Commerz Real has set up a €250m European hotel real estate fund with German luxury hotel company Deutsche Hospitality.
The Commerz Real European Hotel Fund will receive €12m capital from Deutsche Hospitality’s subsidiary Steigenberger Hotels as a co-investor.
A further €92m of capital is expected to be received from investors. The plan is to raise €250m capital in total.
Commerz Real said the fund, which targets an annual internal rate of return of at least 5.5%, expects to invest in up to eight three- to five-star hotels.
Johannes Anschott, the board member of Commerz Real responsible for institutional business, said: “With this fund we are offering a small, exclusive group of investors with a core-plus or value-add strategy the possibility to profit from the expertise of the Steigenberger Group and that of our proven hotel team.
“Thus as a co-investor Steigenberger is a member of the investment committee, and in cooperation with the hotel experts from Commerz Real will analyse every investment with regard to location, concept and profit potential.”
The fund will plans to buy properties under construction or hotels with a residual lease term of about 18 months.
As part of the deal, Steigenberger will conclude long-term lease agreements for these hotels following the acquisition. The fund will then sell them again after a holding period of at least five years.
“Thus we will be making specific use of the potential for value appreciation and ensuring the portfolio remains young and healthy,” Anschott said.
Matthias Heck, the CFO of Deutsche Hospitality, said: “We have a business relationship with Commerz Real going back many years which is characterised by mutual trust.
“With the hotel fund we can jointly make new, long-term investments as equals and continue to develop Deutsche Hospitality with its Steigenberger, IntercityHotel, MAXX by Steigenberger and Jaz in the City brands for our guests.”