German hotel investment falls steeply on borrowing difficulties
The value of German hotel acquisitions in the first half of this year fell precipitously by around 65% with buyers finding it more difficult to borrow money, according to property advisor Jones Lang LaSalle. Total volume invested in the sector totalled only €170m, well down on last year’s €500m at the same stage, the broker said in a statement.
According to Thorsten Faasch, head of hotel investments at JLL, “Although large individual hotels or portfolios are on the market, they haven’t yet found buyers.” Total investments in all of 2012 will probably fall short of last year’s volume of about €1 billion euros, he said. So far this year, German buyers have made more than half of all acquisitions. Foreign investors will probably be more active in Germany as they look for stable economies to invest in, he suggested.
He pointed to a class of wealthy individuals who were increasingly investing along with private equity groups and other institutions. “This group is less dependent on capital markets and can easily buy a hotel without outside financing,”
Meanwhile, property advisor Colliers International issued their own figures for hotel investment in Germany in the period, which differ from JLL’s figures as a result of including several smaller hotel deals in their figures, which JLL do not count. Colliers put the overall figure for investment at €207m, down from €600m in the same period last year, but the overall trend is the same for both, and are below expectations for all players in the market. The key factor is the absence of institutional investors in the market, which has led to few large-volume transactions in the period, compared to last year.
For example, last year Colliers recorded 10 individual or portfolio sales with a volume of €20m or more, but only one single sale exceeded this level in the same period in 2012. That deal involved Invesco Real Estate buying two hotels operating under the Indigo and Holiday Inn brands and belonging to the Parkside Alexander complex for about €60m as part of a sale-and-leaseback deal. The hotels that changed owners between January to June were primarily in the three- to four-star categories. These categories accounted for €168m, or 81% of the investment volume.