Traditionally tightly held by a dominance of owner operators, high net worth individuals and family offices, investment grade hotel assets in Sub-Saharan Africa are scarce.
However, according to Xander Nijnens, from JLL’s Hotels & Hospitality Group in Sub-Saharan Africa, this is changing as owners implement increasingly dynamic investment strategies.
“Hotel owners are reviewing their real estate holding strategies and are more frequently opting to realise the capital gains on their assets and are recycling their equity into new developments and investments.”
The sale in December 2016 of the Movenpick Ambassador Accra by Kingdom Hotel Investments at US$100 million represents the largest single asset hotel transaction to date in Sub-Saharan Africa.
“The sale of the Movenpick Ambassador in Accra is a landmark transaction in terms of the quality of the asset and the selling price achieved. Interest in the asset came from a wide range of global players, yet ultimately the successful buyer was a regionally focused fund with the best ability to understand the risks and rewards in the transaction,” explains Nijnens.
Facilitated by JLL, the February 2017 sale of the Hyatt Regency Johannesburg at US$36 million by a local property fund to a Middle Eastern investment group highlights the continued trend for foreign interest in hotel investment opportunities in South Africa, attracted by the devaluation of the Rand and the high growth in tourism. However, the low level of stock and the predominance of off-market transactions remains a key challenge to hotel investment in the market.
The Indian Ocean region is also seeing increased liquidity with the pending acquisitions of Tamassa Resort by Mara Delta for US$40 million and its 44 percent stake in three Beachcomber-branded hotels owned by New Mauritius Hotel Group for US$55 million. Aside from the more mature markets of the Maldives and Mauritius, JLL is also seeing activity in the Seychelles, Zanzibar and Madagascar.
“There is an increasing interest in the Indian Ocean region by Asian and Middle East capital, as well as some of the prominent regional players,” says Nihat Ercan from the Asia Pacific team.
“The tourism sector has been particularly buoyant in the Indian Ocean due to improved air access and the status of the region as a safe destination.”
Africa remains a market where hotel real estate investment is dominated by development, yet the recent spike in transactional activity and increasing open market transactions is providing much needed liquidity.
The current increase in hotel transactions in Sub-Saharan Africa creates improved exit opportunities, which is critical to attracting new development capital to the region and we expect to see a continued increase in liquidity in 2017,” says Nijnens.