European Hotel Transactions 2009 an Age of Austerity

MARCH 2010 £250

European Hotel Transactions 2009 An Age of Austerity

CRISTINA BALEKJIAN, Market Intelligence Analyst ELKE GEIEREGGER, Senior Associate SAURABH CHAWLA, Associate Director

HVS – London Oﬃ ce 7-10 Chandos Street Cavendish Square London W1G 9DQ Tel: +44-20-7878-7700 Fax: +44-20-7878-7799 Key Issues ‘half’ a 50% stake in the Four Seasons GDP in the Eurozone is estimated Hotel des Bergues in Geneva. The UK to have declined by 4.1% in 2009, How does investment activity took the largest chunk of a relatively compared to growth of 0.8% in 2008. in 2009 compare to that of small distressed-assets pie. The As a result of plunging financial previous years? Aviemore Highland Resort; the Park markets and the general global Inn London, Russell Square; and the economic slowdown, the European What about distressed sales? Marconi building (the former Silken economy entered into an economic project) were the key assets taken out crisis the like of which had not been Who was still able to buy or of administration. seen for more than a decade. For much sell? A lack of funding from banks of the year, the economic environment meant that portfolio transactions How did Europe’s main continued to prove difficult and this faced considerable hurdles, as nearly transaction markets fare? further restricted hotel investment, all such transactions are highly as there was a lack of financing and What to expect in 2010. leveraged. Only €1 billion of the total a lack of confidence in the markets, transaction volumes (approximately and hotel performance continued to Introducti on 35%) were attributable to portfolios, weaken. The last quarter of the year, and only two portfolios (Formule on the other hand, started to see some When taking stock of hotel 1 and Steigenberger) transacted activity in terms of hotel investment investments in Europe a year ago, we at more than €100 million. This and a slowdown in the decline of feared that the ‘party was over’. There compares with seven portfolios in overall hotel performance. were record investment volumes of 2008 and 27 in 2007. €18-20 billion in 2006 and 2007, but In general, single-asset volumes Single Assets just over €6 billion in 2008. Owing to fell to levels last seen in 2002 and deepening recession in most European portfolio values matched volumes last In 2009, HVS recorded a total of 62 economies, falling RevPAR and a freeze seen in the late 1990s. single-asset transactions, each of on lending by commercial banks, 2009 Hotels in Europe continued to more than €7.5 million. We again took the investment community into experience a challenging year in 2009; set €7.5 million as the minimum an ‘age of austerity’. European hotel RevPAR had begun to fall in mid-2008 amount for a transaction to qualify investment activity in 2009 fell further, as a result of the global economic for inclusion in our survey. The by approximately 50%, to just over downturn. To try to maintain their year continued in the same vein as €3 billion: a drop of more than 85% on occupancy, hotels discounted the end of 2008 when transactions the volumes of 2007! average rate more heavily as the year had already slowed significantly. In This fall was expected. After the progressed, and this led in turn to a general, there was a 19% decrease in collapse of Lehman Brothers in double-digit decline in RevPAR in the number of transactions in 2009. September 2008, 2009 was certain most European cities. Later on in the (The number of transactions in 2008 to be a challenging year. But it also year, though, the decline in RevPAR was 77.) The year continued to prove meant that 2009 would be a year of slowed in most cities; markets such as challenging for investors interested in hope for opportunists, some of whom London and Geneva even saw growth the hotel sector: banks were reluctant secretly hoped that banks’ toxic in the closing months. or unable to lend, and financing assets would translate into distressed sales; others hoped lending would FIGURE 1 Total Hotel Investment Volume 2000-09 (€ billions) become relatively easy. However, for most of the year, there were only a 25 limited number of distressed sales, Portfolio lending remained largely restricted Transactions and RevPAR continued to fall in most 20 SingleAsset European cities, right up until the Transactions very end of the third quarter for some 15 and through to the end of 2009 for the rest € Billions Just over €2 billion was transacted 10 in single-asset deals. Only one trophy asset and a half stake in another changed hands in 2009 and no hotel 5 transacted at a value of more than €900,000 a room (compared to one 0 in 2008 and three in 2007). The 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 one possibly trophy asset was The Stafford Hotel in London and the Source:HVS–LondonOffice

2 European Hotel Transacti ons 2009 HVS – London Oﬃ ce FIGURE 2 European Single Asset Hotel Transacti ons 1998-09 into a total investment volume of approximately €317 million. Spain 7 160 accounted for 15% of the total single- asset investment volume and sales 6 140 included the Meliá Madrid Princesa

120 Number and the AB Skipper Hotel, which sold 5 for a combined total of an estimated 100 €160 million (approximately). 4 of

