Strong uptrend in the German hotel investment market holds steady in the first half of 2016
Highest investment volume in a first half year since records began
Portfolio deals contribute to significant increase
Ongoing decline in yields
At €1.27 billion, a good 69 percent more was invested in the German hotel investment market in the second quarter than in the first three months of the current year, bringing the total transaction volume allocated to German hotel properties to €2.02 billion in the first half of the year. These figures translate into an impressive increase of 39 percent compared with the first half of 2015 (€1.45 billion), according to a current analysis prepared by the commercial real estate services company CBRE.
There have not been such high quarterly and half yearly results since records began. This performance was attributable to large-scale single transactions that took place in the first quarter, in combination with the sale of the Interhotel portfolio in the second quarter. The demand for good hotel properties currently outstrips the increasingly scarce availability of properties, particularly in the Core segment. Despite the persistently strong interest of German and international investors in the German hotel property market, it can be assumed that the prior-year record result of €4.39 billion will only be repeated if there are enough properties available in the second half-year.
Portfolio deals drive up the transaction volume
In contrast to the first quarter of 2016 when single deals predominated, only two portfolio transactions contributed to the notable increase in the transaction volume in the second quarter of 2016: Foncière des Murs acquired the Interhotel Portfolio from a syndicate consisting of Brookfield Asset Management and Starwood Capital. The portfolio comprises nine mid-category and luxury hotels with 4,131 rooms in total, including the Park Inn and Westin Grand in Berlin and other hotels in Dresden and Leipzig. CBRE Hotels assisted the buyers in an advisory capacity.
In addition, Motel One acquired the properties Motel One Berlin Tiergarten and Motel One Nürnberg City. Seller Lloyd Fonds had acquired the two hotels from developer GBI in 2008 for a purchase price of €36 million, which corresponds to a multiplier of 14.6-times on the annual net rent. In the current transaction, the purchase price factor stood at around 19.8 according to information provided by the company, which corresponds to a sales price of around €50 million.
Average deal size reports steep increase
In the first half of the year, a total of 63 hotel properties changed hands, 51 hotels in the context of single transactions. The record volume of €2.02 billion is remarkable for the fact that a total of 114 hotel properties were sold in the first half of 2015. Accordingly, the average transaction size of €13 million climbed to a remarkable €32 million, which corresponds to an increase of around 150 percent. The sum total of the 10 largest single transactions in the first six months amounted to approximately €650 million. This result includes the sale managed by CBRE of the Maritim Hotel in Dresden to the Frasers Hospitality Trust at a price of €58.4 million on behalf of Internos Global Investors. Other deals include ECE’s sale of the Holiday Inn project located near Hamburg’s Lohsepark to Union Investment and GBI’s sale of the Holiday Inn Express project on Cologne’s Perlengraben to Deka.
Listed property companies/REITs were by far the most active group with 16 deals worth €977 million, followed by open-ended real estate/special funds (17 deals, €537 million) and high net worth private individuals (12 deals, €133 million).
Measured by the overall number of transactions (single assets and portfolios), around 60 percent (38 transactions) were attributable to German investors at mid-year. This group accounted for €889 million overall. Investors from France participated in 14 transactions worth around €879 million in total, while US investors accounted for four transactions amounting to some €115 million.
Yields still under pressure
The increase in the average deal size, as well as the overall growth in the transaction volume in the first half-year illustrates the unabatedly great interest of domestic and foreign investors in German hotel properties. Given the sustained high level of financial resources and limited supply, the prime yield for hotel property has come under increasing pressure and now stands at 4.75 percent for premium hotel properties.
Head of Hotels Germany
+49 89 24 20 60 25
Head of Corporate Hotel Brokerage Germany & CEE
+49 89 24 20 60 44
Dr. Jan Linsin
Head of Research Germany
+49 69 17 00 77 663
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 (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.