(Union Investment establishes new institutional fund for hotel real estate)
UII Hotel Nr.1 allows institutional investors to benefit from growth in the budget and midscale hotel segment
On 1 April 2013, Union Investment launched a new real estate fund for institutional investors, UII Hotel Nr. 1 .The fund is aimed at institutional investors with a long-term investment horizon, such as banks, occupational pension schemes, insurance companies and pension funds. The target size is EUR 250 million and the anticipated term of the fund is ten years. With regard to investment strategy, the fund will focus on budget and midscale hotel real estate with an above-average location and operator concept. Of primary interest to Union Investment are new and innovative properties with long-term leases. Geographically, investment will be focused on Germany (minimum of 60 per cent), France, Belgium, the Netherlands, Luxembourg, Austria, the UK and Poland. The borrowing ratio is limited to 40 per cent.
Budget and midscale hotels primed for growth
«Branded budget and midscale hotels are experiencing significant growth» said Dr. Frank Billand ( photo) a member of the management team at Union Investment Real Estate GmbH. «The sector has shown itself to be particularly crisis-resistant and provides stable returns and strong inflation protection thanks to long-term leases. Additionally, hotel property has low correlation with other types of investments» added Billand.
Union Investment has its own team of experts for hotel real estate, with many years of market experience.
Core products with high occupancy rates
«Budget hotels are classified as core products. Located in inner cities or at exhibition and conference sites, many of the latest concepts promise correspondingly good occupancy rates as a result of business travellers and leisure customers» explained Dr. Christoph Schumacher, a member of the management team at Union Investment Institutional GmbH. «The long-term nature of the leases and stable cash flows have become features of this new hotel segment. Compared with the established hotel segments, hotels in the two to three-star range offer slightly superior returns» commented Schumacher.
Union Investment has already entered into strategic partnerships with Motel One and Holiday Inn Express with the aim of leveraging these companies’ innovative capabilities to achieve the desired growth. Union Investment has a broadly diversified hotel portfolio that encompasses 22 different hotel brands and is currently worth EUR 1.7 billion. Over the past three years, Union Investment has invested some EUR 400 million in new hotel properties for its funds, of which around EUR 150 million was committed to the up-and-coming budget and midscale segment.
Union Investment currently has assets under management of some 3.5 billion euros across its institutional real estate products.
Source : Company