• Sitq assets add to portfolio deals

A return to portfolio transactions in the sector, mooted at the beginning of the year, is looking more solid with the news that a portfolio of 18 hotels owned by Canadian fund Sitq are coming to market.

The sites, in Germany, Spain and the Netherlands, are to be auctioned by Deutsche Bank and CBRE and are likely to remain under the InterContinental Hotels Group brands they are trading under.

Sitq paid Eu350m for the group in 2006, with the value now thought to be much higher. The group has a portfolio of hotels in Europe, the US, Canada and the Caribbean, including the 138-strong InTown Suites group in the US.

The sale of this portfolio would mark the group's exit from Europe and is part of a larger decision to leave the hotel sector altogether, following a strategic review of its holdings, which are mostly in office property.

The group is a business unit of Ivanhoe Cambridge Group, which counts Canada's largest institutional investor, Caisse de depot et placement du Quebec, as its principal shareholder. Last month saw it sell its 48.5% stake in five Westin hotels in Canada for an undisclosed fee, after which president and CEO William Tresham said: "We are very pleased to have completed this transaction, which is in our strategic goal to focus our portfolio and our investment efforts on office real estate."

The group's 2006 acquisition was part of a European expansion plan, which were also largely focused on the office market. The move to sell is thought to have been triggered by recent improvements in trading in the hotel sector.

Earlier this month Tresham told Montreal newspaper La Presse that the group was reviewing all its hotel holdings and would put certain properties up for sale this year with a view to possibly exiting its hotel investments entirely within three years. "Hotels is a risky industry that takes a lot of capital for a return comparable to what I could get from the office building market," he said. "It's probably not our line of work."

Despite the hotel sector not being Sitq's primary point of interest, the group is nonetheless likely to profit from the sale. It is thought that CBRE Hotels and Deutsche Bank will market the group with a guide price of around Eu600m, almost double what the group paid for it.

It is also thought that, possibly as a result of Sitq's eagerness to exit the sector, it is looking for a clean break and will be searching for a buyer for the entire group, rather than selling the sites piecemeal.

The hotels are under IHG's Express by Holiday Inn, Holiday Inn and Crowne Plaza brands, all under franchise agreements. The majority are located in Germany, which, according to data released by seller CBRE Hotels last month, is expected to see hotel transactions increase from a total value of Eu890m last year to at least Eu1bn in this, as the country's popularity continues to rise amongst investors.

The 2010 figure was in contrast to the Eu350m recorded in 2009, when international players were scarce and only a very limited number of portfolio deals took place. This has changed so far this year, certainly in terms of assets coming to the market. Last month saw the five-strong portfolio of luxury hotels owned by Octavian King Holdings in the country coming to the market, as a result of the death of the majority shareholder, Dieter Bock.

CBRE Hotels said that, while 2009 was dominated by single asset transactions, portfolio sales shifted to the forefront in 2010, accounting for almost 50% of the total volume, although only international investors were active as purchasers, with domestic buyers looking at smaller deals in the two to three star segment. Foreign investors accounted for around Eu500m of the transactions volume.

 

HA Perspective: Despite the Sitq portfolio featuring hotels in France, Belgium, The Netherlands, Austria and Spain, the geographic spread is not thought likely to put off buyers concerned by the economic future of the Eurozone. Of the group covered, only Spain is currently worrying observers, but improvements in trading and increased interest from operators such as Accor have meant that the country's hotel market is looking more attractive than it has done for several years.

The German hotel market has shaken off its recent history, where it was felt, particularly in markets such as Berlin, that it was oversupplied, and factors including its strong domestic economy are now making it attractive to investors. The sale of the Bock portfolio and now the Sitq group of hotels will show whether it can also lead the way in portfolio deals in Europe.

Share →