LONDON—Invesco Real Estate will look to put the finishing touches on its second hotel fund this year.
Invesco earlier this month announced the closing of its second fund, which included approximately €200 million ($263.7 million) of equity. Including leverage and the assets already within, the fund could grow as large as €400 million ($527. 3 million). Invesco is likely to add three or four more properties to the fund, said Marc Socker, senior director, hotel fund management.
The company is looking across Europe to find mid-market, branded properties to add to the fund, he said. The fund already contains eight hotels, which were bought in Germany, Austria and the Netherlands.
Invesco is looking for its deals in Europe’s capital cities and the No. 2 cities in each country, Socker said. “Generally speaking, we should be seeing pretty decent (revenue-per-available-room growth)” in those markets, he said. RevPAR growth in those markets is generally in the mid-to-high single digits, he said.
Socker declined to say how much the fund could spend on its remaining hotel investments. Invesco’s first fund contained 17 hotels, utilizing the same acquisition strategy as the current fund.
The first fund closed with approximately €700 million ($923.3 million) in investments spread across nine European countries.
‘A growth industry’
Socker said the European transactions market is easing, though it’s not back to the level it was four or five years ago. Still, there appears to be a heightened willingness on the part of sellers to sell, and lenders are gradually returning.
“There are opportunities out there,” he said. “The market is starting to open up a bit.”
Also easing is the equity-raising process, Socker said. Investors are beginning to understand the value the hotel sector can bring.
“Travel and tourism is a growth industry,” he said.
Socker said he is largely optimistic for the sector’s outlook in Europe. Occupancy is strong, supply is low and rate is leading RevPAR gains. On top of that, the corporate traveler is hitting the road more often.
Most recently, the European hotel industry showed mixed results when measured in euro terms, according to STR Global, sister company of HotelNewsNow.com. During February, occupancy across Europe increased by 2.7% to 59.2%; average daily rate dropped by 1% to €95.40 ($125.80); and RevPAR grew by 1.7% to €56.47 ($73.87).
The prospect of improving consumer confidence and the slow recovery of the global economy paint a brighter picture for hotels as far as 2014 is concerned, Socker said.
“2014 will be a pretty strong year,” he said.