Euro Ejendomme opens EUR 500m hotel fund to UK investors

German-Danish real estate investor Euro Ejendomme has opened its business hotel fund 'Euro Ejendomme SICAV-FIS Hotelfonds I' to UK investors. The fund invests in 2-4-star business hotels, mainly in Germany, though Switzerland and Austria are also possible locations.

'The hotel market in this region has remained considerably robust throughout this period of economic decline, comparing favourably to countries such as the UK,' commented Marc Thiel, CEO of Euro Ejendomme. 'After spiking in previous years, purchase prices have now dropped to attractive levels, offering investors above-average returns combined with low volatility. We are in a fortunate position to be able to purchase good quality property with sound fundamentals at very attractive prices in order to establish a portfolio in line with our investment strategy.'

The Luxembourg-based fund is targeting returns of 7% to 9% IRR and has a five-year life with an option to extend the lifespan twice by 12 months. It has a target size of EUR 500 mln with a minimum EUR 200 mln of equity. It is open to institutional investors making investments from EUR 10 mln.

The fund's diversified portfolio consists of a mixture of existing, established hotels as well as new hotels where demand and appropriate infrastructure exists. Euro Ejendomme, which manages the acquisitions, requires that properties be occupied by operators with excellent credit ratings as well as long-term lease contracts of at least 15 years. Investments are regionally diversified with volumes ranging from EUR 10-30 mln for each asset in cities with a population in excess of 100,000.

The seed portfolio consists of the Arcotel Camino Hotel in Stuttgart and the Motel One Airport Hotel and the Arcotel Rubin Hotel, both in Hamburg.

Speaking to PropertyEU, Thiel said the fund is in various stages of talks in relation to nine hotels with a total investment volume of EUR 140 mln. Deals will only be completed once equity for the funds has been secured.

The hotel fund was originally announced in October 2008, with DTZ in charge of setting up the Luxembourg structure. Fundraising began in spring this year with European investors. In mid-September another international firm took over fundraising after DTZ resigned the mandate.

Thiel said the focus of the fundraising was then switched to the UK which is seen as a highly professional market with a strong understanding of hotels. It is also planned to raise equity for the fund in the Netherlands.