Transactions France maintained its investment 80 3 activity; five properties were sold € Billions 60 there, four of them in Paris. Such 2 investments accounted for 5% of the 40 total number of single-asset deals, 1 20 and a total investment of roughly €111 million. Paris’s continued — 0 importance was underlined by the sale 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 of upscale assets such as the Radisson Paris Boulogne, which was bought € Billions NumberofTransactions by Algonquin Asset Management Source:HVS–LondonOffice France (AAMF), and the Renaissance Paris Hotel Le Parc Trocadero, which was bought by Westmont Hospitality remained an enormous obstacle to any and six in London. Hotel investment Group in partnership with Rockpoint. larger single-asset deal and portfolio values in London were approximately In 2009, a total of five qualifying activity. One result of the general €306 million in 2009, or just over transactions were made in central and deceleration in activity was a decrease half of the total investment volume in eastern Europe, down from the seven of 22% in the average price per room, the UK. Meanwhile, the UK provinces of 2008. Poland saw two prominent to €169,000. The economic downturn registered an estimated transaction assets sold in Cracow: the Radisson has had an impact on the availability volume of €237 million, a figure Blu Hotel, which Union Investment of trophy assets in the market, as enhanced by the sale, for more Real Estate acquired for €32 million those owners under no obligation to than €143 million, of the Aviemore (a yield of 7.5%), and the 159-room sell have been more reluctant to place Highland Resort in Scotland. Weighted Andel’s Hotel Cracow, which was their properties in an unfavourable average sales prices per room in acquired by Deka Immobilien for market. For this reason, few trophy the UK varied from €137,000 in the approximately €29 million. assets were transacted in 2009, with provinces to €449,000 in London. Unlike previous years, when we the highest transaction value per HVS puts the value of the undisclosed saw many transactions with a sales room of approximately €1.6 million hotel transactions in the UK at around price of more than €50 million, 2009 (based on a 100% asset value) being €55 million. saw only eight deals at or above in Geneva, where a 50% stake in the Last year, Germany proved to be this figure, a decrease of almost half Four Seasons Hotel de Bergues was an active investment arena in terms compared to 2008. sold. The next two highest prices of the number of hotels transacted, The following significant single- per room were the €827,000 of The having overtaken Spain and France asset transacti ons were recorded in Stafford Hotel and the €707,000 of the previous year; there were a total 2009 (full listing in Tables 2 and 3). the former Silken Hotel development of 12 transactions in Germany in project on The Strand, in London. 2009, compared with nine in 2008. In November, Invesco Real Estate We note that the sales price of Such investment resulted in a total announced it had closed the almost a third of the qualifying single- volume of €393 million: a 19% share acquisition for the Radisson Blu asset transactions in 2009 was not of the total single-asset investment Hamburg in Germany. The 556- publicly disclosed. HVS estimates that volume. Key properties sold included room hotel sold for €155 million, the total price of these transactions the Radisson Blu Hamburg, which a price per room of approximately was just over €400 million. had a sales price of approximately €279,000. This purchase is The UK continues to dominate the €155 million. HVS estimates the considered to be in line with the transactions market, claiming just value of the undisclosed transactions company’s strategy of diversifying its European portfolio by acquiring over a quarter of the single asset in Germany to be approximately three-star and four-star properties. transactions by value (€543 million). €135 million. This was Invesco’s twelfth The UK has been predominant Spain continues to be one of the acquisition in Germany to-date; since taking over from Spain as the leaders in terms of the number of leader in 2005. We recorded 11 hotels transacted: a total of seven In June, the Aviemore Highland transactions in the UK provinces, properties (1,465 rooms), translating Resort in the Scottish Highlands

HVS – London Oﬃ ce European Hotel Transacti ons 2009 3 was rescued from administration FIGURE 3 Single Asset Price per Key 1998-09 by its operator Macdonald Hotels, after it had managed to secure 300,000 40% financing for the purchase of the 30%

resort and for the completion (€) 250,000 of an £80 million (€92 million) 20% Room refurbishment currently under way. 200,000

10% % Per

The resort was originally held by a Change consortium of owners that included 150,000 0% Price Macdonald Hotels, Lloyds Banking Ͳ10% Sales

