Global real estate investment manager Invesco Real Estate (IRE) has launched an open-ended fund to invest in hotels across Europe, with an initial equity commitment of €179.5 mln from 10 institutional investors.
Targeting a 6%-7% per annum gross income return, the fund is launching with a €200 mln seed portfolio of four assets in the Netherlands and Germany, with a view to growing the fund to €500 mln in the first two years. It will not invest in the UK.
'We're very excited about the launch of the new hotel fund for institutional clients, and continue to see growing interest in this sector, particularly from investors who find the long leases and strong cash flows generated by hotels very attractive,' commented Marc Socker, managing director of hotel fund management, IRE.
The launch represents the third IRE fund to focus on hotels, but is the first to be open-ended. IRE said it was responding to market appetite from professional clients and institutional investors for open-ended funds, but said the format suited hotels because of their longer leases, lower volatility and long-term income and return characteristics compared to commercial property.
The fund will focus on acquiring high quality, mid-market hotels in city centres that operate as seven-day markets, catering to business travellers in the week and tourists on the weekends.
'Investors also noticed the way hotels continued to provide a positive total return compared to commercial property during the financial crisis, and this gives them an additional degree of confidence today. The fund will target an income return which provides a premium to the long-run average income return from pan-European commercial real estate,' concluded Socker.
