Hotel sector investment forecast to soar in sub-Saharan African
Hotel owners in Africa are finding new ways to release capital to further invest in the continent’s market, according to a new report by JLL, the commercial real estate specialists. JLL has increased its presence in the sub-Saharan sector and oversaw the $36 million sale of the Hyatt Regency in Johannesburg two weeks ago.
It says that investment grade hotel assets are traditionally tightly held due to the dominance of owner operators, high net worth individuals and family offices.
But thanks to changes in the capital markets, which are “|becoming more sophisticated”, according to JLL, owners are taking advantage of new investment strategies.
Xander Nijnens, Senior Vice President for JLL’s Hotels & Hospitality Group in Sub-Saharan Africa says: “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 $100m 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,” said Nijnens. “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.”
Facilitated by JLL, the February 2017 sale of the Hyatt Regency Johannesburg (pictured above) at $36 million by a local property fund to a Middle Eastern investment group strengthens the continued trend for foreign interest in hotel investment opportunities in South Africa.
Nijnens said: “The devaluation of the Rand and the high growth in tourism to South Africa has not gone unnoticed by international hotel investors. The key challenge to hotel investment in the country is the low level of stock in the market and the predominance of off-market transactions.”
The Indian Ocean region is also seeing increased liquidity, says JLL, with the pending acquisitions of Tamassa Resort by Mara Delta for $40m and its 44 per cent stake in three Beachcomber-branded hotels owned by New Mauritius Hotel Group for $55m.
Alongside the more mature markets of the Maldives and Mauritius, JLL is also leading transactions in the Seychelles, Zanzibar and Madagascar. Nihat Ercan, Executive Vice President for Hotels & Hospitality for Asia Pacific at JLL said: “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. 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.”
JLL concludes rthat 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. We see a continued increase in liquidity in 2017, with JLL bringing a number of high quality assets to the market,” said Nijnens.