The total amount of European hotel property traded this year is set to trump the £8bn sold in 2004, with almost £4bn of assets already sold or up for sale.
Deloitte partner Nick Van Marken, speaking at the International Hotel Investment Forum in Berlin last week, said 2005 would be a much stronger year than 2004 as more and more hotel companies announced major asset disposals.
“Hotel groups are increasingly ready to do asset disposals and private equity groups, with their increasing interest in the sector, are driving the market,” said Van Marken. He added that there was more than £250bn of private equity in the global market chasing acquisitions, driving activity in all sectors.
Lou Pirenc, vice-president at Morgan Stanley, said becoming “asset light” was a growing trend in the hotel industry, as demand for real estate was so strong.
He said he expected Millennium & Copthorne to be the next big company to start shedding its assets, following its sale of the Plaza in New York City for £370m last August.
Operators are also expected to bring more hotels to market now they are known to be eligible for real estate investment trusts.
But Marvin Rust, managing partner of the hospitality division at Deloitte, said he did not think UK REITS would be attracted to hotels.
“I’m still sceptical, due to the volume of money in the market at the moment, with yields dropping towards sub-6%. If you can do that kind of deal and get away with not paying much tax, I don’t see hotel REITS being attractive in the short term,” he said, referring to the expected conversion charge.
He added that most UK hotel companies were also too small to attract REITS, which are most likely to be listed entities.
References: EGi News 29/03/05
