• Hotels set to retain acceptable asset class status

The gloom is all pervading in the property market at present but for hotels there is one crucial difference to previous downturns: hotels look set to retain their status as an accepted asset class.

And perhaps even more encouraging for those active in the hospitality investment field is that there is an increasing number of investment companies focused on the sector.

This week Sovereign Hospitality Holdings showed its hand. It was formally launched by the MA Kharafi Group as a Geneva-based outfit with existing assets worth US$800m.

The current portfolio consists of 21 hotels with more than 4,000 rooms spread across Egypt, South Africa, the Gambia, Syria, Lebanon and Albania. There is a further 11 projects underway in territories that include Libya, Senegal, Ethiopia and Mauritania. These extra sites will take the group to 5,800 rooms within three years.

The SHH strategy is to own and manage its own properties but it is also signing managing agreements with companies including Four Seasons, Rotana and Starwood. Recent deals include a new Hyatt Regency due to open in George, South Africa, in early 2010. Another is for a 370-room InterContinental in Damascus, also due to complete in 2010, and yet another InterContinental, this time in Dakar in what is a US$250m project for 250 rooms.

"Our objective, with the support of the Kharafi Group, is to expand though strategic acquisitions in the UK and worldwide," said Mohamed Fahmy, chief executive of Sovereign Hospitality Holdings.

Kharafi is a Kuwaiti based group with an annual turnover of US$4bn from its diversified interests which include the largest food company in the Middle East, an airline and a long-established construction division.

Similarly, at the end of May, Malta-listed International Hotel Investments, the parent of Corinthia, announced it was tapping into high growth emerging markets through a tie-up with Russia's Intertourist. A US$100m fund was created, equally held by the two parties, to develop four- and five-star hotels in Russia.

Intourist is the best known tourist company in Russia and is 66% owned by Sistema, a London-listed conglomerate with worldwide investments, particularly in the technology sector. The next biggest shareholder in Intourist is the Moscow city government.

In statement issued by IHI, the strategic partnership is intended to create Russia's largest hotel chain, operating hotels under various brands including Corinthia and Intourist.

Funds are not just being formed, however, they are also striking deals. Last week, Meridia Capital and Capital Hospitality Group acquired a 50% stake in Six Senses' Thai resort portfolio. The properties encompass three hotels with a total of 500 rooms, all operated under a management contract by Six Senses.

Javier Faus, chairman and CEO of Meridia, said: "We expect this deal to be the first of many with Six Senses and Capital Hospitality Group."

The properties are the 260-room Evason Phuket, the 145-room Evason Hua Hin, and the 55 villa Six Senses Hideaway, also in Hua Hin.

And another big deal, the Eu517m acquisition of 57 Accor hotels in France and Switzerland, closed its first tranche last week. This encompassed 49 hotels with the remaining assets expected to floow by the end of the year.

AXA REIM, on behalf of Caisse Des Depots et Consignations and two of its investment funds, European Hotel Venture and Alternative Income Property Venture, is paying Eu466m for the hotels plus investing a further Eu51m on a three-year refurb programme.

Debt funding for this deal has come from BNP Paribas, Calyon, HSBC France and Natixis. With this deal, AXA REIM will manage the investment in over 80 hotels for its clients. It said in a statement that the deal "illustrates the further development of the liquidity of this asset class across Europe".

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