Group, and Tulloch, a Scottish 100,000 construction company. Delays in Ͳ20% the refurbishment project led to 50,000 difficulties, but the hotel operator Average Ͳ30% managed to secure funding for — Ͳ40% the remainder of the project and 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 came to an agreement with the administrators for the acquisition AverageSalesPriceperRoom %Change of the business. The refurbishment project will see the addition of Source:HVS–LondonOffice children’s facilities, a cinema, and a clubhouse for the golf course; The company will additionally Many of the distressed properties seek to rebrand and reposition the sold were in the UK. A number of In September, Shire Hotels, property; administrators were appointed, owing controlled by the brewer Daniel to the financial difficulties owners Thwaites, the owner of The Staﬀ ord Paris proved yet again that it is an found themselves in. We estimate that Hotel in London, sold the hotel to active hotel investment market, approximately 20% of all transaction Britannia Hospitality, a company although there were no trophy volume in 2009 can be considered to which belongs to an Egyptian family. asset transactions in 2009. The be distressed, and more than 60% of The hotel is said to have sold for French capital registered a total these distressed assets were acquired approximately €87 million, making of four transactions, in line with by hotel operators. Distressed assets it – at €827,000 a room – one of the the previous year. In terms of sold included the Aviemore Highland highest priced per room sales of the investment volume, on the other year. The 105-room hotel recently hand, there was a significant Resort, the former Silken Hotel in took the Kempinski brand and decrease, from €335 million to just London, and the Park Inn London, joined the company’s portfolio to over €100 million. Such a drop in Russell Square. become Kempinski’s only London investment can be attributed to the Over the last 12 years, the average property. It is expected that all of economic slowdown and to a lack of transaction price per key for single the hotel’s public areas will have prime luxury assets available in the assets averaged €188,000. The been renovated by the end of 2011; market. The two most prominent average price in 2009 was some deals in Paris were the sale of the 11% short of this, at €169,000. The London saw the acquisition of 170-room decrease in value in 2009 was due to a another hotel in November when Radisson Paris Boulogne (€32 million) and the Renaissance lack of trophy assets being transacted Crimson Hotels Group purchased and to a number of distressed assets the Park Inn London, Russell Paris Hotel Le Parc Trocadero (€35.5 million). being sold at a discount to their Market Square, formerly known as the Value. Between 2005 and 2008, Bonnington Hotel. The hotel We have witnessed relatively few the average price per key exceeded had first been acquired by WG distressed asset sales (the expectation €200,000, peaking at €246,000 in Mitchell in 2007 for an estimated was that there would be more) 2006 (as shown in Figure 3). £70 million (€89 million). Last as banks have not called in their year, the owners handed the hotel commitments or sought buyers in ‘off over to its administrators who market’ transactions. Many owners Portf olios concluded the sale for an estimated have technically been in breach of Just as they did in 2008, illiquid sum of nearly €50 million. The 214- their loan covenants (loan to value, market conditions drastically reduced room hotel includes a restaurant, for example); but as long as interest the number of portfolios transacted bar and 14 conference and meeting payments are kept up – banks are in the market (see Table 1). With rooms. Crimson plans to enhance continuing to turn a blind eye. With many buyers finding it difficult to the hotel’s facilities including continuing low interest rates, it will, secure finance for single-asset deals the reception, food and beverage however, be interesting to see how exceeding €50 million, portfolio deals outlets, as well as its meeting rooms. long the lenders’ patience lasts. were scarce in 2009.

4 European Hotel Transacti ons 2009 HVS – London Oﬃ ce Hotel portfolios, which, in the estimates for undisclosed portfolio Steigenberger Hotels and Resorts past, made up approximately three- transactions are almost half of the and InterCity Hotels brands, was quarters of the total transactions total investment value. sold for an undisclosed price to the volume, accounted for only 50% of The number of portfolio Egyptian tourism group Travco. the total volume in 2008 and just transactions recorded in 2009 was The German family retained only 34% in 2009, owing to the vast lack of 17; there were 24 in 2008. With the three properties (Frankfurter Hof, finance for larger deals. exception of the Steigenberger and Steigenberger Airport Hotel and In 2009, portfolio transactions Formule 1 transactions, which involved the Hotel Belvedere, in Davos, were a mere €1.1 billion, a reduction 82 and 158 hotels, respectively, the Switzerland) of the original portfolio of two-thirds on 2008. The volume of majority of portfolio deals involved of hotels across Switzerland, investment in portfolios has dropped only two or three hotels. Germany and Austria. by a staggering 92% from the boom Only two European deals last year Golden Tulip Hospitality BV, the years of 2006 and 2007 when portfolio exceeded the €100 million threshold, management company of the various deals were worth approximately compared to seven in 2008. €14 billion, owing to many hotel Golden Tulip brands, went into Accor continued to pursue its asset- operators selling off their portfolios voluntary receivership in early 2009 light strategy and sold 158 of its 270 to manage or lease them back. It is and was subsequently bought by Formule 1 budget hotels in France certain that 2009 has seen the smallest Starwood Capital, which saw it as a in a sale and leaseback deal to a number of portfolio transactions since good fit with its existing Louvre Hotels consortium of French investors for the late 1990s. It is interesting to note portfolio (consisting of the Première €272 million, or €22,000 a room. that although the average number of Classe, Campanile and Kyriad Around 100 of these properties hotels in each portfolio transacted did brands). Golden Tulip complements had recently been renovated to not change dramatically (it was eight the portfolio in terms of brand conform to Accor’s ‘duo’ concept. in 2008 and ten in 2009) the price per variety and geographical spread. The Accor will continue to operate the key halved between 2008 and 2009 transaction included the franchise hotels, which have a total of 12,300 (€140,000 in 2008 and a mere €69,000 and development businesses, the joint rooms, under the F1 brand on 12- in 2009). However, we attribute this venture interests and all trademarks year leases (renewable six times not only to a fall of overall values but and intellectual properties of Golden at Accor’s option). The rent will be to the sheer volume of budget hotels Tulip but excluded any real estate 100% variable and comprises 20% transacted last year. Budget hotels are interest in the Golden Tulip hotels. of total turnover. As a result of the widely regarded as more recession- For that reason, this transaction, transaction, Accor will be able to proof and only a small number of full although noteworthy, is excluded reduce its adjusted net debt from last service properties changed hands in a from our listings. year by approximately €187 million, portfolio transaction in 2009. NH Hoteles and Hesperia signed It is also important to note that 2009 and €130 million of this will be an agreement to merge their hotel was characterised by the increased added to the company’s cash reserves; management businesses, thus secrecy surrounding published The family-owned Steigenberger creating the largest Spanish hotel transaction prices. Therefore, HVS’s Hotels AG, comprising the group in the urban segment. Again,

