Office for lunch, hotel for dinner

More commercial real estate portfolios are changing hands than ever before as international investors rush to obtain first class assets in Europe and Budapest is getting in on the trend.

International real estate services provider JLL represented AEW Europe in the disposal of their Hungarian real estate portfolio. This transaction is the largest portfolio sale in Hungary since the global financial crisis. Parts of the portfolio include: the 44,000 sq m mixed-use MOM Park (shopping center and office space), the 27,400 sq m West End Business Center and the 13,300 sq m EMKE office building. The long-term successful cooperation between AEW Europe and JLL started with a leasing mandate for the office buildings a few years ago, long before the sale of the portfolio.

Ferenc Furulyás, Managing Director of JLL Hungary commented on the transaction:

“The sale of the AEW portfolio is of outstanding importance for the Budapest commercial real estate investment market as it is a clear sign of renewed interest from international and particularly American investors for large ticket properties and portfolio transactions. This deal is a milestone that proves that the positive momentum is getting stronger due to the improving market fundamentals in Hungary.”

The renewed investor appetite is due to improving economic fundamentals, the strong leasing market and the pricing relative to the other markets in the CEE region and in the European context. “We have been working on this transaction for more than a year but we finally reached the finish line. This transaction is a clear signal to the investment community of the return to Hungary of international institutional equity along with attractive debt terms” added Benjamin Perez-Ellischewitz, Head of Capital Markets. The total transaction volume in the first half of 2015 reached some EUR 280 million in Hungary and is expected to exceed the 2014 volumes by 20-30% this year.

Half year volumes show that 2015 is set to be a bumper year for hotel deals in the entire EMEA region (Europe, Middle East and Africa.) Transaction volumes are up 85% on the same period in 2014 with EUR13.2bn in sales. This rise is primarily driven by the UK which is pulling away as the stand-out regional leader accounting for nearly 50% of all hotel deals in the region and is up a staggering 172% on 2014.

In Germany there was a 60% increase with hotel deal volumes reaching EUR1.4 bn. The first half of 2015 has seen a significant number of single asset and portfolio transactions. The largest portfolio deal to date was the sale of 18 Accor hotels in Germany as part of a sale and franchise-back deal with Event Hotel Group for EUR150m, while the Marriott Hotel in Munich was just one of handful of single asset deals completed during H1.

Chinese at the doors

EMEA is also seeing a flux of Chinese capital enter the market. “A red-tape-laden approval process for overseas investments previously hindered Chinese investing more than USD100 million overseas. But since China’s Ministry of Commerce has changed the rules, they have effectively changed the game. Earlier in the year we predicted that in 2015, Chinese capital was expected to represent some USD 5 billion in global hotel investment. In EMEA we have already seen USD 1.9bn invested by Jin Jiang for the Louvre portfolio and more deals are expected before the year is out.