GlobalHotelNetwork.com: Where do you see the best opportunities for hotel investment or development?
Larissa Esser: Overall commercial real estate investment volumes across Europe declined in Q1 2019 compared to the same previous-year period (a six-year low), mainly resulting from political uncertainty and slow economic growth coupled with high prices and constrained availability of product. Yet, a number of markets and product types continue to buck the trend; especially in the alternatives / niche segments as investors are voting their capital in favour of these asset classes. We also see institutional investors gradually moving up the risk curve and showing more flexibility in terms of operational structures, moving away from pure fixed-income structures. This can be achieved for example through collaborations with third party operators which can satisfy specific fund requirements.
Big-ticket, high-quality real estate in key Western-European cities / A-locations continue to be highly contested, given the current weight of core capital in the market. In addition, alternative deal structures such as credit and ground lease bifurcations are gaining popularity, particularly in the UK as it allows investors to take advantage of the favourable hotel operating business dynamic whilst assuming a low risk position. We also see an increasing number of investors willing to explore development deals, either on a forward funding or turnkey basis. Development deals allow these investors to gain access to mature markets where pricing is peaking, including London and Amsterdam, whilst still achieving target returns.
As core assets price at record levels in most mature markets across Europe, we experience investors turning to Southern and Eastern Europe in search of yield. Spain and Italy are increasingly the forefront of investment activity, and investors’ focus increasingly falls on resort and leisure assets in Mediterranean markets. This development is in part driven by the perception that leisure travel is more resilient during a downturn. At the same time, the financeability of this asset class is significantly improving.
The European hospitality sector still offers substantial opportunity for consolidation. Hence, platforms are anticipated to remain sought after either as a “bolt on” to existing structures or an opportunity to gain access to key strategic markets, including Germany and the Netherlands.
Larissa Esser is a Senior Vice President at Eastdil Secured, specifically focused on operational real estate including hotels, hospitality and co-working. She was influential in growing the European hospitality business at Eastdil Secured, who since 2015 have transacted 442 hotels totalling just under €15 billion. Larissa has over 8 years of experience in the real estate industry with a prior hotel operational background, enabling her to seamlessly combine global capital market with real estate fundamental knowledge.
She advised on (and continues to be involved in) over €2 billion of hospitality deals in the Netherlands alone in the past 24 months. Larissa focuses her efforts on creating custom-crafted strategies for an array of distinguished clients, combining conventional real estate brokerage with corporate finance expertise including equity sales, financing, joint-venture structures and corporate and M&A transactions.