TABLE 1 Portf olio Transacti ons 2009

Number Number TotalSales Priceper Portfolio Location ofHotels ofRooms Price(€) Room(€) Buyer Seller

158Formule1Hotels France 158 12,300 272,000,000 22,000 InstitutionalInvestors Accor SixTravelodgeHotelsinLondon UK 6 828 96,600,000 117,000 Travelodge Undisclosed 12UKHotels UK 12 1,443 88,550,000 61,000 Travelodge Undisclosed HotelBudapestJSC(55%Stake) Russia 2 137* 45,925,000 335,000 MosCityGroup VTB(15%)andMCKoHotelsMgtLtd 5PremierInnHotelsandRestaurants UK 5 450 40,682,000 90,000 M&GInvestments Whitbread TwoSpanishHotels Spain 2 912 — — HotasaHoteles MaspalomasHotelesSA/EstanciaHoteleraSA 4AquisHotels&Resorts Greece 4 964 — — AquisHotels&Resorts Undisclosed 3PurpleHotels UK 3 258 — — Travelodge BDOStoyHayward(forTheRealHotelCompany) 2H10Hotels Spain 2 432 — — NuevaRumasa H10Hoteles TwoSpanishHotels Spain 2 335 — — HotasaHoteles StilHoteles NordicHotels Sweden 2 542 — — ChoiceHotelsScandinavia EjnarSöder&HansMellstrom SixCampanileHotels France 6 268 — — LFPI/TimeHotels BNPParibasRealEstate PrincessHotels&Resorts Spain 2 530 — — Ibersol RedaAlaywan/PrincessHotels IntrawestHotels&Residences France 2 793 — — Pierre&Vacances IntrawestHotels&Residences SteigenbergerHotelsAG Various 81 14,890 — — TravcoGroupInternationalHolding SteigenbergerHotelsAG NineHotelsinFrance France 9 600 — — LFPI/TimeHotels SopaliaCompagnieFinancièreHoldingsSA 8FolioHotels UK 8 498 — — AkkeronHotels FolioHotels

*Prorata(55%stake) Note:Thetotalinvestmentvolumeshownincludestransactionsforwhichthesalespricesareconfidential

Source:HVS–LondonOffice

HVS – London Oﬃ ce European Hotel Transacti ons 2009 5 since no real estate was exchanged, investment among the different The investment made by hotel this transaction is not featured in our investor types, with real estate investment companies totalled hotel investment totals. investors once again being at the top approximately €285 million, UK budget hotel operator of the single-asset investor table (see or 14% of the total single-asset Travelodge has used the difficult Figure 4). We expect the presence of investment volume. Such investors economic environment affecting high-net-worth individuals (HNWI) managed essentially to maintain the owners of distressed hotels to and institutional investors in the share they had in the previous increase its portfolio. In March 2009, hospitality investment to increase in year (of 16%) by acquiring prime Travelodge acquired 12 hotels for the future, particularly HNWIs from assets in gateway locations. €88.6 million, or €61,000 a room, Asian countries, as their appetite to Acquisitions made by this group across the UK in locations such acquire European assets becomes of buyers included The Stafford as Cambridge, Edinburgh, Epsom, stronger. We expect to see too the re- Hotel and a 50% stake in the Four Liverpool, London (Waterloo) and emergence of more sovereign wealth Seasons Hotel des Bergues; Twickenham. In July, Travelodge funds and the emergence of new acquired another six properties for REITs and funds formed as a result of Hotel operators remained active development across London for the economic slowdown in the hope of in the single-asset transactions €96.6 million with the aim of having seizing the opportunity and acquiring market, acquiring a total of 16 them ready for the 2012 Olympic desirable properties that may come properties (or 20% of the total Games in London. onto the market in the medium term. single-asset investment volume) Whitbread signed a deal with M&G for a total of approximately In single asset investment, real Investments to acquire five Premier €401 million. Such investors estate investors continued to Inn properties, including the adjacent become increasingly active in 2009, maintain their position as the top restaurants, for €40.7 million, or and we are likely to see increased investors in 2009, accounting as approximately €90,000 a room. The activity from similar buyers. Last they did for approximately 28% reported yield on this transaction year saw increased activity by hotel of the total number of single was 5.5%. Whitbread is leasing the operators in the UK especially; a asset transactions. The amount of properties back on 25-year leases. number of hotels in the UK found capital spent on hotel acquisitions Mos City Group (MCG) acquired themselves in financial difficulty decreased to just over €568 million, two hotels in Moscow: the 116-room and consequently many entered down from nearly €940 million in Budapest Hotel and the 133-room administration. Hotel operators 2008. Investors within this category Peter I. The 55% stake in the two who found themselves in a better were particularly active in Germany, hotels had a transaction value of position made an investment where a total of nine deals were €45.9 million. MCG plans to refurbish decision to acquire these struggling completed. Key assets acquired by the Budapest Hotel to a five-star properties in the hope of better standard. This is a rare deal, as real estate investors included the Radisson SAS Royal Viking Hotel managing and operating them. eastern Europe hardly ever features Examples of investments made by among portfolio transactions. in Stockholm, by the Norwegian property company KLP Fastigheter hotel operators include the Park Inn Time Hotels, part of La Financière London, Russell Square, which was Patrimoniale d’Investissement (LFPI), for just over €112 million (a yield of approximately 6%); the acquired by Crimson Hotels Group, recently completed the acquisition and The Forbury Hotel, which was of nine hotels in France for an Radisson Blu Hotel, Cracow, by Union Investment Real Estate for acquired in October by von Essen undisclosed sum. The hotels are all Hotels; in the Île-de-France region and have approximately €32 million; and a total of approximately 600 rooms. The Charles Hotel in Munich, by AM HNWIs continued to maintain their The seller was Sopalia Compagnie Alpha. The Charles Hotel is part of activity, albeit at a relatively reduced Financière Holdings SA. Time Hotels a mixed-use complex that sold for level, by acquiring seven properties also acquired six Campanile-branded around €200 million (a yield of in 2009, a 9% share of the total properties (268 rooms) from the around 6%); single-asset investment volume, for asset manager BNP Paribas Real Institutional investors accounted €188 million. Investments made Estate in July 2009. Time Hotels will for 26% of the total single-asset by such buyers include La Perla continue to operate the hotels under investment, an increase of 11% Ionica in Italy, which was bought a Campanile franchise. on 2008, amounting to a sum of by a Middle Eastern investor for €525 million. Deals completed approximately €46 million; Lapa Proﬁ le of Investors – by such buyers included the Palace Hotel, in Lisbon, which was Meliá Madrid Princesa in Spain bought by a private investor for just Single Assets (€88 million), the Park Inn over €29 million; and La Canaria Within single asset investment, Frankfurt Airport (€28 million), Hotel, in Spain, which was bought the profile of buyers continued to and the former Silken Hotel project by a Norwegian investor for an demonstrate a balanced spread of in London (€122 million); undisclosed sum.

