Investor Arbireo Capital and developer Value One have launched joint venture focusing on hotel projects.
The pair have secured a pipeline with more than 1,000 keys, in European markets, targeting institutional investors.
The announcement came after last month’s appointment of Theodor Kubak as managing director for the group’s new Arbireo Hospitality platform. Kubak spent more than 11 years advising Union Invest and is the president of the Hospitality Asset Manager Association, Europe.
Arbireo Capital, which has EUR360m of assets under management and a projected investment volume of EUR500m, said that the platform would cover most hotel-related businesses, from sourcing and acquisition to structuring and active asset management, as well as exit strategies.
“Theodor Kubak was our first-choice candidate from the very beginning when it came to appointing a managing director for our new hospitality platform,“ said Christoph Flügel, co-CEO of Arbireo Capital. “His many years of experience in all facets of the hotel business proper, as well as his role in structuring investments coupled with his active involvement in a wide range of European asset-management assignments fits perfectly to our strategic approach. We want to combine both aspects in one single platform and offer synergies to our investors in this growing, yet crowded, market.”
The launch of the joint venture brings the platform together with Value One Development International. Flügel said: “With this new team and the enormous experience of Value One, we want to take advantage of opportunities across Europe. Our 360 degree hotel expertise enables our investors to achieve attractive yields. The first projects are already undergoing due diligence and will be realised this year.”
Kubak said: “The cooperation is not just exciting but also simply makes sense for everyone involved. The synergies achieved by linking development, operation, asset and investment management are substantial. This way we can provide better products and services both to hotel guests as well as to investors.”
He told Hotel Analyst: “It is important to have a platform which covers the value chain of the hotel industry. We have the investment, we have the management, and the possibility to operate hotels. We are working with a developer with long and outstanding international experience, who we have worked with them on a number of different enterprises.”
Commenting on whether the joint venture would work with the global brands, Flügel told us: “That is key. We would like to use the various strengths of the brands in their markets, franchising and then operating – taking leases for institutional investors. If you compare the different asset classes, hotels have one of the most favourable outcomes for institutional investments. We see that, especially in the current market, it makes sense for them to invest. We have also seen increasing demands from family offices and private equity, depending on the kind of investment they are looking for, which is mostly the same returns as the institutional investors.”
Flügel added that, for those looking for more risk – and greater return – there was the option of becoming more involved with the management of the hotel.
Looking at the joint venture’s targets, Kubak said: “Germany is a natural area for us to play in. If you look at all the supply coming into the major cities then it is wise for us to look at areas across the borders. Scandinavia is a closed shop, but there are opportunities in other areas, such as Portugal or Central or Eastern Europe.
“You can’t deny that we’re at the tipping point in the cycle, we have to be careful over what to buy and at what price. You have to play an active role, you have to pursue active asset management.”
Value One’s background includes student housing. Flügel said: “Investing in education is always a good thing to do. You have to look at the different markets very carefully, but at the high end of student housing there we feel that there could be some synergies during the holidays in peak season to [rent the units].”
HA Perspective [by Katherine Doggrell]: The enthusiasm of the institutional investors in the sector has been noted by many and has contributed to the growth of the market in countries such as Germany, where their favoured leases are plentiful.
With the country’s market being feasted upon by the unexpected enthusiasm for leases, many are also looking east for returns and Arbireo will not be the only ones offering a stress-free route to investment in what has become a mainstream asset class. Where they offer something different is the full-service option, which, critically in Europe’s busy market, comes with a development component.
What they don’t offer is a brand, but they do offer a window into the role which the brands are increasingly playing in the sector – the cherry on the top. Having moved away from ownership and, increasingly, from operations, they are now distribution and recognition. For Arbireo, they remain key. The need to battle with the other brands to maintain pipeline through ventures such as these should help keep all parties’ interests aligned.