AXA IM invests €126m in London hotel project

AXA Investment Managers - Real Assets has committed to the forward purchase and fit-out of a new hotel under development within the 250 City Road development scheme in central London.

The transaction represents a total investment of £90 mln (€126 mln).

Construction of the hotel has already started and shell & core delivery by vendor and developer the Berkeley Group is planned for early 2018. The four-star hotel will be fitted out and operated by NH Hotel Group.

AXA IM completed the transaction on behalf of a large US pension fund client. The deal further strengthens the company's €2.7 bn alternatives platform, according to Hideki Kurata, head of Alternatives at AXA IM - Real Assets.

'The acquisition ties in to the ongoing expansion of our alternatives platform, as we continue to diversify our investment offering. The hotel market is underpinned by robust economic fundamentals and this transaction extends our relationship with NH Hotel Group,' said Jurata.

The eight-storey hotel’s exterior was designed by British architects Foster + Partners and will comprise 190 bedrooms, a restaurant, bar gym and meeting rooms.

The Berkeley Group secured planning permission for the 5.5 acre 250 City Road development project in August 2014 and, in addition to the four-star hotel, the 1.2 million sq ft (11,000 m2) mixed-use scheme will incorporate 75,000 sq ft of office space, circa 40,000 sq ft of retail space and 933 residential apartments.

JLL and Hall Kemp acted as joint-advisers to the vendor.

Hotel investment
Europe's hotel investment market continues to experience exponential growth as the asset class progressively becomes mainstream. According to global property advisor CBRE, the sector is on track to crash through the €20 bn barrier for the first time.

‘The €20 bn threshold seems within reach and would set an unprecedented benchmark for European hotel investment; a realisation that the asset class is becoming progressively mainstream,’ commented Joe Stather, information and intelligence manager EMEA, CBRE Hotels.

Hotels are grabbing interest from a wide range of investors. In the UK, Thai investors Singha Estate and Fico Group have emerged as the buyers of Jupiter Hotels from Patron Capital and the Royal Bank of Scotland, for £160 mln (€216 mln). Jupiter Hotels owns and manages 26 UK hotels operating under the Mercure brand, with a total of 2,883 rooms.

On the continent, a joint venture of US hotel owner and operator Highgate Hotels and investment bank Goldman Sachs has bought a portfolio of 10 hotels spanning Europe’s most sought-after cities from the Austria-based Koller family.

Similarly, UK-based fund manager Benson Elliot has just teamed up with Chicago-based peer Walton Street Capital and French hospitality group Algonquin to acquire a pan-European portfolio of high-end hotels for €420 mln.

Meanwhile, Spain is seeing the launch of the first hotel REIT while in Italy the so-called Tricolore Collection portfolio of three luxury hotels is expected to win offers from a large number of international investors, according to its marketing agent, CBRE.