6 European Hotel Transacti ons 2009 HVS – London Oﬃ ce FIGURE 4 Single Asset Investment Acti vity by Buyer Category 2006-09

6 HighͲNetͲWorthIndividual RealEstateInvestor 5 PrivateEquity HotelInvestmentCompany 4 InstitutionalInvestor HotelOperator (€ billions) (€ billions) 3 Investment Investment 2

0 2006 2007 2008 2009 Source:HVS–LondonOfficeOffice Proﬁ le of Investors – increasingly difficult to remain at the d’Investissement (LFPI) of several top in the prevalent economic climate Campanile properties in 2009. Portf olios and they therefore disappeared from A number of investors are currently the buying scene almost entirely. planning private equity funds for In 2008 and especially in the years Investments made by this category 2010. It will be interesting to see how before that, private equity funds were of buyer totalled €33 million in many are successful and how easy one of the top investors in portfolios 2009 compared with €892 million in they find it to invest their capital. (see Figure 5). In 2009, however, 2008 and a staggering €6.8 billion in Like they did in 2008, hotel private equity funds, with their 2007. An example is the acquisition operators are still buying hotel highly leveraged buyouts, found it by La Financière Patrimoniale real estate, as the Travelodge and

FIGURE 5 Portf olio Investment Acti vity by Buyer Category 2006-09

16 HighͲNetͲWorthIndividual 2008 14 8% RealEstateInvestor 26% 29% PrivateEquity 12 Hotel InvestmentCompany 9% 28% 10 InstitutionalInvestor HotelOperator (€ billions) (€ billions) 2009 8 3% 4% 22% 42% stment 6 Investment 29% 4

