Covivio, through its subsidiary Covivio Hotels, has acquired from AXA Investment Managers – Real Assets, on behalf of one of its clients, a 32% stake in a portfolio of 32 Accor hotels in France and Belgium for €176 million including duties. This strategic portfolio, valued at €550 million, will be jointly owned with the Caisse des Dépôts and Société Générale Assurances, which are already long-standing shareholders. Covivio will manage this portfolio.
A high-quality portfolio, predominantly based in Paris
This transaction will enable Covivio to strengthen its presence on the hotel market in France, the world’s leading tourist destination (almost 90 million international tourists in 2018), and especially in Greater Paris where a record 35 million overnight hotel stays were recorded in 2018 (+3.6% year-on-year).
The portfolio, comprising 30 assets in France and 2 in Belgium, for a total of 6,221 rooms, has the benefit of strategic locations : 43% are in inner Paris, 24% in Greater Paris, and 33% in the centre of major French and Belgian cities. The hotels are operated under mid-range (Mercure and Novotel) and budget chains (mainly Ibis and Ibis Budget).
These assets offer good levels of profitability with an average EBITDAR margin above 30%.
Firm leases are already in place with Accor with a residual term of 6.5 years. The rental income arrangement, 100% variable as a percentage of hotel revenues, will enable Covivio to fully benefit from any improved performances in the future.
Significant growth levers
The acquisition price, at €176 million including duties for 32% of the portfolio, is based on the valuation of €88,000 per room. Covivio’s aim is to increase rental income between now and 2021, notably as a result of recently financed work on the portfolio (€29 million invested between 2017 and 2019 by the tenant), which should help boost hotel revenues. And the results have already spoken for themselves in early 2019, with +5% growth in revenues over one year to the end of April. The target net yield of 5.3% in 2021 is based on a low rental income of €4,700 per room, thus offering significant potential for growth.
“Following this acquisition, Covivio will manage over 25,000 rooms operated by brands of the Accor group, Europe’s leading hotel operator. With its vast experience in the hotel industry, Covivio will replicate the strategy implemented ten years ago on its shared portfolio with Accor and identify the key value drivers with each operator”, explained Dominique Ozanne, Deputy CEO of Covivio.