The hotel transactions market in Northern Europe has started the year in buoyant form, with a number of hotels changing hands in Austria, Germany Norway, Scotland and Sweden.
Deka Immobilien and Scandic have both been building their portfolios, with the latter backing Stockholm with plans for an “international grand hotel”.
Deka has shown an increasing interest in the hotel sector, picking up three hotels; spending EUR74m in Vienna on a Courtyard by Marriott bought from Austrian-listed S IMMO for EUR35m, a project in Frankfurt for EUR39m from developer GBI and The Radisson Blu Hotel on Edinburgh’s Royal Mile for an undisclosed sum.
The 244-room Vienna hotel was built in 2008 and is leased to operator Realotel W Hotelbetriebsgesellschaft, a company of Bierwirth & Kluth Hotel Management and is being run as a Courtyard by Marriott under a franchise agreement.
In Frankfurt Deka has bought the Adina Apartment Hotel, which is due to be completed in Autumn 2016. Once completed, the four-star hotel will include 181 apartments. The tenant is the Adina Hotel Frankfurt Messe. Deka acquired the property for its Domus-Deutschland fund, which currently holds six properties. Prior to the purchase, the fund consisted solely of office and retail properties, with Deka commenting that this deal added some diversification to the portfolio.
In the case of the Edinburgh hotel, which had a guide price of GBP59m, the local press is reporting that JLL was calling the deal “the largest hotel transaction in Scotland since 2007” (when the Radisson SAS in Glasgow was sold for GBP68m). The sale includes a youth hostel and retail unit plus a site to the rear of the hotel which is reported to have significant development potential.
Kerr Young, director of hotels and hospitality for JLL, said: “The Radisson Blu in Edinburgh offers not only a secure income stream with great covenant strength, but also prime real estate in Scotland’s historic capital – one of the most sought-after hotel markets in Europe.
“Since the hotel went up for sale, alongside the Park Inn by Radisson in Manchester, we have received a huge amount of interest, underlining the appetite from investors in today’s market.”
Rezidor has a lease on the hotel until 31 October 2028, with an option to extend. Deka acquired the Edinburgh hotel on behalf of WestInvest Gesellschaft Für Investmentfonds mbH’s TargetSelect hotel fund.
The hotel was part of the WG Mitchell group of companies, many of which went into administration in 2009 at the behest of lender Royal Bank of Scotland. The hotel was part of the Project Lagan portfolio, which also include the aforementioned Manchester Park Inn, and the Springfield Quay Leisure Park in Glasgow. The portfolio was brought to the market in September last year by CBRE and JLL and had a combined asking price of GBP132.3m.
Paul Collins of CBRE Hotels said: “The hotels are fantastic assets for WestInvest and The Ability Group, and we are certain that the current buoyant investment market will continue into 2015 as disappointed investors seek alternative opportunities.”
At Scandic, the company announced plans to convert the scene of Greta Garbo’s pre-Hollywood career into a 400-room landmark hotel, in Stockholm. Alongside owner AxFast, Scandic will renovate the PUB department store into an “international grand hotel” and, Scandic said, “fortifying Stockholm’s position on the international hotel map”.
“With Scandic Haymarket, we want to create a unique grand hotel for both Stockholmers and travelling guests. We will let the grand meet the playful and create an exciting encounter between the past and the present, old and new,” said Frank Fiskers, president & CEO of Scandic.
Scandic recently increased its presence in a city known more for fish markets and conferences than department stores, with deals which will add three hotels in Bergen, Norway. The company bought the operations of the Scandic Neptun, Scandic Bergen City and Scandic Strand with a total of 630 rooms and some 40 conference rooms. The seller of the operations was the current franchisee, Erling Falch Monsen, who will continue as property owner of Scandic Neptun and Scandic City.
The hotels have been Scandic branded since 2000 under a long-term franchise contract between Bergen Hotel Group and Scandic.
Fiskers said: “Norway is an important home market for Scandic. During this year, mainly as a result of the acquisition of Rica Hotels, we have increased from 19 to 86 hotels in Norway. With the acquisition of these three hotels, Scandic will further solidify our position as the absolutely leading player in the Bergen market.”
With funds enthusiastically snapping up unfinished hotels such as the Adina in Frankfurt, it looks to be another busy year for the sector’s agents.
HA Perspective [by Chris Bown]: From its German offices, Deka has clearly decided that it now has funds to invest in real estate, and a portion of those funds ought to be placed in European hotels. It is back in the room, buying, and being a German fund, is only able to buy leased properties. The move to forward purchase, as it has done in Frankfurt, indicates that Deka has now decided the German market is heading upwards once more. It also sees another institutional buyer give their nod of approval for the serviced apartment niche, within the wider hotel landscape.
The Edinburgh buy was an opportunity to get a piece of the returns from a market with attractive fundamentals. Sufficiently attractive for Starwood Capital to chase down boutique operator the Townhouse Collection, and persuade its owners to part with its Edinburgh and Glasgow properties.
Scandic, meanwhile, remains wedded to Scandinavia, and to deepening its dominant position in the Swedish market. Diversification, for Scandic management, has meant buying into next door Norway, and opening a new brand, HTL, which is launching in Sweden.
Having scale in a relatively small market like Scandinavia has its risks but it looks a safer bet than spreading out over too wide a geographic area.