• Bricks, brawn and brand


Accor's sale and franchise back of its hotels in Sweden for an undisclosed fee marks the continuation of its disposal strategy, as it moves to sell Eu2bn worth of hotel property assets by 2013.

And the deal, which was under a 15-year franchise agreement, also marks the next evolution of the bricks and brains split, with the fund acquiring the portfolio bringing an asset manager and operations manager to the table to join the brand.

The portfolio of 14 Ibis hotels and four Formule 1 properties was acquired by private equity house Sveafastigheter's Fund III, with Midstar and Event Holding as minority owners in the joint venture.

Asset manager Midstar, which was set up in 2008, part of Sveafastigheter Group,  specialises in identifying and acquiring hotels with potential for value creation through active investment management, either purely as a real estate investment or in combination with hotel operations. In keeping with this, the joint venture is planning to put the hotels through an extensive renovation programme, with room counts increased in some cases.

The group is currently looking for hotel investments from single assets with over 100 rooms to portfolios, in the budget to upscale segments, working with all types of operating contracts from fixed leases to management contracts.

Peter Tengström, Midstar partner and CEO, said that the group was looking at further transactions in the region, identifying branded or "brand-able" product for acquisition by Sveafastigheter's Fund III. 

Tengström said he was "humbly positive" about the coming year, adding: "There hasn't really been any distress. In Sweden we haven't gone into a recession situation with hotels, or even in Denmark, where more supply has come into the market." He said that owners were, however, reviewing their long-term positions, which could lead to opportunities. 

Hotel operating partner Event Holding, which will manage the hotel operations under a management agreement, is a long-time partner of Accor's and already operates Pullman, Mercure, All Seasons and Ibis hotels through franchise agreements. The move into Sweden marks a departure for the group, which currently concentrates its operations in Germany and France, with a portfolio of 93 hotels under a range of brands that includes non-Accor badges such as Park Inn.

For Sveafastigheter, the deal marks its first transaction in Fund III. The group's first real estate fund, Sveafastigheter Sverige I, was launched in 2003. In 2006 Sveafastigheter launched its second fund, Sveafastigheter Fund II with Fund III holding its second closing in October 2010, after which it announced that it had received commitments from investors totalling more than Eu120m. The fund's investment strategy is opportunistic with a value-added approach to asset management.

Accor will keep its international sales office for Scandinavia in Sweden and plans a new phase of expansion across the region based on franchise and management contracts, particularly in Sweden, Norway and Denmark.

The hotels in the portfolio located in or around Stockholm, Gothenburg and Malmö generate approximately 75% of the revenue, a statistic borne out by data from STR Global in September which found that, of the six Swedish markets it tracked, Malmo and Gothenburg showed revpar growth driven by improving average rates despite lagging occupancy due to new supply.

Sweden registered the highest rate of revpar growth of the Nordic region through September, reporting an 8.0% revpar increase compared to Denmark (-5.9%), Finland (2.3%) and Norway (-2.5%).

Simon de Château, CEO at Sveafastigheter, said that the budget segment was underdeveloped in Sweden and that "consequently many new initiatives will be seen, and we are excited to be part of this development".

In conjunction with the transaction, Accor has signed a master franchise agreement with Sveafastigheter for the Ibis brand in Sweden. The brand, which has close to 900 hotels globally, is one of Accor's key expansion drivers, with the group announcing earlier this year that, in emerging markets, in particular Asia Pacific, it was looking to the brand to provide growth.


HA Perspective: This deal is the latest in a trend where ever-greater specialism is seen in ownership structures. The split is not just between property and operating company – or "bricks and brains" – but now property, operating company and brand which should perhaps be dubbed "bricks, brawn and brand".

For Accor and new CEO Denis Hennequin the deal typifies those that its board will be demanding more of as it seeks to complete its disposal strategy and speed up its expansion.

If Hennequin needed a reminder of the scale of the challenge he faces, this is surely one. The disposal of an 18-strong portfolio of hotels in the current market, even if in the more resilient territory of Sweden, is quite an achievement. And it was obviously put in train on Pelisson's watch.

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