CBRE Hotel Investment Germany Q4 2015

Hotel Investment Market Breaks All Records: Investment Volume Rises For The Sixth Time In A Row To €4.4 Billion

  • Year-end rally with €1.5 billion sets new record result
  • Annual volume more than double compared with the last boom in 2006/2007

  • Large number of portfolio transactions and growth in individual transactions

  • Domestic and international investors each contribute 50%

Frankfurt, January 13, 2016 – A new full-year record was set on the German hotel transaction market in 2015. At around €4.4 billion, the record volume of €3 billion achieved in 2014 has been exceeded by 46%. The investment volume of the German hotel investment market has therefore risen for the sixth time in a row from its low caused by the global financial crisis in 2009. This is the conclusion drawn in an updated analysis prepared by commercial real estate services company CBRE. "While the commercial market, which generated a total of €55 billion, has recently succeeded in almost attaining the level posted in 2006/2007, we already have a volume in the hotel investment market which is more than double compared with the last boom. Good performance figures delivered by the hotel industry, the growing importance of city tourism – particularly popular with guests from abroad – and upbeat guidance are attracting an increasing number of ​investors", stated Olivia Kaussen, Head of CBRE Hotels Germany. 

35% of the overall volume in the fourth quarter

As in 2014, heady performance in the final quarter in particular contributed to the record results. Just under 35% of the overall volume (approximately €1.5 billion) was generated in the months of October through to December (2014: 34%), one quarter of which was attributable to the acquisition of the Leonardo portfolio comprising 18 hotels with a sum total of 3,415 rooms by Swedish Pandox AB. CBRE accompanied this sale-and-lease back transaction in the role of consultant to the buyer. The vendor was the Fattal Group from Israel.

Upbeat development of the hotel sector

The number of hotel transactions totaled 217, thereby exceeding the 189 transactions conducted in the previous year by more than 15%. The average deal size stood at around €20.2 million in 2015, up some 27% in a year-on-year comparison (2014: €15.9 million). "Demand for hotel properties has again reached an unprecedented level. The repeated increase in the share of the hotel segment in the overall German real estate investment volume, up from 7.5% in 2014 to 8.0% in the year now ended, illustrates the positive development of the hotel sector as one of the most popular alternative asset classes, alongside office and retail properties", commented Armin Bruckmeier, Head of Corporate Hotel Brokerage of CBRE Germany & CEE

Munich reports highest investment volume

Mirroring the overall hotel investment volume, the transaction volume in the Top 5 locations of Berlin, Düsseldorf, Frankfurt, Hamburg and Munich climbed by 46% to around €2.7 billion in a year-on-year comparison, which corresponds to growth of €865 million. The five largest investment centres therefore accounted for a good three fifths of the overall German hotel investment volume. At around €934 million, Munich reported the highest investment volume, with a sharp increase of 74% compared with 2014, followed by Berlin and Hamburg with €789 million (up 74%) and €465 million (up 53%) respectively. In Düsseldorf, the transaction volume more than trebled to €273 million, even exceeding the full-year volume observed in Frankfurt of €254 million (down 49%), which, in comparison a strong investment year in 2014, suffered a downturn due to the limited number of investment products.

Focus on large-scale individual transactions

Over the past year, large-scale individual transactions in particular fuelled the strong uptrend. The 112 registered individual transactions worth around €2.5 billion are juxtaposed to the 93 individual deals worth € .9 billion transacted in 2014, signifying an increase in the volume of 32%.  The two large-scale individual transactions involving Sofitel Munich (Germany's largest single transaction to date) and andel's Hotel Berlin (€105 million) already transacted in the first three quarters of 2015 were joined in the fourth quarter by the Radisson Blu Hamburg deal. The investment company and lessee of Azure Hotels based in London and Luxembourg repurchased the 556 room hotel from asset manager and fund provider Invesco. The parties agreed to keep the purchase price confidential. This transaction is, however, also likely to have topped the hundred million euro threshold.

Further key individual transactions in 2015 include the sale of the 25hour hotel project in Munich by the FREO Group. Inka AG, a subsidiary of the Munich-based brewing dynasty Inselkammer, is the buyer of the hotel which is currently being developed in the building which formerly housed a post and telegraph office near Munich's central station. The press reported the purchase price for the historical property located at the address of Bahnhofplatz 1 at around €120 million, an estimated €85 million of which were attributable to the hotel belonging to the 25hours brand.

All in all, 105 hotels were sold in the context of portfolio transactions in 2015. The volume of portfolio transactions totals €1.9 billion, which is around €793 million, up 70% compared with the year-earlier figure (€1.1 billion). Of this amount, some €400 million was accounted for by the Leonardo portfolio.

Similarly, the Accor Hotel's Hotelinvest division purchased a hotel portfolio from Invesco consisting of six hotels of the Accor brands Novotel and Mercure at a price of €152 million in the last quarter. Novotel München City and Novotel Hannover form part of the portfolio properties located in Germany.

Furthermore, the Oman Investment Fund purchased a portfolio comprising seven European Hilton Hotels for around €400 million. The Dresden Hilton and the Düsseldorf Hilton form part of the portfolio properties located in Germany. The seller of the portfolio was a joint-venture from US hedge fund Baupost and the Westmont Hospitality Group.

Germany and international investors account for 50% each

Over 2015 as a whole, CBRE observed a balanced ratio of investments split between German and international investors. Both groups contributed around 50% each to the investment volume. A major part of the foreign capital was sourced from the USA, Sweden and France in particular. Domestic and foreign asset/fund managers, along with hotel development companies and real estate developers, were the main group investing. In addition, institutional investors such as open-ended real estate/special funds were very active on the hotel investment market in 2015. The largest hotel buyers in the year now ended include Pandox, Union Investment and Deka. The largest sellers were Fattal Holdings, Ebertz & Partner Unternehmensgruppe and Invesco. Over the past year, investors focused first and foremost on hotels in the four-star category: 94 hotels in this category with an overall volume totaling​ around €2.5 billion were sold.

Uninterrupted pressure on yields

"Prime yields in the core segment are still running at around 5.00% and, in some cases, significantly lower. In our opinion, pressure on yields is set to continue as hotels are increasingly attracting both domestic and foreign investors. As a result, we believe that investment activities in 2016 may remain at the year-earlier level, although product availability is becoming a constraint", stated Bruckmeier.

Sample single hotel transactions 2015


 Source: CBRE Research 2016

Exemplary hotel portfolio transactions in 2015


* Of which 18 hotels in Germany and 11 hotels in the Netherlands

Source: CBRE Research 2016

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