Last year saw a record €16 billion in single asset and portfolio hotel transactions representing the strongest figures to date; comfortably surpassing 2004s total by 42%. A report produced by Jones Lang LaSalle Hotels showed that the sale of large portfolios by international hotel chains in 2005 gave private equity groups, high net worth individuals and institutions the opportunity to acquire highly desirable and rarely traded real estate.
Rob Seabrook, Executive Vice President, Jones Lang LaSalle Hotels, said: Liquidity levels in both single asset and portfolio hotel transactions in Europe have achieved all time highs of 5 billion and 11.1 billion respectively. As expected, the UK and France achieved the largest total volume of activity.
Within the single asset transaction market, the UK came top with 1.6 billion not just in London but the UK provincial market boomed making up 917 million of the figure. In Continental Europe, Germany took the lead with single asset deals worth 769 million assisted by a resurgence in the countrys economy. Followed by France, with the notable sale of the Paris InterContinental being a major highlight of the year.
The markets that saw the largest increases were Ireland and Turkey. Ireland saw 543 million in volume transactions in 2005, a staggering increase of 39 times the 14 million traded in 2004. The Turkish hotel market ended the year with the impressive sale of the Hilton Istanbul for 209 million, a part of the government pension fund hotel asset sell-off. The landmark 177m sale of the historic hotel Danieli saw Italys market activity increase.
Private equity investment remained the most dominant source of finance increasing from 28% to 40% in one year. Growth was stimulated by Asian and American investor groups particularly the US-based investors who spent 5.6bn the largest activity to date, making a third of the total investment volume. Although domestic investors take the largest share of activity, the US participants have fuelled competition in the market diminishing European investor activity by over a third.
Jones Lang LaSalle Hotels predictions for 2006
Public hotel operators will continue to dispose of assets enticing interest from private equity groups and institutions and this will continue to reflect positively on cross-border transactions especially from the US. Imminent deals this year include: the disposal of IHGs European portfolio, the Whitbread Marriott portfolio in the UK and further strategic disposals of European assets by the Hilton Corporation.
London and Paris will continue to see strong levels of investment with Germany, Prague and Budapest set to see further income growth. Spanish resorts will see strong demand in the coming year. With the REIT structure likely to be introduced in the UK mid-year, this could further increase liquidity and deal volume in the UK as well as other European markets, concluded Rob Seabrook.
Source: Jones Lang LaSalle