LONDON—Principal Real Estate Europe has confirmed the exchange of contract for the sale for $594.19 million (€545 million) of its remaining portfolio of 11 high-quality, city-center hotels in major European cities in its Principal Hotel Immobilien Spezial Fonds to AXA Investment Managers—Real Assets (AXA IM – Real Assets), which has acquired the portfolio on behalf of clients in an off-market transaction.
The portfolio being sold comprises more than 2,300 rooms in seven hotels in Germany, including the Mondial Hotel am Dom MGallery in Cologne; the NH Hotels in Duesseldorf and Cologne; two Mercure Hotels in Berlin and Hannover, the Intercity hotel in Leipzig and the Steigenberger hotel in Kiel, as well as four hotels in other major European cities like the Hilton Danube hotel in Vienna; the Ibis hotel The Hague City center; the Lux Hotel Lisboa Park; and the NH Hotel Turin Centre. The closing of the transaction is expected in Q4 2019.
This transaction will conclude the disposal of the entire portfolio of Principal, Europe’s first hotel real estate fund, which first closed in 2012, acquired 16 hotels until 2016 and started a disposal process including, among others, the sale of three hotels in Amsterdam, Frankfurt and Nuernberg in 2018.
In the eighth year of this fund’s life, this portfolio sale to AXA IM – Real Assets will mark the conclusion of the fund’s investment cycle, which since 2012 consistently exceeded annual distribution targets and based on the disposal proceeds from the sale of the entire hotel portfolio including this latest portfolio transaction far exceeded its IRR targets. These results validate the fund’s core+ strategy focused on the acquisition of three to four well-located, established city-center hotels in major European cities with long-term leases with strong well-known hotel groups, according to the company. This strategy was supported throughout the fund’s life by various value-enhancing asset management initiatives such as limited refurbishments and lease extensions, which along with good hotel market and asset selection, as well as attractive financing conditions throughout the investment period, allowed it to achieve excellent returns.
Jochen Schafer-Suren, CEO of Principal’s hotel and leisure division, said: “At Principal, we are proud of the results of our first-ever hotel fund product, which with this transaction will come to its successful conclusion as we will unwind the fund in early 2020 and return capital and profits to our institutional investors. It highlights the expertise of our strong team of seven dedicated hotel real estate specialists to develop well-designed hotel real estate investment strategies, select attractive hotel markets and assets, execute effectively acquisitions, financings, and asset management initiatives all the way to managing eventual disposals strategies. After this very successful first Principal hotel fund we will focus on investing over $435.98 million (€400 million) of capital available for new hotel investments of our existing second hotel fund focused on value-add hotel investments across Europe. Furthermore, we will leverage our expertise in hotel real estate, which attracts more and more investors due to its attractive long-term income generation, by developing new well-designed hotel real estate investment strategies in Europe and the U.S. as markets mature and evolve to serve investors in delivering attractive returns with institutional-type, high-quality hotel assets and risk return profiles.”