LONDON—Invesco is raising up to €500 million (US$687.6 million) to acquire mid-market, upscale business hotels in Europe.
The fund—Invesco Real Estate Hotel Fund II—will likely have the capital raised by the end of 2011, according to Marc Socker, director of hotel fund management. The fund represents a larger capital raise than Invesco’s previous hotel fund, which raised €350 million (US$480.1 million) and closed four years ago.
Capital raised will be institutional money from investors, such as pension funds, Socker said.
“In trading across Europe, the markets are picking up,” Socker said. “There’s growth in occupancy and rate.”
European occupancy increased by 7.4% to 74.8% year-over-year in September, according to STR Global data. Average daily rate increased by 8.8% to €106.68 (US$145.18) while revenue per available room was up 16.8% to €79.78 (US$108.57).
In Europe, 90% of the markets tracked by Invesco show positive RevPAR growth, Socker said. “It’s been quite a nice rebound and we’re seeing the negotiation upward of corporate rates,” he said.
Investment profileInvesco
is hunting “good, strong brands” in Europe. Brands have not taken hold in Europe as they have in the United States, Socker said.
New supply of hotels in Europe is at an all-time low, Socker said.
“There’s a huge opportunity in the market for consolidation and conversions,” he said.
Europe’s hotel pipeline comprises 705 hotels with 120,488 rooms as of September 2010, according to STR Global. There are 310 projects in the construction phase with 56,582 rooms.
The fund is currently seeking to close on investments in five hotels. Socker declined to disclose the identity of the hotels, but did say they are located in Germany and Austria and were internationally branded.
As for pricing, Socker said the bid-ask spread is narrowing.
“It was much wider for a long time,” he said. “People are getting more sensible.”
Invesco’s current hotel portfolio includes 16 hotels, representing 3,500 rooms, in nine countries, said Transactions Manager Keith Evans. An additional 200 rooms might be added by year’s end. The portfolio includes Hilton, Marriott and other brands.
The economy
The fund’s success will hinge on continued macroeconomic improvement, Socker said.
One big contributing factor to the sector’s turnaround is the return of meetings, incentives, conventions and exhibitions business, he said.
“In terms of overall (operating performance), it’s a big improvement,” Socker said. “But it will still take us a while to get back to where we were.”