating them. Its CEO Christian Windfuhr, an international hotel group veteran and who also appears to be the driving force behind the group’s German residential housing acquisitions, indicated last year that his group would be selectively offering hotel assets for the first time to test the state of the market.