The total volume of hotel transactions in Scandinavia reached approximately €414 million ($560 million) during 2012, which represents a 248% year-on-year increase over 2011’s volume of approximately €119 million ($161 million) in transactions.*
The total volume in 2012 was strengthened by four transactions above the €45-million ($61-million) mark, including the forward-purchase sale of the Clarion Hotel & Congress Malmö for a reported €109.5 million ($148 million).
More than 75% of transactions were contracted during the first six months of the year. The most active market (with 67% of all transactions in Scandinavia) was Sweden.
Institutional investors were particularly active, with KLP Eiendom and AFA Fastigheter coming out as the leaders in regards to single-assets acquisition with total transactions of more than €100 million ($135 million) each.
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As for portfolio transactions during 2012, three transactions—for a total of more than €100 million ($135 million)—were traded, as illustrated below:
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The portfolio acquired by Pandox includes three hotels in the greater region of Copenhagen (i.e. Scandic Hvidovre, Scandic Glostrup and First Hotel Copenhagen), as well as one hotel in Kolding (i.e. Scandic Kolding).
The NP Hotels portfolio includes Scandic Front Hotel and First Hotel Kong Frederik, which are located in the city center of Copenhagen. The Formule One hotels are in regional locations in Sweden.
2006-2012
2010 saw the highest total volume of hotel transactions, which includes both single-asset and portfolio trades. At nearly €1.2 billion ($1.6 billion), deal volume—which was led primarily by portfolio transactions—during that year was considerably higher than the second most-active period of 2012.
2012, however, saw more single-asset deal volume at €310 million ($419 million).
The seven-year period saw some notable trades. The landmark property Hotel D’Angleterre (Copenhagen) changed hands twice between 2007 and 2011. The property was sold to Nordic Partners, an Icelandic investment company, by the Remmen Foundation in 2007, and the Remmen Foundation bought it back in 2011. Hotel D’Angleterre is currently undergoing a total renovation reported at more than €70 million ($95 million).
Another landmark property that changed hands was the Radisson Blu Royal Viking Hotel (Stockholm), which RBS Nordisk Renting sold to KLP Fastigheter in 2009 for approximately €112 million ($151 million).
The graph below illustrates that Scandinavia did follow a similar pattern as the rest of Europe.
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Most active players
Very few global investors were active in Scandinavia between 2006 and 2012, as both buyers and sellers were mostly either Scandinavian or Finnish-based.
Why? The market is primarily lease-driven, which requires investors with strong knowledge of Scandinavian operating models and the challenges that go with them.
The strong presence of regional hotel property companies, such as Pandox, as well as dominance of local/regional hotel operators, only contribute to the near monopoly of Scandinavian investors.
Furthermore, prime assets that would typically appeal to international investors are being driven by local competition as local investors still acquire prime properties at very low yields compared to yields elsewhere in Europe, which makes it very challenging to international investors.
During 2012, hotel property companies as well as institutional investors were the front-runners in terms of volume. They acquired 70% of all single-asset- transactions and two out of three portfolio transactions. Institutional investors shelled out the most capital for single-asset transactions (68% of the total volume), whereas hotel property companies were the leaders for portfolio transactions.
Some of the main players in the Scandinavian market include, but are not limited to:
- Hotel property companies: Pandox, Home Properties, EVENT Holding GmbH & Co., Host Hoteleiendom and Thon Hotels
- Institutional investors: DNB, KLP Eiendom, AFA Fastigheter.
- Private equity: Blackstone, Patron Capital Partners, Solstra Capital Partner and Sveafastigheter/Midstar.
- Hotel Funds: Invesco European Hotel Real Estate Fund and DEKA Immobilien GmbH.
- Other: Balder, CapMan, Wenaasgruppen, Eiendomsspar ASA
Outlook
The availability of financing has decreased since 2008. Pre-financial crisis, investors were used to higher leverage levels with both senior and junior debt—especially in Denmark.
Today, senior lenders have become more conservative and, consequently, the number of hotel investors has decreased significantly. Although not nonexistent, debt financing remains scarce; senior debt appears to be easier to get, but junior debt remains a challenge.
So, where is the transaction market in Scandinavia heading and where will opportunities be in 2013 and beyond?
Opportunistic investments likely will increase in the next year or so. Banks probably will be more active in divesting distressed hotel assets, which likely correlates with an increased interest in opportunistic investments.
In conclusion, the Scandinavian hotel transactions market is expected to display a modest growth in 2013. The Danish hotel market has seen limited transactions since 2006; however, it is expected to increase at a slightly higher pace. The Norwegian and Swedish hotel transactions markets, meanwhile, are expected to show a similar pattern to that of 2012 for the upcoming year. But that is dependent on assets being brought to market that appeal to the most active investors.
Karine Bourget holds a MSc in International Hotel & Tourism Management with a Major in Finances from Oxford Brookes University. She has gained several years of hotel operational experience having worked in different hotel chains in Canada. She currently works as a Hotel & Leisure Consultant within the Investment Advisory division of Nordic Hotel Consulting. She can be reached at kb@nordichotelconsulting.com.
NHC is the leading hotel consulting firm with a focus on Scandinavia and has offices in Copenhagen, Århus, Oslo and Stockholm. The NHC Group offers a wide range of services and is separated in three distinct divisions: consulting, investment advisory and asset management. NHC has carried out some of the largest and most prestigious hotel projects in the Nordics and in Europe and serves as an advisor to some of the industry's leading players. It primarily represents developers, investors and banks.
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