Strong start to the year on the hotel investment market in the first quarter of 2017
Transaction volume with record result of €1.15 billion
Single transactions dominate with 69 percent
Investment volumne outside the Top 7 climbs by 90 percent in a year-on-year comparison
The German hotel investment market began 2017 with a transaction volume of around €1.15 billion (42 transactions in total), outperforming the year-earlier investment volume by 55 percent and setting a new record result for the start of a year. This is the conclusion of a current analysis prepared by the commercial real estate services company CBRE.
Prime yields for core products in top locations continue to run at 4.5 percent, with downward deviations nonetheless on the increase.
Focus remains on single transactions
Although the number of portfolio transactions increased significantly compared with the first quarter of 2016, single transactions clearly dominated with a share of around 69 percent in the overall volume. One of the largest single transactions in the first quarter includes the sale of the 556-room Radisson Blu Hamburg that was sold by Azure Hotels to the Wenaasgruppen, a Norwegian family-owned business. In Berlin, the 4-star ABBA Hotel changed hands in the context of a sale-and-leaseback deal. AXA Investment Managers purchased the 214-room hotel from the Spanish Abba Hotel group. In addition, Arcotel John F Berlin (190 rooms), that is part of the “Quartier am Auswärtigen Amt” complex, was sold. Along with the hotel, the complex also includes office and residential space. The property was sold to Warburg-HIH Invest Real Estate. CBRE acted as exclusive advisor to LaSalle Investment Management during the process.
An increasing number of property developments continue to change hands. These transactions highlight the trend of investors already securing locations at an early stage despite the project risk.
The proportion of property developments in the transaction volume came in at approximately 28 percent in the first quarter. As part of a forward deal, for instance, Motel One at Berliner Freiheit in Bonn that will have around 219 rooms was sold by Bonn Grund, a member of the Hirmer Group, to Württembergische Lebensversicherung. A transaction that stands out is the sale of the B&B portfolio comprising around five hotel projects bought by Patrizia Immobilien AG from List Retail Development. The hotel projects are located in Krefeld, Wuppertal, Dortmund, Stuttgart and Berlin. “As these deals show, property developments can generate significant demand in the current market situation,” Kaussen explains.
Other portfolio transactions include the two Motel One hotels – Motel One Berlin Hakescher Markt and Motel One München Sendlinger Tor – acquired by LHI Leasing as part of a sale-and-leaseback deal. The properties were sold together for around €88 million by the hotel chain. The Generator Hostels chain was sold by Patron Capital and Invesco Real Estate to Queensgate Investment in the first quarter. This portfolio comprises a total of 14 hostels in Europe, three of which are situated in Germany, specifically in Berlin Prenzlauer Berg, Central Berlin and Hamburg.
With a share of some 59 percent in the transaction volume in the first quarter, hotels in the 4-star category continue to be especially attractive, followed by hotels in the 3-star category that accounted for around 24 percent of the investment volume.
Hamburg with the highest transaction volume in the first quarter
Of the seven top locations, Hamburg registered the highest transaction volume at around €227 million, with the sale of Radisson Blu Hamburg making a major contribution. At approximately €176 million, Berlin also reported a relatively high investment volume. Although the Top 7 cities still account for the lion’s share of the transaction volume, secondary locations are increasingly attracting attention. Around €500 million of the investment volume went into cities outside the Top 7, which corresponds to an increase of 90 percent in a year-on-year comparison. Examples include the NH Hotel in Weinheim near Mannheim purchased by Deutsche Fondsvermögen for €17.5 million. In addition, Internos Global Investors bought the four-star Steigenberger Hotel in Kiel from the Danish investor group K/S Schlossgarten at a price of €16.7 million for its “Internos Hotel” real estate special fund.
Around 58 percent (30 transactions) of the transaction volume was generated by domestic demand. On the seller side as well, German players also constituted the largest group, taking 50 percent in the investment volume. Asset and fund managers are the largest buyer group with a share of 33 percent in the transaction volume, while on the seller side property developers that account for 29 percent dominate the market.
Outlook: secondary locations and property developments gaining in importance
“Owing to the low yields in the core markets, investors are increasingly turning to secondary locations. Investors will be stepping up their efforts to secure good locations at an early point in time at still relatively favorable prices. Given the strong demand for hotel properties, it can also be assumed that investments will increasingly be made in property developments,” Bruckmeier concludes.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.