18 August 2015 – Cinco Días
Hotels have become a very desirable haven for investors. Private and sovereign funds and hotel chains are all committed to boosting these purchases. In fact, according to a report by the real estate consultancy JLL, a “new historical high” was reached during the first half of 2015, as acquisitions amounted to €37,590 million.
“All indications show that 2015 is going to be a record year for hotel transactions at the global level”, says JLL in a statement, “driven by significant overseas investment”. During the first half of 2015, the largest volume of transactions was recorded on the American continent, with €21,490 million changing hands in total – that figure reflected an increase of no less than 73% YoY. Next in the ranking was EMEA (Europe, the Middle East and Africa), with an increase of 55% to €13,430 million.
The consultancy had predicted that the volume of transactions in the hotel sector would amount to €60,870 million in 2015. “We have already reached 60% of that figure during the first half of the year, and so if the level of activity continues into the second half of the year, then we may actually exceed our original forecast”, say JLL.
“The clear improvement in the main hotel markets in Europe and USA, the general economic recovery and the availability of debt with interest rates at historical lows are some of the drivers behind the increase in the level of investment at the global level in 2015, strengthening the trend that began in 2013”, explains Carlos Ortega, Vice-President of the JLL Hotels & Hospitality Group.
Although US private equity firms continue to be the main source of capital, the number of transactions involving investors from mainland China and the Middle East increased significantly during the first half of 2015 – their contribution to the global hotel real estate sector amounted to €8,775 million, compared with €2,060 million a year earlier.
The major transactions closed so far this year have involved several sovereign funds, such as the Abu Dhabi Investment Authority, which acquired the Grand Hyatt in Hong Kong, the Reinaissance Harbour in the same city, and the Edition in New York. The largest sale was closed by the hotel chain Hilton, which sold the Walforf Astoria in Manhattan for €1,745 million.
These investors are looking for trophy businesses, in other words, iconic buildings in large cities that guarantee high returns and have secure customer bases. “Europe, with Paris and London as the major capital cities, continues to be one of the best destinations for agreements involving trophy assets, and hence is where the Middle Eastern sovereign funds continue to show most interest”, says Ortega.
Original story: Cinco Días (by Alfonso Simón Ruiz)
Translation: Carmel Drake