Institutional investor BVK is partnering with Germany’s largest hotel developer GBI to check into the ‘secure and predictable’ hotel segment.
German project developer GBI has won a mandate to invest half a billion euros in hotel properties in Germany, Austria and Switzerland on behalf of institutional investor Bayerische Versorgungskammer (BVK) via a fund launched by Universal-Investment.
The new hospitality-focused fund will seek to create a high-quality portfolio with a long-term investment horizon, according to both firms. GBI, Germany’s largest hotel developer, will manage the assets. 'Hotel properties are highly attractive for long-term-oriented investors,' said Christoph Geirhos, head of real estate purchases and sales at BVK. 'The long-term operator agreements in particular provide a high degree of security and predictability.'
BVK plans to invest around €500 mln initially, including the fund's first deal, the Lindner Hotel Am Michel in Hamburg, purchased at the start of the year. 'This 4-star hotel in a prime city location in one of the most dynamic hotel markets in Germany is a fitting start for the fund,' said Simon Behr, director of fund management & transaction at GBI. Lloyd Fonds was the vendor after a 10-year hold period.
The fund is now seeking comparable existing properties in the 2- to 4-star category in Germany, Austria and Switzerland, not only in top locations such as Hamburg, but also in attractive locations in B and C cities. ‘A variety of B and C locations offer a healthy mix of business and leisure tourism, and tend to experience a stable growth of overnight-stays and RevPars,’ said Jessica Kronseder of BVK, who will be responsible for the fund.
Although the fund will not shy away from development projects, Behr said it had purposely debuted with the purchase of a standing property to ‘kick off with operational liquidity’.
‘The Lindner hotel opened nearly 10 years ago,’ Behr noted. ‘It’s important for a new fund to get going in terms of cash flow, and hard to find hotels in prime city centre locations which offer that, so we were lucky to make this deal, with an experienced operator on board. We actually built the property as developer so we know it inside out.’
He added: ‘Finding more existing properties would be very good for us, but it’s not easy. Especially the top seven cities in Germany are now flooded with foreign money competing for existing hotels. Buying developments is a bit easier, as overseas investors tend to shy away from the risk.’
According to Kronseder, both ‘the very good fundamentals of the German and German-speaking market in general and the hotel market in particular’ and ‘steadily growing numbers of overnight stays, as well as locations with low proportions of appropriate brand hotels’ drove the decision to have a hospitality focus. ‘As a conservative and long-term and oriented investor, we will always focus in investing in products with outstanding operators, sustainable concepts and healthy lease agreements to achieve predictable and stable returns,’ she added.
‘BVK has been monitoring the hotel market very closely for several years. The first investment took place in 2017 with the Moxy development in Hamburg, which is held directly in one of our pension funds. So, hotels are not a completely new asset class for us,’ Kronseder added.
In addition to traditional hotels, target properties will include assets in the long-stay sector, noted Behr. ‘Serviced apartments represent quite an interesting market,’ he told PropertyEU. ‘There are not a lot of serviced apartment operators in the German market right now, with typical hotels making up 85% of stock, and serviced apartments less than 15%. There are operators like Adina coming up, but at current rates of undersupply, we see a big upside potential there. We’d be most likely to seek growth there in the top seven cities, although other places like Heidelberg, Freiburg, Bielefeld and Nuremburg, which attract significant commuter numbers, could be interesting.’
Size to be determined
While the fund is initially targeting €500 mln of investments, it could get even bigger, Behr said. ‘We want the fund to grow organically, so we don’t make hasty decisions and take our time to find the right assets. But after three years we will assess how the acquisitions are going, how the fund is performing, and could go up above 500 mln at a later stage.’
With assets under management of around €77 bn, BVK remains one of the most significant institutional investors in Germany.