€936m hotel investment by France's FDM Management in two portfolios

France's FDM Management, the recently-created dedicated hotel joint venture of REIT/SIIC Foncière des Régions and a group of institutional investors, has managed to secure two hotel portfolios in Germany, France and Belgium for an investment of €936m.

The transactions push up the level of its overall portfolio to more than €1.1bn, generating an expected full-year revenue of €210m. FDM Management is 40% owned by FdR's Foncière des Murs and 12% by investors ACM Vie, BNP Paribas Cardif, Caisse des Dépôts, Crédit Agricole Assurances and Société Générale Insurance.

In Germany the firm has signed a preliminary purchase agreement for a portfolio comprising nine hotels in the city centre of Berlin, Dresden and Leipzig. The assets, in the medium- and high-end segments, are operated by international brands (Park Inn, Radisson Blu, Westin, Pullman, Mercure, Ibis), and have a total of 4,131 rooms.

This package, which includes the towering 1,012-room Park Inn on Alexanderplatz and the Westin Grand in Berlin, also provides 18,000 m2 of retail space with an additional buildable area of 70,000 m2 at Alexanderplatz in Berlin. Ownership of the assets is expected to be transferred this summer. Event Hotels will continue to manage this portfolio.

Overall the portfolio covers 4,131 rooms in the medium and high-end segments and more than 18,000 sqm. of retail premises and an additional buildable area of about 70,000 sqm. Long-time hotel sector observers will recognise the assets as the bulk of the old Interhotel portfolio, which was sold last year to a consortium managed by Brookfield and Starwood. The assets are expected to be transferred this by August this year, and Event Hotels will retain management of the portfolio.

There's a chequered history behind the portfolio. Starwood Distressed Opportunity Fund IX (SOF IX), a fund managed by Starwood Capital Group, had acquired a significant stake in the senior debt secured on the Interhotel portfolio at a discount to par in 2012, after insolvency proceedings had begun. SOF IX subsequently purchased a 50% stake in the portfolio's junior C note at a discount, after which it teamed up with Brookfield, an existing owner of the junior C note, on a 50/50 joint venture to bid on the portfolio. The JV was successful in the auction and signed a binding contract to acquire the portfolio. The insolvency proceedings were lifted in 2015, after which the JV assumed full ownership of the portfolio.

The second portfolio comprises nine hotels in France and Belgium, notably in the centre of Lille (60% of the rooms, including l'Hermitage Gantois and Le Couvent des Minimes), and in Rouen (the Bourgtheroulde hotel). It provides 650 rooms, mainly operated under franchise agreements under the Autograph Collection, Best Western, Crowne Plaza and Holiday Inn brands. This portfolio is managed by FDM Management.

Dominique Ozanne, chairman of FDM Management and CEO Hotels and Hospitality Management at FdR commented: “With these two major transactions, we are entering high-growth markets in partnership with the main international operators: Marriott, Starwood Hotels and Resort, IHG, AccorHotels, Best Western and Carlson Rezidor. As such, we are securing our position as a major player in hotel investments, and our aim is to continue our development in Europe.”

Created in 2014 by FdR in partnership with long-term investors, FDM Management is a dedicated vehicle for investments in hotels. It draws on its own financial and human resources to manage its hotels. Its main shareholder is Foncière des Murs, which holds 40% of the share capital. The other shareholders are ACM Vie, BNP Paribas Cardif, Caisse des Dépôts, Crédit Agricole Assurances and Société Générale Insurance, each holding approximately 12% of the capital.

FdR launched a share exchange to buy out minority shareholders in its Foncière des Murs hotels and services unit after boosting its stake to 47.5% last month. Foncière des Murs directly owns €3bn of hotel, healthcare, leisure and restaurant assets.