Union Investment has established a new institutional fund to tap into the growth in the budget and midscale hotel segment.
Union Investment has established a new institutional fund to tap into the growth in the budget and midscale hotel segment.
UII Hotel Nr.1 is aimed at institutional investors with a long-term investment horizon such as banks, occupational pension schemes, insurance companies and pension funds.
The target size is €250 mln and the anticipated term of the fund is 10 years.
The fund will focus on budget and midscale hotel real estate with long-term leases. Geographically, investment will be focused on Germany (minimum of 60%), France, Belgium, the Netherlands, Luxembourg, Austria, the UK and Poland.
The borrowing ratio is limited to 40%.
'Branded budget and midscale hotels are experiencing significant growth,' said Frank Billand, a member of the management team at Union Investment Real Estate. 'The sector has shown itself to be particularly crisis-resistant and provides stable returns and strong inflation protection thanks to long-term leases. Additionally, hotel property has low correlation with other types of investments.'
Union Investment has a diversified hotel portfolio that encompasses 22 different hotel brands and is currently worth €1.7 bn. Over the past three years, Union Investment has invested some €400 mln in new hotel properties for its funds, of which around €150 mln was committed to the budget and midscale segment.
