Covivio’s 8-hotel portfolio buy boosts Europe presence
Covivio’s 8-hotel portfolio buy boosts Europe presence
09 JANUARY 2020 9:54 AM

French real estate investment trust Covivio makes another splash in Europe with a €573-million ($640 million) buy of eight assets leased to NH Hotel Group.

PARIS—French real estate investment trust Covivio has opened its wallet again, this time to buy eight hotels with a combined 1,115 rooms in key European cities, according to sources.

The portfolio is the former stable of hotels managed under the Dedica Anthology umbrella, owned by Milan-based investment firm Värde Partners.

Covivio’s investment totalled €573 million ($640 million), which includes capital expenditure, for a yield target of 5.8%, including 4.7% minimum guaranteed yield, according to an accompanying news release.

The eight properties in the portfolio are:

  • 238-room Palazzo Naiadi (Rome);
  • 185-room New York Palace (Budapest);
  • 152-room Carlo IV (Prague);
  • 152-room Hotel Plaza (Nice, France);
  • 138-room New York Residence (Budapest);
  • 100-room Hotel Bellini (Venice);
  • 86-room Palazzo Gaddi (Florence, Italy); and
  • 64-room Grand Hotel Dei Dogi (Venice).

Private-equity firm Värde bought the portfolio from Italian firm Gruppo Boscolo—the properties were branded Boscolo—in April 2017. It spent at the time €350 million ($389 million) to acquire 90% of the Italian company’s debt.

In 2018, Covivio made its first splash outside of France with a purchase of 14 United Kingdom hotels from Starwood Capital Group, which included 10 of its assets operating under the Principal Hotel Company flag.

In that deal, Covivio brought in InterContinental Hotels Group to operate the hotels under a long-term lease agreement, but this time it has turned to Spanish operator NH Hotels, which is majority-owned by Thai hotel firm Minor International.

Covivio also has purchased a 120-room hotel in Dublin for €45.4 million ($50.43 million) with a 6.4% yield, and plans to add 10 rooms to the property.

Dominique Ozanne, deputy CEO of Covivio, said the Värde-NH deal is almost identical to the Starwood Capital-IHG deal.

“We have been speaking with Värde for a long time. We did what we did in the U.K, where at the same time we bought the PropCo and the OpCo and, exactly as we also did, signed a long-term lease with (a hotel operator),” Ozanne said.

He added that Covivio’s focus has not changed in the two years since the Principal deal, although the number and geography of markets the company is concentrating on have grown.

In 2018, Gaël Le Lay, also deputy CEO at Covivio, said the three-prong approach was to be agile, with the ability to have lease, management and franchise agreements; to grow in the most attractive of Europe’s cities and gain critical size across the continent to better attract development partners and operators; and to increase its exposure in the upscale segment to better balance its portfolio of economy, midscale and upscale hotels.

“We are exactly in line … to develop the company across Europe in its main markets, although we also now are focusing on East European and Italian markets where we see growth and (revenue per available room) opportunities as very good,” Ozanne said.

Anantara in Europe
Ozanne mentioned the low rate of brand penetration in Italy as another positive aspect of the deal.

“There are not a lot of brands there, but NH does have some dominance and a very good track record. We already own 11 hotels that (NH) operates, and we see opportunity for more consolidation,” he said.

Also as a result of the deal, Minor’s Anantara brand will debut in new European markets. Currently, the Asia-dominated brand only has two assets in Europe, one each in Portugal and Spain.

Before it bought NH, Minor moved into Europe with its acquisition of Portugal’s Tivoli Hotels in February 2016.

“We want to develop Anantara in Europe, and the (newly bought) hotels in Budapest, Nice and Rome will be renamed. We see that brand has done a lot in Asia,” Ozanne said.

The other hotels in the deal will likely be branded NH or NH Collection, he said.

Ramón Aragonés, CEO of NH, reiterated comments in NH’s news release on the deal, telling Hotel News Now it is a continuation of the advantageous partnership formed with Covivio in 2014 for properties in Germany and The Netherlands.

Philippe Doizelet, hotel consultant and managing director for France at Horwath HTL, said Covivio has become the No. 1 hotel owner in Europe.

“They built up their initial portfolio from a sale and management (leaseback) with Accor in 2005 or 2006. What is remarkable … is that NH will pay leases and not manage the hotels. It is a hotel real-estate deal above all,” Doizelet said.

Eastern Europe is proving attractive to Covivio, Ozanne added.

“It looks like five years ago in Germany, and the average price increases (for Eastern European hotels) will prove really important,” Ozanne said. He added the timing of the Dublin purchase was based on convenience and opportunity.

Ozanne and Covivio remain buoyant about the company’s U.K. portfolio.

“We are very happy there. There is a lot of potential in London. Yes, we will keep an eye on Brexit, but London will always be London,” Ozanne said.

Covivio has €23 billion ($25.69 billion) of European assets and €6 billion ($6.7 billion) of development projects in the continent, according to the company figures.

Värde returned a phone call but referred to its press release on the deal.

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