China and Middle East drive record hotel investments
2015 is on track to be a record year for foreign investment into hotels, driven by acquisitions made by investors from mainland China and the Middle East, a new report has revealed.
Jones Lang LaSalle‘s (JLL) Hotels & Hospitality Group has announced that global hotel transactions reached US$42 billion in the first half of the year.
Edition New York was recently sold to the Abu Dhabi Investment Authority (ADIA) for US$343 million
And while American private equity funds remain the largest source of capital flowing into hotels, JLL reports a significant rise in transactions involving mainland Chinese and Middle Eastern investors, who invested US$9.8bn in global hotels in the first half, up more than 300% year-on-year.
“One of the biggest trends of 2015 is the surge in Middle Eastern and mainland Chinese investment into hotels globally. This is despite some underlying concerns across the globe, such as the Greek debt crisis and the recent fluctuations in the Chinese stock market,” said Mark Wynne Smith, global CEO at JLL Hotels & Hospitality.
“At the start of the year we predicted full-year global hotel transaction volumes of US$68bn. We’ve achieved 60% of this already in the first half of 2015 and, if momentum continues in the second half of the year, we could surpass our forecast.”
Mark Wynne Smith
Total foreign investment into hotels in the Americas in H1 2015 hit US$4.2bn, up 176% on the same period in 2014. Of this total, US$4bn came from mainland Chinese and Middle Eastern investors. Key transactions include the Edition New York (US$343 million to ADIA) and the Baccarat Hotel & Residences NYC (US$230m to Sunshine Insurance Group).
Europe, Africa and the Middle East (EMEA) received the largest amount of foreign hotel investment in H1 2015, at US$9bn. The largest deal in Q2 2015 was the sale of the Maybourne portfolio in London to a Middle Eastern investor for US$2bn.
“Portfolio sales are increasingly popular in EMEA and accounted for 65% of the total transaction volumes,” commented Wynne Smith. “This tells us that investors are looking for scale in what’s becoming a very competitive market.”
Single asset transactions dominated the Asia Pacific market, accounting for 82% (US$3bn) of total deal volumes. Sovereign wealth funds were the most active buyers in Q2 2015; the largest deal was the 50% sale to ADIA of three hotels in Hong Kong (Renaissance Harbour View, Hyatt Regency Tsim Sha Tsui and Grand Hyatt) worth around US$1bn.
The largest deal volumes in H1 2015, including both domestic and overseas investments, were witnessed in the Americas, where transactions surged 73% to US$24bn. EMEA was up 55% to US$15bn, whilst the Asia Pacific region saw a slight decline, down 6% to US$4bn