Schroders has completed the first closing of its debut hotel fund, with €300m (£255m) of equity commitments.
Schroder European Operating Hotel Fund I has gained commitments from European institutional investors and family offices. It is structured as a closed-end limited partnership domiciled in Luxembourg, with a three-year investment period and eight-year life.
Its investment strategy focuses on creating a diversified portfolio of between 10 to 15 hotels by acquiring, refurbishing and improving existing three-, four- and five-star hotels in Western Europe.
The fund will own both the real estate and the underlying operating business of each hotel. Schroders’ real estate hotels arm will either manage each property independently, or work with an operator under a franchise or hotel management agreement.
Frederic de Brem, head of Schroder Real Estate Hotels, said 60% of the €500m target fund size has already been raised, with “several more investors in the process”.
Consequently, he expects the fund will close in “a few months” with around €800m of capital, including leverage of 40%, and a “strong pipeline including one property already in exclusivity”.
Georg Wunderlin, global head of private assets at Schroders, said: “At a time when yields are at an all-time low across many property sectors, we believe that this segment of the hotel market has the capacity to generate attractive, risk-adjusted returns for investors looking for alternative, non-mainstream investment opportunities.”
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