AccorInvest and Covivo agree asset swap

Image © Covivio
A complex swap of assets sees hotel investment groups Covivio and AccorInvest unlock significant opportunities across their European portfolios, to refurbish, upgrade and rebrand a significant number of hotels

Major European hotel ownership groups Covivio and AccorInvest have agreed a complex asset swap to help each realise more value from their respective holdings.

The transactions involves interests in 34 properties, all currently operating under Accor brands such as Ibis, Novotel and Mercure. Assets worth a total of EUR474m will be transferred, untangling situations at the property level that will simplify ownership.

Unlocking opportunities

Through a variety of historical transactions, the pair found themselves where their ownership situation lacked flexibility. As a major hotel landlord across Europe, Covivio for example owns many hotels, but these are then generally leased or managed by other companies under long term fixed or flexible leases, management contracts under possibly a brand franchise agreement. With management and operations in the hands of others, it can then be difficult to agree a forward property strategy between two parties who may have differing longer term aims.

The scene is now set for a substantial number of European budget hotel to be refurbished and rebranded. The combined transactions will simplify ownership of 59 hotels, with the result that their owners can now more freely decide where in the market to place them. “By repositioning a large part of the portfolio, we intend to strengthen our ability to act directly on its performance, thereby leveraging significant growth potential,” said Tugdual Millet, CEO of hotels at Covivio.

Covivio will acquire the operating businesses of 24 hotels, all properties that Covivio already holds the real estate ownership of, with an agreed combined value of EUR266m. AccorInvest will, in return, acquire the property assets of 10 hotels, all properties which they already have an operating interest in via arrangements such as leases, with this transfer having an agreed value of EUR208m.

For Covivio, the opportunity means it will now fully control a number of hotels in major tourism destinations, where the group can see opportunities to shift properties upmarket via a renovation, improving medium term returns. Often such a move will be accompanied by rebranding, to note the different customer proposition and higher price point. Currently, all of the hotels in the transaction operate with an Accor brand above the door; however, after repositioning, some may in future operate under Accor brands, while others will migrate to new brands from other hotel groups.

Refurbishments planned

A further, similar transaction is also under way, simplifying ownership structures at a further 60 hotels held in joint ventures. These were all leased to AccorInvest, to trade as Accor branded hotels. These structures were set up in 2010 and 2014, the first seeing Covivio work with co-investor Credit Agricole Assurances while the second was a group deal with Caisse des Depots et Consignations and Society Generale Assurances.

Within these agreements, Covivio and its fellow investors will acquire 19 operating companies, in exchange for AccorInvest receiving ownership of six hotel property companies. Again, each party will now hold both the real estate asset, and the operating business of the hotel inside it.