Earlier this month Singapore-based property group City Developments Ltd (CDL) completed the purchase of St Katharine Docks waterfront office complex in London from Blackstone for £395 million.
It was a major transaction, driven in part by the turmoil in the UK market, but it also showed the returning appetite of Asia-Pacific investors for big deals in Europe.
Unsurprisingly, cross-border transactions from this region slowed in the immediate aftermath of the pandemic in 2020 and places like Singapore and Hong Kong were also slower to get back to normal and endured Covid restrictions up until 2022. With these all disappearing now, it makes travel between continents much easier, meaning that the ability to visit a property is back to normal.
Notable transactions
In the last couple of years there have only been a few hospitality deals involving Asian capital, some notable ones include:
- India's Roseate Hotels buying The Dunstane Houses in Edinburgh in November 2022
- CDL buying the Hotel Brooklyn Manchester in February 2022
- The Ascott buys Mercure Amsterdam Centre Canal from AccorInvest in January 2022
- Fragrance Group buys Holiday Inn Forum Kensington from Queensgate Investments in December 2021
- Fragrance Group buys Aloft Liverpool from North John Street in December 2021
Outlook for 2023
According to JLL, in the five years before Covid (2015-19), cross-border hotel investments accounted for an average of 17 percent of total global hotel investment volume. In 2022, this fell to only 4%. The pandemic wasn’t the only reason why this might be the case, Russia’s invasion of Ukraine and the following period of economic turmoil likely agave some investors pause for thought. However, the situation on a global level seems to have stabilised, opening the door for more transactions.
But even if this does happen, how can we know for sure. “There is definitely Asian capital that's coming into Europe, but a lot of it can be in disguise of other funds, " said Will Duffey, head of EMEA hotels capital markets at JLL.
But, he added, that ther was a renewed willingness for investors based in some jurisdictions to look again at Europe.
"I was in Singapore, and in Hong Kong in October last year. And what was really interesting is Singapore, pretty much they are through COVID and they were very much like: 'we're now open for business. We want to look for doing deals in Europe, it was quite interesting," Duffey said.
And investors based in different countries have different reasons for wanting to invest, for example in Hong Kong, particularly family offices, they see European real estate as a defensive wealth preservation play.
Location, location, location
Global investors tend to be quite specific on the locations they are looking at when they are planning cross-border transactions. Prime London is still the favoured option followed by Paris. Asian investors, especially REITs, are also looking to diversify their portfolios away from pure hospitality.
"They're moving into kind of wider living and beds," said Ed Fitch, a partner in the hospitality team at Cushman & Wakefield and a specialist in inbound capital from Asia.
Fitch said the availability of debt was a major hurdle in deal progression, adding: "I'm very skeptical about banks saying they're open but... the margins are creeping up and the cost is that much higher."