0 2006 2007 2008 2009

Source:HVS–LondonOffice

HVS – London Oﬃ ce European Hotel Transacti ons 2009 7 Whitbread transactions demonstrate. FIGURE 6 Cross-Border Transacti on Acti vity 2001-09 This investor type took a 42% share of the total portfolio transaction 25 activity: €445 million compared with the €781 million of 2008. Abroad Insti tuti onal investors had another 20 Home strong year in 2009. They usually look for a stable income play in the form of a lease, and this risk-averse strategy 15 fits well with banks’ currently limited lending appetites. Accounting for 10 29% of the total portfolio activity, € Billions institutional investors bought hotel assets totalling approximately 5 €313 million in 2009, compared to €836 million in 2008. The largest portfolio deal of the year was that 0 carried out between Accor and a 2001 2002 2003 2004 2005 2006 2007 2008 2009 consortium of institutional investors for 158 Formule 1 hotels. Source:HVS–LondonOffice Investments made by hotel investment companies totalled lending closer to home are likely to be in the medium term, we foresee the approximately €231 million, or 22% of the main reasons why the geographical return of Middle Eastern and Asian the total portfolio activity; this figure split of hotel assets in terms of volume buyers, often using sovereign wealth is close to the €270 million of 2008 has shifted towards domestic markets: funds as investment vehicles. and the acquisition of Steigenberger 60% of all acquisitions, €1.9 billion In 2009, only one Middle Eastern by Travco is one example. worth, were generated in the country investor was active in the European Real estate investors showed little of the buyer. By contrast, in 2008, market. Sheikh Hamed Al Hamed activity within portfolio deals: their only 38% of all acquisitions, a total of of Abu Dhabi bought the resort La investment volume of €46 million €2.3 billion, were made by buyers in Perla Ionica in Italy. accounted for 4% of the total their home countries. Cross-border Our buyer analysis by continent investment made in 2009. This was transactions totalled €1.2 billion in (see Figure 7) shows the clear a significant decrease on 2007, when 2009. In terms of volume, cross-border dominance of European companies. real estate investors accounted for activity fell by 68% between 2008 and However, we note that the investment approximately €1.3 billion worth of 2009 (see Figure 6). share from Africa increased strongly, portfolio transactions, but was higher As access to finance slowly albeit only to 9%, on account of the than the €10 million of 2008. Russia’s improves and with the expectation of acquisitions made by Travco and Mos City Group, which acquired two more trophy assets hitting the market Britannia Hospitality. hotels in Moscow in 2009, falls into this category. FIGURE 7 Buyer Analysis by Region 2008-09 We recorded no portfolio transactions made by high-net-worth 100% individuals in 2009. Africa Asia 80% Cross-Border Acti vity MiddleEast Cross-border activity has witnessed USA a shift in buyer preference. With the 60% marketplace becoming more and Europe more international, hotel transactions have become an international affair 40% in recent years. However, with the deepening of the financial crisis, of 20% which last year brought but a foretaste, buyers have increasingly looked inside their home country for hotel assets. 0% Familiarity with the market and legal 2008 2009 procedures, the avoidance of currency fluctuations and banks’ preference for Source:HVS–LondonOffice

8 European Hotel Transacti ons 2009 HVS – London Oﬃ ce Outlook for 2010 and hotels sold in the transaction peak of About the Authors 2006-07 are expected to come up for Conclusions refinancing in 2010. This, combined Cristi na Balekjian is with banks’ wait-and-see approach a Market Intelligence Inactivity in the transaction market towards underperforming assets Analyst with HVS’s over the past 12 months has largely so far, should give rise to distressed London office. Cristina been the consequence of four factors: assets particularly in the UK and holds a BSc (Hons) the wide bid-ask pricing spread Spain, but far from the flood that in International between buyers and sellers, the lack most investors have been predicting Hospitality and Tourism of distressed selling, the difficulties and eagerly awaiting. Management from the University of in obtaining new financing for In general, the European Surrey. She worked in a number of purchases and the continued decline transaction market is expected to operational roles in the hospitality in the trading environment. remain under immense pressure industry before joining HVS in 2007, Can we expect an improvement in for another 12 months or so, since when she has worked on a these areas over the course of the until confidence in hotel trading number of assignments in Europe, the next 12 months? performance is restored, sellers Middle East and Africa. There does appear to be greater start pricing their assets in line visibility in respect of the trading with market value, and banks send Elke Geieregger is outlook; most commentators, sustained signals of support for the a Senior Associate including HVS, are predicting a hotel sector. with HVS’s London bottoming out of RevPAR in most Our expectation is that hotel office. Having worked European hotel markets during investments in 2010 will, at the very as a consultant and 2010. A number of banks also seem least, fare better than they did in in various roles in to be looking at new financing with 2009, with a more meaningful upturn hospitality accounting, genuine intent to lend, albeit on a occurring in 2011. It will, however, she is now completing assignments conservative basis. These two factors, be several years before confidence is in numerous European countries. together with a marked upturn in restored similar to the levels of the Elke specialises in central and eastern the broader commercial real estate dizzy heights of 2006 and 2007. But European markets, with recently investment market, have resulted in for now it is the Age of Austerity – at completed assignments in Russia, a noticeable increase in the number least in terms of the European hotel Poland, Kazakhstan, Azerbaijan and of buyers looking to take advantage transaction market! Slovakia. Originally from Austria, of the anticipated upswing. Elke holds a BA (Hons) in tourism 2010 thus could see a rise in – HVS – management and is presently institutional investors who are likely completing her membership of the to continue to count on security Chartered Institute of Management and quality and who will therefore Accountants (CIMA). prefer western European properties is with lease contracts or management Saurabh Chawla an Associate Director contracts with guarantees in place. with HVS’s London Unencumbered properties and office. He joined HVS repositioning opportunities are also in 2006 after seven expected to be popular acquisition years’ operational and targets with small-scale private managerial experience investors and well-capitalised in the hospitality industry. Saurabh private hotel groups. Private equity holds an MBA from IMHI (ESSEC funds with new capital already raised Business School – France), a degree are also looking to return to the hotel in Hotel Management and a Bachelor investment scene. of Commerce. Since joining HVS he It will, however, be some time until has conducted numerous valuations, the hotel investment community feasibility studies, and consulting takes a stronger interest in eastern and asset management assignments Europe (which has, to-date, been an across Europe, the Middle East and illiquid investment market) or on Africa. properties in secondary cities and resort markets. For further information please contact With values still at a low point in Elke Geieregger on +44-20-7878-7747 the cycle and owners unwilling to ([email protected]) or Saurabh Chawla sell, a large portion of sales is still on +44-20-7878-7708 ([email protected]) expected to be bank-driven. Many or visit hvs.com

