First closing of INTERNOS’ Hotel Real Estate Fund II with €260 Million of capital for Value-Add Hotel investments
INTERNOS Global Investors, the pan-European owner managed fund manager, announces the first closing of its second hotel real estate fund with equity of €133 million from seven German institutional investors. All but one of the seven investors had already invested in Internos’ first hotel real estate fund which, with its core strategy, has consistently exceeded target returns since 2012 and recently reached AUM of €500 million .
Hotel Fund II pursues a value add strategy focused on 3-4* city centre business hotels across Europe offering the opportunity to add value at the market and asset level via renovations, conversions, repositioning or change of tenants, amongst others initiatives. Considering the targeted LTV of 50%, the initial equity allows us to acquire hotels for over €260 million.
Several hotels fitting the new fund’s investment strategy are already under exclusivity or in advanced discussions so that INTERNOS expects to deploy this initial capital over the next 12-18 months. Thereafter, similar to its Hotel Fund I, INTERNOS expects committed equity to increase significantly to allow further investments so that the Hotel Fund II’s AUM shall also reach €500 million by late 2019/2020.
Jochen Schaefer-Suren, Partner managing INTERNOS’ Hotel and Leisure d ivision, commented: “ Hotel Fund II provides investors with access to value-add opportunities at a point in the cycle where many hotels with long-term fixed income are fully valued in many markets, yet may face rising interest rates and resulting potential value impact over the coming years. In such markets, the new strategy focuses on creating value at the individual asset and market level, which can be achieved in any general market context. This highlights the need for a very experienced specialist hotel real estate fund management team to design and implement the value-add strategy at the asset level.
“With the addition of Hotel Fund II to our existing hotel funds and mandates, we offer investors attractive returns across the risk spectrum, from core / core+ through to value-add and even opportunistic hotel investments.”
INTERNOS now manages 14 hotels in its hotel real estate fund I, which has paid out over 8% cash dividends every year since 2012 and achieved an IRR of 14% by 2016, as well as four hotels representing €150 Million of AUM in its separate account hotel value -add mandate. Considering capital available in this new fund and remaining available capital from other mandates, as well as existing hotel investments, Internos therefore manages hotel investments or has capital available to deploy into hotel real estate in excess of €1 billion.