• Second deal adds to HotelInvest

Accor has made its second major portfolio purchase for its HotelInvest property division, buying in eleven hotels across Switzerland. A EUR180m deal puts Accor back in control of seven Ibis properties, three Novotels and one MGallery across Switzerland.

The deal is the second in quick succession made by HotelInvest, following the EUR722m acquisition of 86 European hotels from investor Moor Park. This first transaction transferred ownership of 67 hotels in Germany and 19 in Holland. It underlines a commitment from Accor chief executive Sebastien Basin to deploy capital in line with the group’s new strategy of holding its own properties in mature markets.

During June, the group has also tapped the capital markets twice, further adding to its financial firepower. Both transactions were oversubscribed, suggesting broad approval for Accor’s acquisition strategy, and confidence in the company’s long term creditworthiness. A EUR1.8bn line of credit was syndicated with 18 banks, with a five year facility replacing a EUR1.5bn agreement due to expire in May 2016. Strong demand from lenders meant the final figure was increased from an initial EUR1.6bn sought.

Additionally, EUR900m was raised in a placing of hybrid bonds, which pay the holders interest of 4.125% until 2020. “The issue strengthens Accor’s flexibility in deploying its strategy,” remarked the company, which saw investors scrambling for an issue that was five times oversubscribed. The bonds have no maturity date, but can be called any time from 2020, while the interest rate paid can be reset after that time. 

The Swiss hotels were subject to variable rent leases signed in 2008, when they were sold to AXA Real Estate Investment Managers as part of a larger portfolio including a number of French properties. Since then, AXA has invested in the properties to refurbish and upgrade them, and views the sale as a worthwhile deal. “We acquired this portfolio at an advantageous point int he market cycle, and then implemented development and refurbishment plans which would both increase the operational performance of the assets,” said AXA Real Estate’s Pierre Vaquier. “We have now crystallised that value for our clients through a disposal at a time when we can also benefit from the strength of the Swiss franc.”

The 2008 deal saw Accor sell 10 Swiss hotels and 47 French hotels to a consortium including Caisse des Depots et Consignations and two AXA funds, for EUR518m. The deal included a EUR52m commitment by the buyers to renovations and EUR30m to extend two of the properties. The hotels were on 12 year leases with rents based on an average 16% of revenue, with no minimum guaranteed.


HA Perspective [by Chris Bown]: Sebastien Bazin says he had EUR1.2bn remaining after these first two deals, and “of course” he will be looking to do more. That figure was quoted before Accor tapped the markets for a further EUR900m, and added to its credit line.

But Bazin also said there is no pressure to do deals, and they must stack up under current financial conditions. And so it is interesting that AXA is only selling back a part of the portfolio that it bought for EUR518m in 2008. With the benefit of an advantageous currency swing, selling the Swiss hotels made sense for AXA: with no currency play, the other 47 Accor branded hotels across France remain, for now, in the hands of landlords.

Prior to the establishment of HotelInvest, much was made of the need for Accor to get out of onerous fixed leases in its portfolio, and it appeared HotelInvest would be the vehicle to help achieve that. Now, it seems that variable rent agreements – even those which had no minimum rent guarantee – are in the firing line, so long as Accor can continue to access cheap funds.

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