Hamburg-based Union Investment Real Estate has expanded its €2.5 bn hospitality portfolio to the US by buying a development project in Boston for $180 mln (€164 mln).

Hamburg-based Union Investment Real Estate has expanded its €2.5 bn hospitality portfolio to the US by buying a development project in Boston for $180 mln (€164 mln).

The deal comes shortly after Union Investment, which has been investing in European hotels for 40 years, disclosed in an interview for the December edition of PropertyEU Magazine that it intended to grow and diversify by entering the US market.

The first step came on Tuesday with the announcement of the acquisition of the Godfrey Hotel Boston development for $180 mln (€164 mln).

'The international growth of our hotel investment activities is based on a clear strategy of expanding our hotel portfolio and diversifying even further across all asset classes,' said Andreas Löcher, head of investment management Hotels at Union Investment Real Estate.

'Our long-standing presence in the US office market and our strong commitment, both in metropolitan areas and in gateway cities, is successfully opening doors and enabling us to tap into attractive hotel markets in North America,' Löcher added.

Deal structure
The transaction takes the form of a sale-and-lease/manage-back deal with the vendor, a joint venture of Chicago-based private equity real estate firms Oxford Capital Group and Walton Street Capital. The hotel is being added to Union Investment's UniImmo: Europa open-ended real estate fund.

The transaction is structured as a 25-year lease covering 100% of the total rentable area of 12,500 m2 based on an annual fixed rent. There is also a profit share component to emphasise the alignment of interests between Oxford Capital, Walton Street Capital, and Union Investment.

Growing neighbourhood
The Godfrey Hotel Boston is a 242-room high-design, lifestyle hotel located in Boston's Downtown Crossing neighbourhood. Oxford Capital affiliate, Oxford Hotels and Resorts, will manage the hotel when it opens in January 2016.

The vendors said that the hotel is situated in the heart of Boston’s business district and benefits from its central location in the immediate vicinity of the theatre district and the sea port. 'Downtown Boston/Downtown Crossing is in the midst of a dramatic transformation, as reflected in the many new high rise residential and retail developments as well as significant refurbishments of office buildings, apartments and retail properties,' Oxford Capital and Walton Street said in a statement.

John Rutledge, founder, president and CEO of Oxford Capital Group: 'After thoroughly vetting a large number of interested investors and suitors, we chose Union Investment for a variety of reasons, including its commitment to a highly professional transaction process, the scale and quality of its organisation and people, and its competitive pricing. And as always, we’re looking for win-win relationships with our investors.'