Figures indicate bumper year for hotel deals

Estimates of a bumper year of Irish hotel purchases look set to be met, with figures showing nearly €650m having been spent on such transactions in the first nine months of the year.

The new data, published yesterday by commercial property consultant CBRE Ireland, shows that 54 hotel transactions took place in the nine months to the end of September, meaning that previous estimates for around 60 transactions for 2015 should be met.

Already 2015’s transaction total is rivalling that of 2014, when 63 deals were signed. However, last year’s total transaction value of under €400m has already been comfortably overtaken.

The last time the €600m value mark was breached was in 2008, when only 10 deals were completed and the last time values exceeded €1bn was in 2006. This year’s activity has been boosted by the likes of Nama and Ulster Bank continuing to offload assets.

“Following an extremely busy first half to the year, in which 39 hotel properties, totalling €575m, changed hands in the Irish market, transactional activity has remained strong in the third quarter with a further 15 hotel sales totalling €74.7m concluding in the last three month period.

In total, the sale of 54 Irish hotels closed in the first nine months of 2015, with several other hotel properties trading by way of loan sales in the period,” noted Lisa Keogh of CBRE’s hotels division.

Ms Keogh added that there is a marked supply and demand problem simmering in the Irish hotels market.

“There is now a scarcity of hotels to satisfy inherent volumes of demand from hoteliers and investors. The need to release more hotel assets for sale, to cater for this demand, is becoming increasingly apparent,” she said.

The leading hotel player in the Irish market, the Dalata Hotel Group is about to embark on a significant fundraising exercise to attempt to take advantage of the rise in demand amid the glut in room supply. Its shareholders are scheduled to vote on the company’s latest share issue plan, which is targeting a fresh €160m to be used on significant portfolio expansion.

The additional raising of up to €90m in debt financing should give Dalata in the region of €250m to bolster its hotel offering.

Its money will be spent on a mix of buying existing hotels, significantly expanding premises already in its portfolio and building new properties. Speaking at the group’s interim results presentation last month Dalata’s management noted the need for more hotel space; particularly in the Dublin area. It is looking at a number of sites there.

It hopes to have sites purchased in the next five months and would like to be on-site within a year, with construction likely to take up to 18 months. The company sees scope for two or three new hotels in Dublin, with the consensus being that the capital is short of about 4,000 to 5,000 rooms at peak demand times.

Meanwhile, CBRE also noted yesterday a marked recovery in the overall commercial property sector, with nearly €2.2bn having been invested in the year to date.

Its headline figures even exclude some of the bigger property assets that have sold as loan sales so far this year. There were 109 individual transactions of more than €1m signed in the period.

“Interestingly, 41% of the total spend in the first nine months of the year comprised assets with a value of more than €100m,” said CBRE’s Stephen Aherne.

“However, there is also activity at the other end of the scale, with 77 individual transactions of between €1m and €10m signing in the first three quarters of 2015,” he added.

“The third quarter was another active quarter in the Irish investment market ... the largest (sale) being the sovereign portfolio of retail assets and the Block R office building in Dublin’s Docklands,” Mr Aherne said.


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