French listed property giant Foncière des Régions has inked the purchase of two Motel One budget hotels in Berlin-Mitte and at the Frankfurt airport for €34 mln.

French listed property giant Foncière des Régions has inked the purchase of two Motel One budget hotels in Berlin-Mitte and at the Frankfurt airport for €34 mln.

The sale & lease back transaction is the initial stage of a new alliance for FdR's hotel unit, Foncière des Murs, which has recently announced plans to focus on budget hotels and expand outside its home market.

Hotel operator Motel One has agreed to a 20-year leaseback of the assets, which provide 450 rooms.

'With this initial transaction, Foncière des Régions intends to support Motel One in its development, as we have done with our other hotel partners over the past 10 years, such as Louvre Hotels Group, B&B Hôtels, and more recently, Meininger,' commented Gaël Le Lay, Deputy CEO Hotels & Service sector.

The announcement follows FdR's launch in December last year of a €400 mln strategic investment partnership with Meininger Hotels to support the hotel brand's expansion across Europe.

FdR, through its 28%-owned subsidiary Foncière des Murs, has formed a commercial partnership with Meininger Holding under which Meininger will source assets to be acquired by FdR and leased to Meininger itself.

Target cities include Amsterdam, Barcelona, Brussels, Berlin, Geneva, Hamburg, Frankfurt, London, Madrid, Milan, Munich, Paris, Rome, Vienna and Zurich, the companies said in a statement.

Over the next four years, the JV could translate into up to €400 mln of hotel investments.

Meininger is a subsidiary of Holidaybreak, a specialist travel group which in turn forms part of Prometheon Holdings, itself part of Bombay and Luxembourg-listed Cox and Kings Ltd. Founded in 1999, Meininger currently operates 7,089 beds and 2,093 rooms in 16 hotels across 10 European cities.

EUROPEAN HOTEL EXPANSION
The partnership with Motel One and Meininger are part of FdR's growth plans in the European hotel sector.

PropertyEU announced last year that Foncière des Régions was working on the launch of a new subsidiary focusing on European hotel properties. The new company is being created to follow the group’s hotel partners – which currently include NH Hoteles, Louvre Hotels, Pierre & Vacances and B&B Hotels - in their expansion across the continent through both acquisitions and new developments.

‘We are going to adapt ourselves to our operators which are increasingly looking for an asset-free strategy. The new dedicated vehicle will have third-party equity and will be a consolidated subsidiary with a focus on budget hotels in growing tourist cities such as Berlin, Frankfurt, Amsterdam and Barcelona,’ Dominique Ozanne, CEO of FdR’s hotel unit, told PropertyEU. The focus will be on hotels with margins (EBITDA) of over 30%, he added.

It is understood that FdR’s partners in the existing hotel business FdM will participate in the new company with similar stakes. They include insurers Generali (20.5%), Predica (15%), ACM Vie (14.3%), and Cardif Assurance Vie (10.2%).

‘It had to be a strategic decision for our investors to participate in this new investment strategy,’ Ozanne commented. ‘They are used to real estate leases and not to taking risk in an operating company, which in a way is the case for hotels. But this sector also allows them to increase profitability.’ Typical hotel management contracts which regulate the relation between the landlord and the hotel manager, include a 5% fee on the asset’s turnover and an 8% fee of EBITDA. Investment yields are at over 7% in the sector.

Earlier in 2014 the company, which manages a €3 bn portfolio of 404 hotels, already signed a partnership agreement with B&B for the financing of nine new hotels in Germany over the next three years. The new B&B hotels, representing 900 rooms located in town centres of major German cities, are due to open by 2016.

Last summer, Foncière des Régions' hospitality arm also made its first acquisition in the Netherlands with the purchase of the four-star NH Amsterdam Centre hotel from NH Hotel Group for a total of €48 mln. The deal allowed FdM to secure a new hotel partner and advance its strategy to develop the business across Europe.

Ozanne: ‘We were convinced in 2005 that we could apply the FdR partner strategy to hotels as well because operators were looking for investors to buy their assets. Today we are one of the few hotel-focused investors in Europe and the only one that is listed.’

Commenting on the rationale for the planned expansion in the sector, Ozanne said a number of factors contribute to making now a good time to act. ‘Hotel companies are expanding and on a global basis, tourism is booming in Europe. Plus, there is much more interest and liquidity from institutional investors than in the past.’