An attractive exchange
Through its subsidiary Covivio Hotels, Covivio owns 54 hotels that are let to AccorInvest under long-term variable rent leases based on revenues. AccorInvest owns the business assets for these hotels and has signed long-term management contracts with the Accor Group.
The consolidation operation would take the form of an exchange of business assets, currently held by AccorInvest, for hotel premises owned by Covivio Hotels. Following this transaction, Covivio Hotels would own 24 hotel operating properties and AccorInvest would own 10. The agreed value of the properties transferred to AccorInvest represents around €210 million, while that of the business assets acquired by Covivio Hotels is around €260 million. Based on 2022 figures, the assets transferred to AccorInvest represent annual rental income of €9 million, while the business assets acquired by Covivio generate EBITDA of €25 million.
A further step taken for joint-venture hotel real estate
Covivio Hotels is also joint shareholder and asset manager for a further 60 hotels let to AccorInvest and held via two joint ventures, established in 2010 and 2014 respectively: one is 80% held by Crédit Agricole Assurances and 20% by Covivio Hotels, while the other is held by la Caisse des Dépôts, Société Générale Assurances and Covivio Hotels. An exclusive agreement has also been signed with a view to consolidating the property and business assets of 25 of these hotels: 19 hotels for the joint ventures and six for AccorInvest.
These consolidation transactions for Covivio Hotels and the joint ventures represent a total of €390 million3 in hotel properties transferred, identical to the value of the business assets acquired, thus making the transaction cash neutral. Upon completion, Covivio Hotels and its partners will have consolidated ownership of 43 hotels and AccorInvest 16 hotels.
Hotels: a dynamic and resilient sector
This deal will take place in a context where the European hotel market has once again shown its ability to overcome crises, ensure long-term performance and adapt to new expectations.
Created in 2005, Covivio Hotels has constantly expanded its portfolio in terms of segments, operators and management methods. As such, the Group has developed expertise in operating property management (currently 23% of the portfolio) over a ten-year period through structuring acquisitions in several countries, including Germany, France and Belgium.
Through this transaction, Covivio Hotels intends to increase its capacity to directly influence portfolio performance by repositioning some hotels it has held for almost 20 years in order to leverage their considerable growth potential.
An operation intended to launch a new growth cycle for Covivio Hotels
The deal would therefore enable Covivio Hotels and its partners to acquire business assets in major tourist areas with considerable potential for value creation through repositioning and management optimisation. Some of these hotels would remain under the Accor brand (under management or franchise agreements), while others may be rebranded.
This accretive strategic move would mark a new step in Covivio’s development in the hotel sector towards a more diversified model (leased assets, operating properties). On a pro forma basis following this transaction, Covivio Hotels’ revenue structure would comprise 54% fixed revenues and 46% variable revenues (mainly EBITDA from operating properties, whereas the proportion of variable rents would drop to 7% from the current 20%).
The operation will shortly be submitted to the Covivio and AccorInvest Social and Economic Committees for the information and consultation process and is also subject to certain conditions precedent and the completion of the customary due diligence procedure. It is set to be completed during the second half of 2024.
This project to consolidate the business and property assets of high-potential hotels is a unique opportunity to accelerate the value-creating asset management of our hotel portfolio. By leveraging our real estate and hotel expertise, we aim to reposition some of these hotels to meet changing customer expectations and increase their profitability.Tugdual Millet
CEO Hotels, Covivio