Invesco launches second pan-European hotel fund

Invesco Real Estate has announced the launch of a second pan-European hotel fund with an exclusivity agreement to purchase a EUR 168 mln seed portfolio. The seed portfolio has been secured by Invesco Real Estate’s specialist hotel team via its relationship with major international hotel operators, Simon Redman, head of product management, said on the first day of EXPO REAL in Munich.

‘We hope to raise EUR 350 mln to EUR 500 mln for the new fund which will give us firepower of between EUR 750 mln and EUR 1 bn,’ he said. The second fund is targeting total returns of 12% over a seven-year period. This compares to a targeted return of 11% for its first hotel fund which runs until 2016. That fund closed in November 2006 with EUR 350 mln of equity and today represents a pan-European, multi-brand portfolio of 16 mid-market hotels across nine countries with a gross asset value in excess of EUR 650 mln.

The launch of the new hotel fund follows a spate of hotel deals by Invesco in recent weeks. In mid-September, the fund manager acquired the Novotel in Munich and the Mercure Zabatova in Bratislava.

And at the end of last week, it added the Mercure Grand Hotel Biedermeier in Vienna to its portfolio. In total, Invesco has made real estate acquisitions worth some EUR 1.2 bn so far this year.

‘This is a good time to invest in hotels,’ Redman said. ‘Core offices are selling for yields below 5% whereas core hotels are selling for 6% to 7% or higher. We bought the Mercure hotel in Bratislava for a yield in excess of 9%.’ Invesco invested only in leased hotels, not in management contracts, he pointed out.

Redman called the European hotel market ‘immature’, but said that the market risk is very low ‘Many of our first fund investors have shown interest in our second fund and we’re also seeing a high percentage of interest from new investors,’ he said.