Asian investors have taken Paris’ hotel market by storm this year, accounting for almost half of all deals, just two years after their first foray into the market.
Asian investors have taken Paris’ hotel market by storm this year, accounting for almost half of all deals, just two years after their first foray into the market.
Paris has seen €734 mln of hotel deals so far this year, of which Asian buyers have accounted for 47%, according to Patrick Saade, vice president of JLL Hotels & Hospitality Group.
‘Asian investors entered the hotel market in Paris in 2012 and their appetite for assets has increased significantly since then,’ he said. North American investors were the next biggest group, with 36.1%, followed by European investors with 17.1%, according to JLL.
Last week, Invesco Real Estate acquired the 4-star Mercure Terminus Nord hotel in central Paris on a behalf of an Asian separate account mandate. The hotel, which was sold by Morgan Stanley’s MSREF fund, is a 6-storey 236 room property built in 1865 with a protected façade. The sale price has not been disclosed, although it is believed to have sold for about €80 mln, reflecting an initial yield of 6%, according to those who track the market. CBRE advised.
Nr 1 tourist destination
‘Asian interest in Paris is strong and they like hotels because Paris is the number one tourist destination in the world,’ Marc Socker, senior director of hotel fund management at Invesco, told PropertyEU. ‘Last year, the Chinese topped the list of tourists from Asia going to Paris with 881,000 visitors, surpassing the Japanese. This is absolutely helping to drive Asian interest in the Parisian hotel sector.’
Invesco’s unnamed Thai client behind the Mercure purchase ‘is also looking for other hotel opportunities in Paris and elsewhere in Europe’, Socker said. ‘The business plan may include a repositioning of the hotel, including a capex injection and some refurbishment,’ he added.
In November, Jin Jiang International Hotels, China’s largest hotel company, outbid Europe’s biggest hotelier Accor for Groupe du Louvre, a French budget hotel chain that operates the Campanile, Kyriad and Premiere Classe brands. The group was sold by Starwood Capital Group for an undisclosed amount and includes hotels in Paris.
From flirting to buying
Such deals send a message to the market that Asian investors are serious about buying hotels in major European cities, according to Christoph Härle, CEO EMEA at JLL Hotels & Hospitality. ‘Asian buyers have stopped “flirting” and are now buying hotels in Europe,’ he said.
In June, Hong-Kong listed investment company Kai Yuan Holdings acquired the Paris Marriott Hotel Champ-Elysées - the only hotel on the Avenue des Champs-Elysées - for €344.5 mln, in the biggest single asset hotel sale in Paris this year. The landmark deal offered a rare opportunity to acquire a major hotel in one of the most popular gateway cities in Europe. JLL advised the seller. ‘The price paid for the Marriott helped the market a lot,’ said Dirk Bakkar, head of EMEA hotels at Colliers.
However, there are a limited number of buyers who have deep enough pockets to acquire hotels in the French capital, Bakkar said. Talking of the Invesco deal, he said: ‘It’s a significant deal, due to the size and location. It was marketed quietly. There are a limited number of buyers who can pay these big amounts. However, everything in Paris is for sale – at the right price.’
Qataris queue up
Qatari investors are also a force to be reckoned with in Paris, according to Bakkar. ‘There’s a lot of Middle Eastern money, especially Qatari – it’s flowing into Paris in a big way, because it tends to be their next target after London. Singaporean investors are the next biggest group, often backed by Chinese money via Singaporean REITs. London is such an overstretched market that Paris is the next choice.’
For Asian or Middle Eastern investors looking to snap up a sizeable Parisian hotel before Christmas, there is good news. The Paris Marriott Opéra Ambassador Hotel on the Boulevard Haussmann in the city’s Opéra district is up for grabs. ‘It will probably sell for around €200 mln plus and is certainly the kind of asset that Asian investors would be interested in,’ Socker said.
In addition, the sale of the Starwood-operated W Hotel on the Rue Meyerbeer in the Opéra district is expected to be announced next week. The 91 room hotel is expected to sell for around €100 mln. ‘Interest in the hotel has been very international, including offers from Asian and Middle Eastern investors,’ said Catherine Rawanduzi, head of CBRE Hotels in France, who has been marketing the hotel. ‘In addition, the buyer may have the opportunity to extend the hotel by acquiring the Ministry of Justice office building next door.’
See the December edition of PropertyEU Magazine for more on hotel investment and Asian investment into Europe.