Newsletter Q1 UK 2018

Newsletter Q1 2018

Stages of maturity, hotel property investments

Hotels

Stage 3

Hotels viewed as infrastructure investments. Focus on experienced operators with strong track- record. Hotel investors’ appetite for short lease agreements and management agreements is mounting. More investors enter the market and liquidity increases.

Stage 2

Hotels run by strong operators on long lease agreements offer attractive risk-adjusted returns. Institutional investors show interest in core-profile hotel Investments. Liquidity increases and yields are driven down, always provided hotel operators are ready to enter into long lease agreements.

Stage 1

Hotels considered special- purpose assets associated with high risk. Hotels appeal to investors with substantial risk appetite and experience with owning and/or operating hotel properties.

Few buyers, low liquidity and high yields.

Source: Sadolin & Albæk

Although parts of the Danish investment property market in general are nearing the same stage of maturity as international markets, the Danish markets for logistics and hotel properties still hold a certain amount of maturing potential compared to the investments markets in e.g. Great Britain, Germany, the Netherlands or Sweden.

Against the backdrop of the currently strong momentum in the Danish investment property market, along with the bright outlook for the logistics occupational market, we believe that it is fair to assume that the investment market for logistics properties is gradually starting to climb to a higher maturity stage. Hotel property investments were a topic of much interest in 2017. Due to highly favourable trends in the Copenhagen hotel market, operators have been queuing up to expand or enter the Copenhagen market. This has aroused investors’ interest, fostering demand for prime hotel investment properties. Demand continues to be driven largely by operators’ readiness to enter into fixed lease agreements offering long non-terminability periods. However, as investors are getting a better understanding of the hotel market and learning the ropes of how to run an efficient hotel operation, we believe that the market for hotel property investments may well begin to climb the maturity scale.

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