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HVS International`s London office has published a review of the European single asset transactions during 2003. This article provides an overview of transactional activity during 2003 for Spain, France and Italian hotel markets.
Spain
Spain has been one of the most resilient markets in Continental Europe, although Madrid and Barcelona have seen some declines, mainly due to their exposure to international travellers and as a result of sizeable new hotel supply in recent years. Significant investment activity has occurred in Spain throughout 2003 with it becoming the most liquid of markets within our survey. HVS recorded 28 single asset transactions above €7.5 million, totalling approximately €880 million – more than a three-fold increase on the previous year. This increase is due to the following:
In 2003, HVS recorded three large transactions that completed. These included the sale of the 500-room InterContinental Princess Sofía to Expo Hoteles for €135.5 million (€271,000 per room); the sale of the 167-room Ritz Madrid for approximately €125 million to a joint venture between Orient Express Hotels and a Spanish investment company Omega Capital; and the sale-and-leaseback of the Le Meridien Barcelona for approximately €87 million to the German open-ended fund Deka Immobilien, with Le Meridien granted a 40-year lease.
HVS recorded 17 resort transactions, totalling approximately €360 million. Germany and the UK remain important feeder markets to Spain, although as a result of the introduction of the euro, there is a growing perception that Spanish resort markets are more expensive than Turkish or North African resort destinations. Nevertheless, we consider that there are further opportunities for brand consolidation and investment in both the Spanish resort markets and the secondary Spanish cities.
Single Asset Transactions in Spain 1998-03
Madrid and Barcelona continue to be considered as key investment markets, with a strong interest from international investors and representing 45% of Spain’s total investment volume in 2003. Nevertheless, with substantial new supply currently being built, institutional investors are seeking to acquire quality, well-established assets, with a proven strong cash flow, which would be suitable as a secure, long-term investment. Fuelled by the continued dominance of domestic companies and the fragmented ownership structure of the market, the future liquidity of the four-star and five-star hotels will depend upon the availability of quality assets on the market.
Spanish Single Asset Hotel Transactions – Average Price per Room Sold 1998-03
France
Trading conditions in Paris have been particularly challenging, with the hotel market heavily affected by the war in Iraq and the lack of US inbound tourism. Paris remains attractive both to hotel operators and investors, with a number of quality hotel assets on the market, such as the 56-room Montalembert Hote and the group of Sofitel Demeure Hotels. The most significant single asset transaction that took place in Paris during 2003 was the sale of the 192-room Marriott Champs-Elysées, which was sold to DIFA by Strategic Hotel Capital for an undisclosed sum. Meanwhile, the hotel investment company JJW Hotels acquired the 50-room Hotel Pierre for €11 million (€220,000 per room). This transaction followed the acquisition in 2002 by its subsidiary JJ France of two adjacent hotels, Le Beau Manoir and the Lido Hotel for €19 million (€300,000 per room). The hotels have since been refurbished and will trade under the Amarante brand. In 2004, the Paris hotel market is expected to witness a greater number of hotels transacting. Meanwhile, the sale of the 115-room Bel Ami Hotel was completed in early 2004 for an undisclosed amount, sold by Westmont Hospitality to Le Cabinet Bessé, an insurance company.
While the Paris hotel market has been one of the worst hit in Continental Europe, France as a whole has seen a relatively resilient performance. In the last few years, the French Riviera has become an investment hotspot for investors, who are attracted by the region’s excellent transport links (namely the TGV link from Marseille to Paris and the growth of budget airlines) and the market’s growth in stature as a conference and congress destination, aided by improved facilities.
In 2003, the 119-room Beau Rivage Hotel in Nice was sold by Lone Star and Caisse des Dépots du Quebec to Vigie-Finance for approximately €14.5 million (€122,000 per room). In 2002, the 329-room Radisson Hotel in Nice exchanged hands for approximately €24 million to the UK property company Capital and Income Trust Group (approximately €74,000 per room).
Single Asset Transactions in France 1998-03
Note: The Marriott Champs-Elysees transaction price is confidential, and therefore we are unable to show the total investment value for 2003.
Source: HVS International Research
In terms of portfolio activity, various transactions took place in France in 2002 and 2003, as outlined below.
We consider that while the French regions will enjoy steady growth in 2004, we envisage a recovery in Paris to remain muted by the weak US dollar and a continued lack of US visitation. Where investment activity is likely to take place, we envisage institutional and private equity investors to continue to show strong interest. The limited opportunity for development in central Paris as a result of strict building regulations is likely to mean that further transactions will occur, particularly at the top end of the market.
Single Asset Hotel Transactions in France – Average Price per Room Sold 1998-03
Note: The Marriott Champs-Elysees transaction price is confidential, and therefore we are unable to show the total average price per room sold for 2003.
Source: HVS International Research
Italy
The Italian single asset hotel investment market has historically remained relatively illiquid, due largely to the fact that the market is highly fragmented with a limited presence of international brands, dominated by domestic owner-operators. The lack of transparency and limited data relating to hotel performance also acts as a deterrent to market entry. However, as scarce quality hotel assets are increasingly sought after on an international scale, the Italian market has become increasingly more liquid in recent years.
In 2003, HVS recorded two significant transactions. The acquisition by the Dorchester Hotel Group of the 404-room Principe di Savoia for approximately €275 million (€681,000 per room) represented the largest single asset sales transaction ever recorded by HVS that excluded any additional value for a non-hotel component (the sale of the Arts Hotel in Barcelona in 2001 transacted at €285 million but this included an office element and an adjacent site). The second transaction in 2003 was the 115-room Anglo American Grand hotel in Florence for approximately €24.5 million by the Deutsche Bank real estate fund Piramide Globale.
The transactions that took place in 2003, together with the acquisition of the 118-room Four Seasons Milan in 2002 by the Quinlan Partnership, highlight the increased investor interest in Italy by international and institutional investors.
Single Asset Transactions in Italy 1998-03
In terms of portfolio activity, in 2002 Starwood Hotels & Resorts succeeded in divesting the interests of four properties within the CIGA portfolio in Costa Smerelda, for a consideration of €290 million. The transaction, purchased by the private equity company Colony Capital, included in addition to the hotels a golf club, a marina and ship yard and a controlling stake in 2.4 hectares of undeveloped oceanfront land.
Single Asset Hotel Transactions in Italy – Average Price per Room Sold 1998-03
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
