Euro Ejendomme AG, the German-Danish investor in commercial real estate, has opened the "Euro Ejendomme SICAV-FIS Hotelfonds I" - its hotel fund investing in business hotels, ranging from two to four stars, in Germany, Switzerland and Austria - to British Investors.
The Arcotel Camino Hotel in Stuttgart is among the Hotelfonds portfolio.
The fund, originally launched in spring to European investors, offers above average returns combined with low volatility, in a market segment which has experienced above average growth due to both an increase in tourism and increasing cost sensitivity of companies caused by the current economic climate.
The Fund is a Luxembourg based SICAV-FIS designed especially for institutional investors seeking long term holdings as well as a diversification into the attractive hotel market. It provides investors with access to a stable real estate market, delivering sustainable and steady growth.
The diversified portfolio consists of a mixture of existing, established hotels as well as new hotels where demand and appropriate infrastructure exists. Requirements insist that properties be occupied by operators with excellent credit ratings as well as long-term lease contracts of at least 15 years. Investments are regionally diversified with volumes ranging from 10-30 million for each asset in cities with a population in excess of 100,000. The seed portfolio consists of the Arcotel Camino Hotel in Stuttgart and the Motel One Airport Hotel and the Arcotel Rubin Hotel, both in Hamburg.
Acquisitions are managed by Euro Ejendomme AG in Frankfurt, which benefits from extensive experience in both the German real estate and hotel investment sectors.
The Fund targets returns of 7% to 9% IRR after fees, before taxes and has a five year life with an option to extend by 2 x 1 year. It has a target size of 500 million with a minimum 200 million of equity. It is open to institutional investors making investments from 10 million.
Marc K. Thiel, CEO of Euro Ejendomme, commented: "The hotel market in this region has remained considerably robust throughout this period of economic decline, comparing favourably to countries such as the UK. After spiking in previous years, purchase prices have now dropped to attractive levels, offering investors above average returns combined with low volatility. We are in a fortunate position to be able to purchase good quality property with sound fundamentals at very attractive prices in order to establish a portfolio in line with our investment strategy."
He added: "Since 2003, the number of day trips and over-nights in Germany increased by approximately 3.8% annually. In particular, budget hotels have emerged and experienced a boom, serving the expanding target group of city travellers and weekend guests, which demand good value for money."