HVS – London Oﬃ ce European Hotel Transacti ons 2009 9 Projektentwicklung KG Co. Estate & Co. Resorts & BV Real & Gmbh Resorts Resorts & Estate GmbH & Group Hotels Lucette Hotels Projects La Real SpA Family Hotels Dépôts Dépôts Projektierungen/Wölbern Hotels Hotels Hotels Private/FOM Monrif SpA Immobilien company Cie. Express Fibeira de de Steinweg Ͳ Property Therme Realitätenentwicklung & Med Invest Property AG Steigenberger (AAMF) Compagnie Fund TCN Fund Azure France IRE Starwood Estate Estate SA Club (plc) Real Real Estate Neuer Estate UBM Rimini Sogefin GmbH Investor Orient di Real Real Estate Hotel Hotel Hamed Constanzo Management Vacances Al Real SpA Chia Hotels Hamburg Lang Asset GmbH Immofinanz Plus Undisclosed Management Harpen Germany Eiendomsforvaltning Norgani Invest GBI Invest Undisclosed Holding Lotus SGR European European Spa Gruppo Portuguese Hamed Days Hill Caisse d'Epargne Caisse Investment Investment Greek Coratim Immobilien Quinlan Immobilien Euroland Immobilien Warimpex Dennis Starman Montagne Asset Alpha Hotels Grupo Group Immo Immo Price Room Per Sales Price Buyer Seller of Rooms Number Netherlands 216 25,000,000 115,700 Invesco Italy 116 21,500,000 185,000 Leasint Carlo Monaco 403 25,000,000 62,000 Cyril Baden Germany 139 — — EP Ͳ Hague The Arcs France 222 11,000,000 50,000 Mer ons 2009 (€) ti Düsseldorf Germany 160 20,000,000 125,000 LB Heviz Hungary 232 35,000,000 151,000 Taverna Lisbon Portugal 109 29,400,000 270,000 Private Bologna Paris France 259 24,900,000 96,000 Forest Cracow Poland 159 29,000,000 182,000 Deka Deredorf Ͳ Leipzig Halle Germany 73 — — Aurum Private Ͳ Trocadero Paris France 116 35,500,000 306,000 Westmont/Rockpoint Strategic Halle Square Dresden Germany 228 14,000,000 61,000 LB Parc Forum The Le Hof Baden Düsseldorf Ross Altstadt Erfurt Germany 141 10,000,000 71,000 Ejendoms Palace Munster Munster Germany 140 — — SEB Office World Villette development Plaza Monte Airport Frankfurt Germany 209 27,500,000 132,000 Fondshaus Hotel Brussels Belgium 511 — — International (Rosenquartier)* Hanover Germany 148 — — Deka Hotel Hotel Rotes La Cluj Cluj Romania 101 12,000,000 119,000 Elena use Erfurt Hotel Arezzo Italy 80 8,000,000 100,000 Happy Ͳ Boulogne Paris France 170 32,000,000 188,000 Algonquin Badische Hotel Cracow Villette Paris France 71 7,900,000 111,000 Caisse City Frankfurt Germany 256 30,000,000 117,000 Deka Hotel Cracow Poland 196 32,000,000 163,000 Union Hamburg Hamburg Germany 556 155,000,000 279,000 Invesco Hill Paris London Hague Resort Cagliari Italy 452 82,600,000 183,000 Castello Beach Hotel Hotel* Munich Germany 160 — — AM Dresden Hamburg Hamburg Germany 450 — — Union – La Rica Lisbon Portugal 171 31,000,000 181,000 VIP Hotel Hotel Altitude Les Brussels mixed Blu Paris Blu Hanover Hotel Oslo Oslo Norway 119 17,710,000 149,000 Kristiania Frankfurt Treff The Ionica Catania Italy 459 46,350,000 101,000 Sheikh Palace a Hotel Premium Hotel HVS One One Internazionale Forest Villa Arc City of Paris Palace Inn Inn Laguna Charles Frankfurt Méridien Perla Part Radisson Steigenberger Park Mercure Innside Novotel Motel Park West Le Rogner The Chia Citea NH Ramada Etrusco InterCity Hotel Lapa Hotel Motel Hotel Renaissance Radisson Sheraton Hotel La Radisson Kempinski Property Location Country Sales Andel's Source: * TABLE 2 TABLE Transac Hotel Single Asset European

