A transaction volume of €661 million was registered on the German hotel market in the first quarter of the current year. The result has dropped 41 percent below the level of the previous year’s period. The downturn in the volume is mainly attributable to the size of the transactions and the focus on secondary locations. This is a conclusion drawn in the current analysis prepared by the global commercial real estate services company CBRE.
“The current decline in the hotel investment market is a snapshot that is explained by smaller deal sizes and the focus on secondary locations. While investor interest in German hotel property is unfaltering, product availability is a limiting factor,” says Olivia Kaussen, Head of Hotels Germany at CBRE. In the first quarter of 2017, 53 percent of the transaction volume was still attributable to the Top 5 cities compared with the first quarter of 2018 when this was only 26 percent at just under €175 million. Without exception, single assets were traded.
Focus remains on single transactions
The transaction volume in the first quarter was achieved overall through 32 transactions, 27 of which were single transactions and five portfolio transactions. Single transactions therefore accounted for around 84 percent (€571 million) as against the year-earlier quarter when this figure was still 64 percent of the overall transaction volume. The largest single transaction in the first quarter was the sale of the 454-room Maritim Hotel in Cologne that was sold from Commerz Real’s closed CFB Fund 111 to Art-Invest. The seller was advised by CBRE. Furthermore, as part of a closed fund of Balandis Real Estate, the SI Centrum in Stuttgart was sold to Brookfield Asset Management. Brookfield is reported to have paid around €145 million for the entire property that comprises numerous restaurants and bars as well as conference and entertainment facilities, along with two hotels with 646 rooms in total. Furthermore, the British Premier Inn brand intends to expand further in the German market through two developments in Hamburg: Strabag Real Estate sold a project with 230 rooms on the Simon-von-Utrecht-Straße in the St.Pauli district and GBI a 280-room development in the Hammerbrook district.
While 13 portfolio transactions were concluded in the first quarter of 2017, in 2018 this was only five. The sale of the Dorint Hotel Main Taunus Zentrum in Sulzbach and Dorint Parkhotel in Bad Neuenahr-Ahrweiler were among the largest portfolio transactions acquired by the HR Group from Ebertz & Partner. The purchase was made at the same time as the acquisition of three more hotels by the HR Group, namely the Arcadia Hotel Hanover, the Best Western Hotel des Nordens and the Arcadia Hotel Bottrop, comprising 865 rooms in total.
With a share of some 66 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 20 percent of the investment volume.
Secondary locations increasingly important
In conjunction with the higher number of single transactions, the average investment volume per deal is similarly also lower than in the previous year. While, in the first quarter of 2017, this figure still stood at €28 million, it had dropped to just under €21 million by the first quarter of 2018, reflecting a difference of around 25 percent. The main factor of influence here was the higher investment volume in secondary locations where the average transaction volume is generally lower than in primary locations. Honestis, a Cologne-based financial holding, took over the majority in the holding company of Herrenkrug, a first-class hotel with 147 rooms in Magdeburg. Dorint, an operator belonging to Honestis, also became the operator of the property as part of the deal.
Focus on Cologne and Hamburg
The highest transaction volume in the first quarter of 2018 was registered in Cologne with almost €147 million in total (up 195 percent in a year-on-year comparison). The sale of the Maritim Hotel was decisive for this result. The Hotel im Wasserturm was also acquired by the Vicus Group AG. This hotel has 88 rooms and was sold by an Austrian investment company. Hamburg followed on from Cologne with a transaction volume of €104 million, marking a decline of 54 percent year on year. Along with the sale of the Premier Inn development, a former administrative building of Deutsche Telecom on the Kronsaalweg was also sold. This building is to be rededicated in future to accommodate 347 long stay apartments. It was sold by Hamburg property developer Sicon to Catella Residential Investment Management for €43.5 million.
Closed-ended real estate funds as most important seller group
“With numerous hotel projects that are currently under development in the German market, developers remain a very important seller group, accounting for 25 percent in this quarter”, Kaussen says. Closed-ended real estate funds dominated on the seller side, however, with a share of 38 percent. This group includes, for instance, the aforementioned Commerz Real transaction involving the sale of the Maritim Cologne and Balandis Real Estate AG that sold the SI-Centrum in Stuttgart. Another hotel sold by a closed-ended fund was the Castra-Regina-Center with its 153 room Star Inn Hotel in Regensburg’s city centre that was acquired from Doba Grund by an open-ended fund of Swiss Life. Open-ended and special funds were the largest buyer group with 44 percent in the transaction volume.
Domestic investors predominate
While, in the year-earlier period, 50 percent of the sellers were German players, this was 91 percent in the first quarter of 2018. Berlinovo Immobilien Gesellschaft sold the Tryp Hotel in Wolfsburg to Aermont Capital and the Pentahotel in Trier to IFA Gesellschaft für Immobilien, for instance.
The purchaser side presented a similar picture. In the first quarter of 2017, 43 percent of the purchasers were foreign compared with only 22 percent in 2018. As already mentioned, the HR Group proved to be particularly active. Art-Invest with its Core Budget Hotel fund also bought two recently opened B&B Hotels in Rosenheim and Neu-Ulm with a total of 98 rooms from B&B Hotels by way of a sale-and-lease-back transaction. As a result, 78 percent and around €515 million in total were acquired by domestic investors. On the international purchaser side, Canadian Brookfield was the most active with the acquisition of the SI-Centrum.
Outlook: foreign investors also set to play a greater role with larger portfolios
“In the first quarter of the year, the focus of activity was clearly on domestic investors, which is explained by the high number of single transactions. Until larger portfolios are released onto the market, domestic purchasers will continue to dominate the market,” Kaussen says.
Source : Company