EUROPE - Invesco Real Estate has achieved a first close for its second pan-European hotel fund after fully investing its first fund last year.
The investment manager has secured €85m in capital commitments from four institutional investors for the new fund, considerably less than the €350m raised for the first fund in 2006, although Invesco intends to raise further capital in the future.
However, Invesco will already have enough investment (capacity approximately €170m) when combined with leverage to acquire a seed portfolio of European hotels identified ahead of the capital raising programme.
Invesco acquired a number of assets for its first fund in 2010, completing a portfolio of 17 mid-market hotels across nine European countries with a gross asset value of more than €700m.
The close of the second fund shows Invesco's positive view on the sector and investor appetite for hotels in Europe.
Andy Rofe, managing director at Invesco Real Estate, said: "We are delighted to have reached a first close so quickly after the fund's launch late last year.
"This has, in part, been due to the sector's high income component and the potential to deliver stable, attractive long-term returns for institutional investors."
He added: "The sector is one which is of strategic importance to us as a business and which should be represented in investors' portfolios.
"Timing is now optimal for hotel investment activity as asset pricing remains low, while hotel trading has shown strong signs of improvement across Europe."
This second pan-European hotel fund's strategy is similar to IRE's first fund. It will invest in mid-market, modern hotels in strategic locations near city centres, airports and convention centres in Europe, focused on long leases and operated by established national or international hotel operators with recognised brands.
Marc Socker, director of hotel fund management at Invesco Real Estate, said: "Hotels are part of a strategic growth sector, providing a stable income product underpinned by strong covenants and rental guarantees.
"The branded hotel market is a growth sector, and such hotels are more fundable, saleable and offer stable high-income potential. With low brand penetration in Europe, this provides opportunities for consolidation within the sector."