10 European Hotel Transacti ons 2009 HVS – London Oﬃ ce AB Ltd Enache Resort (M&B) Company Ltd ASA Scandinavia UK Resorts 44 & Group Hotels Hotels/Radu Butlers Highland Hayward & Manor Holding Resorts Rose Owner Eiendom Thwaites Urvasco Preyco Hotels Thornton Properties & Family Hoteleiendom Stoy Hotels Hotels Nordisk Mitchell Meliá Hotels Best Aviemore Investments Kingdom Ltd Zola Ltd Shendish Group WG Estate Lenta plc Grant Hotel Hotel Unknown Hotels Investor Dunas Hus Faktor Hotels Waterbridge Hospitality Daniel Fund Undisclosed London Hayley BDO Real Hotels Holding Hotels Mitchells Hoteles Properties Private Hoteles AC Best Frost (subsidiary) Grupo Renting Sol Immobilien Host Hotels English REIM Grupo Essen Fastigheter RBS Price Room Per Sales Price Buyer Seller of Rooms Number nued ti Canary Spain 249 — — Norwegian ons 2009 (€) – Con ti Jersey UK 82 13,272,000 162,000 Jayne London UK 49 — — Berkeley * Geneva Switzerland 50 80,000,000 1,600,000 International acquired. stake) stake (50% project) London UK 173 122,329,900 707,000 BBVA Bridge London UK 190 28,300,000 149,000 Aprirose GuestInvest) London UK 187 — — Undisclosed Undisclosed Hotel Stockholm Sweden 459 112,380,000 245,000 KLP Square London UK 214 49,801,500 233,000 Crimson percentage Silken Bergues for Lodge Åre Sweden 112 18,586,000 166,000 Home Crawley Crawley UK 74 8,865,600 120,000 Sojourn Office des Viking Tower Resort Aviemore UK 359 143,780,000 401,000 Macdonald Malmö Malmö Sweden 128 11,260,000 88,000 Stockholm (former Russell Hotel (former Hotel Swindon UK 192 11,044,800 58,000 Holidaybreak Hotel Bournemouth UK 95 9,322,500 98,000 Peel Princesa Madrid Spain 274 87,800,000 320,000 BBVA Glasgow Glasgow UK 222 — — Principal Hotel Royal Hotel London UK 105 86,800,000 827,000 Britannia adjusted Hotel London Hotel Reading UK 23 7,600,000 330,000 von Hull Hull UK 139 — — Undisclosed Undisclosed Bay Stevenage Stevenage UK 140 — — Queensgate Express London Borehamwood Borehamwood UK 97 — — Offshore Hotel Barcelona Spain 241 — — AXA – Hotel Tenerife Spain 300 — — Hotasa G Gothenburg Sweden 300 41,000,000 137,000 Deka Hotel Grand Highland Terrace Mountain Hotel Manor Apsley UK 70 8,175,000 117,000 Planned SAS House London, Inn Inn Inn Royale Hotel count HVS Madrid Hotel Bucharest Romania 150 9,000,000 60,000 Immorent Continental Seasons Inn Hotel Stafford Forbury Liddington Skipper Som Barcelona Spain 102 13,400,000 131,000 Invisa Canaria Brelade's Room St Travelodge Aviemore Vildmarkshotellet Kolmården Sweden 213 14,852,800 70,000 Pandox Parks Tophams Park Travelodge Central Holiday Inverness First The The Radisson Coppehill Marconi Shendish AB Holiday La Semiramis Norfolk Premier AC Hello Meliá Property LocationRenaissance Country Sales Four The Source: * TABLE 3 TABLE Transac Hotel Single Asset European

HVS – London Oﬃ ce European Hotel Transacti ons 2009 11 HVS is the world’s leading consulting and services organisation focused on the hotel, restaurant, shared ownership, About HVS gaming, and leisure industries. Established in 1980 by President, Steve Rushmore, MAI, FRICS, CHA, the company offers a comprehensive scope of services and specialised industry expertise to help you enhance the economic returns and value of your hospitality assets. Steve Rushmore began his career in the 1970s as a consultant in the hospitality division of a prominent New York City real estate firm. Through that experience, he noted the limited body of knowledge available to assess the value of hotels and motels, taking into consideration both the business and real estate components. Rushmore’s first book, The Valuation of Hotels and Motels, quickly became the definitive work on the subject and, soon after, HVS was born. The HVS method of providing an economic study and appraisal for hotels immediately became, and continues to be, the industry standard. Over the past three decades, HVS has expanded both its range of services and its geographical boundaries. The company’s global reach, through a network of 30 offices staffed by 300 seasoned industry professionals, gives you access to an unparalleled range of complementary services for the hospitality industry. Our clients include prominent hotel owners, lending institutions, international hotel companies, management entities, governmental agencies, and law and accounting firms from North America, Europe, the Middle East, Asia, Latin and South America, and the Caribbean. Our principals literally ‘wrote the book’ on hospitality consulting, authoring numerous authoritative texts and hundreds of articles. HVS principals are regarded as the leading professionals in their respective regions of the globe. We are client driven, entrepreneurial and dedicated to providing the best advice and services in a timely and cost-efficient manner. HVS employees continue to be industry leaders, consistently generating a wide variety of articles, studies, and publications on all aspects of the hospitality industry. HVS is the industry’s primary source of hotel ownership data. Our 2,000+ assignments each year keep us at the forefront of trends and knowledge regarding information on financial operating results, values, management contracts, franchise agreements, compensation programmes, financing structures, and transactions. With access to our industry intelligence and data, you will have the most timely information and the best tools available to make critical decisions about your hospitality assets.

HVS London Oﬃ ce For further information please contact Elke Geieregger on 7-10 Chandos Street London W1G 9DQ +44-20-7878-7747 ([email protected]) or Saurabh +44-20-7878-7700 (fax) +44-20-7878-7799 Chawla on +44-20-7878-7708 ([email protected])or visit hvs.com