Invesco Real Estate has bought a minority stake in UK hostels operator Generator from Patron Capital, its first opportunistic purchase.
The investment manager, along with WL Ross & Co and Invesco Fixed Income, has paid €60m for the 23% holding.
Patron remains invested in Generator, which it bought in 2007.
Erik Jacobs, director of hotel fund management at Invesco Real Estate, said the deal was an extension of the company’s commitment to the hospitality industry “beyond the traditional lease model”.
“We see strong fundamentals supporting the hostel segment,” Jacobs said.
Generator will use the €60m to its portfolio.
The chain currently has 5,200 beds in eight properties across Europe.
The group expects to grow its portfolio to 20 properties in European cities and at least three cities in the US by 2018.
The company typically identifies distressed assets for conversion to hostel usage.
Invesco this week said investors were executing a wider range of strategies, precipitated by “near record low yields” for core assets and continued improvements in sentiment.
In its ‘Real Estate House View: European Market Outlook’ for the second half of this year, the manager said more creative investors might consider smaller deals in European value-added property – a “niche that has been largely overlooked by the recent influx of major North American players”.
Returns for core investors are expected to be moderate, with shopping centres and logistics likely to outperform other sectors over the next five years due to the higher income returns they offer.
Kim Politzer, director of European research, said: “With interest rates looking like they are going to be low for longer, real estate provides some great opportunities for investors to generate yield, if you know where to look.
“We are seeing some interesting options for manage-to-core and development strategies, though the opportunity is often highly localised – you can’t just buy the market.”