20 July 2011, Munich – Transaction volume increases 82% over same period last year
Activity in the German hotel investment market remains brisk, continuing the positive development in this sector. The quarterly result for April through June was significantly higher than the result for the first three months of the year. “All told, we registered a transaction volume of just under €352 million in the second quarter, which is over the values for both the previous quarter and the previous year,” reports Andreas Trumpp, Head of Research at Colliers International in Germany. “At the half-year mark, transaction volume had risen from €320 million last year to almost €582 million, an 82% increase that reflects the renewed confidence in more than just hotel properties,” he adds. Interest in hotel properties is, however, confined to a small group of specialized investors, which is reflected in the fact that this asset class makes up only about 5% of the total commercial transaction volume of €11 billion posted in the first half of 2011.
While international investors still dominated the activity on the hotel investment market during the first quarter, German investors were able to increase their share of the transaction volume from less than 20% in the first quarter to nearly one-third in the first half of the year viewed as a whole. The major factors contributing to this included two sales of five-star and luxury-class hotels. A closed-ended real estate fund operated by Deutsche Immobilien Invest purchased the 177-room Grand SPA Resort A-Rosa Sylt, located in the town of List, for just under €63 million. At the same time, this purchase represents one of the biggest individual transactions so far this year. The Handelshof, in Leipzig, was also purchased by a German family office. The former trade fair venue, located right near the old town hall in the city center of Leipzig, is home to both retail space and the Steigenberger Grandhotel Leipzig, which also has 177 rooms.
Although only three of the 26 sales finalized in the first half of the year took place within the five-star and luxury hotel segment, those sales make up some 30% of the transaction volume, at about €175 million. Eighteen of the sales involved three-star and four-star hotels, which together amounted to €371 million, or nearly 64% of the total transaction volume.
“Private investors represented the biggest group of buyers in the hotel investment market in the first half of 2011,” Trumpp says, drawing what might at first seem like a somewhat surprising conclusion from his analysis of the deals finalized during this period. Because of the modest size of this market segment compared to the overall market, however, and due to the two major signings in the first half of the year, private investors were able to move to the top slot in terms of sales volume, at about €143 million, followed by open-ended and special real estate funds, at about €122 million, and opportunity and private equity funds, at approximately € 108 million. The differences in investment behavior appear even more pronounced when we analyze the average deal size. While this figure was nearly €41 million for open-ended and special real estate funds, closed-ended real estate funds invested about €36 million on average. Private investors, by contrast, preferred investments in smaller properties, so the average of some €19 million was pulled upward by three sales of over €20 million, while the rest of the sales in this segment were all below €10 million.
Andreas Erben, Managing Partner of Colliers Hotel GmbH in Berlin, sums up his expectations for the second half of the year as follows: “Investment volume of about €582 million confirms the assumptions we made at the start of the year. Based on current market activity, we expect positive transaction volume considerably above €1 billion for the year as a whole.”