AccorInvest sells up

AccorInvest has achieved a further sale, as it looks to retrench its hotel portfolio to a purely European play.  

Its most recent disposal saw eight hotels in Ivory Coast, Senegal and Cameroon sold to African investment vehicle Kasada. While the continent has been hit hard by the clampdown on international business travel, local market specialists say the properties have a bright mediumterm future.    

AccorInvest, which was separated from Accor group and partially sold off in 2018, has been struggling as its 900-strong portfolio has been prevented from trading due to pandemic lockdowns, or faced massively reduced demand if trading.  

In October, AccorInvest hired Rothschild & Co to advise on restructuring options. Talks were opened with the group’s 19 lenders, while other potential routes including a new capital raise were evaluated. The group had EUR2.9bn of bank debt at the end of 2019, with around EUR931m of that falling due in 2021.  

More recently, the company has won approval for a EUR500m loan package from the French government, under its Covid-19 support programme. The government-backed loan will help protect the future of AccorInvest’s 7,000 strong workforce, said French finance minister Bruno Le Maire.  

Accor currently holds 30% of AccorInvest. Other investors in the asset vehicle, introduced in 2018 as Accor reduced its ownership, include Saudi Arabia’s Public Investment Fund and Singapore’s GIC Pte, institutional investors Colony NorthStar, Credit Agricole Assurances and Amundi, as well as private investors. An initial 55% stake was sold, and since then Accor has reduced its stake further.  

The sale of non-core assets, away from the European core of the portfolio, has been under way for many months. In November, AccorInvest sold 17 Ibis branded hotels in Australia in a portfolio deal that saw them bought for AUD180m by Iris Capital. An earlier deal lined up in 2019, which would have seen 23 properties disposed of, fell through when buyer iProsperity failed to complete.  

“We are delighted to have secured such a large portfolio in one line,” said Iris Capital’s Sam Arnaout. “This purchase fits in well with our current hospitality pub portfolio, takes our count to 45 hotels and delivers on the group’s strategy for diversification. The AccorInvest portfolio is well placed for repositioning and gives Iris immediate scale in an extremely tightly held hotel market.” 

Into the new year, AccorInvest’s African disposal completed, covering the Pullman, Novotel and two Ibis hotels in Abidjan, Ivory Coast; a Pullman, Novotel and Ibis in Dakar, Senegal and an Ibis in Douala, Cameroon, for an undisclosed sum.  

The buyer, Kasada, used some of the more than USD500m gathered into its first hospitality fund, which closed in April 2019. Olivier GranetKasada CEO called the acquisitions “an outstanding portfolio of hotels – we believe we can have a positive impact by providing much-needed capital at a critical time.” Kasada’s managing partner David Damiba added: “Despite the challenging global macro-economic conditions, Kasada intends to invest and support the African hospitality sector as it begins to adapt to a new market. The Kasada team’s deep-rooted regional and sector expertise meant we were well placed to execute this complex transaction, one which spans multiple jurisdictions across West Africa.” 

Kasada has, to date, been struggling to find suitable investment opportunities, across a continent that has been hit hard by the pandemic. Trevor Ward of W Hospitality Group told Hotel Analyst the deal “is an obvious fit – and Accor will want to continue with the hotels.” He said the market in Africa is opening up, and he is busy planning projects for clients.  

Banks and governments have been supportive, according to Bani Haddad, managing director of operator Aleph Hospitality, and that has led to few hotels coming to the market. “In terms of transactions, we haven’t seen much.” All of Aleph’s hotels have been open since the end of December, though occupancies remain weak at 30-35%. One positive of the last few months, he said, has been that owners have been prepared to start thinking about using a focused third-party hotel manager. “The positive impact has been how the market started shifting at a much faster pace.”  

Ward tracks projects across Africa, and notes just 25% of the 91 hotels due to open in 2020 have so far opened – this compares with a 75% completion figure for 2019. Most, he believes, are delayed rather than cancelled, as Covid-related issues around construction and shipping came into play. “There are a lot of people tell me they are looking at a lot of opportunities.” 

Ward warns the return of business in Africa will be at a slower pace: “So many cities rely on international air travel – the distances in Africa are huge, and the roads are poor. The pent-up demand is for leisure, not business. Business travel is not dead – it will come back, but right now, it’s a hassle.”  

HA Perspective [by Andrew Sangster]: Africa is a big continent and it is dangerous to assume that its many different markets are identical in outlook. But there are common themes. 

The first is that existing supply of international standard rooms is small. According to HVS, the biggest market, Egypt, has just 53,000 rooms. In sub-Saharan Africa, the biggest market, South Africa, is just under 20,000 rooms. 

The biggest chain, unsurprisingly given its Protea acquisition, is Marriott with Accor and Radisson hot on the heels of the US giant. But with pipeline, Marriott looks to further extend its lead, holding 37% of pipeline against the next biggest share, that of Accor, at 12%. 

The received wisdom in high-income economies is that leisure travel will bounce back quicker than business travel. Not so in Africa, according to an HVS study published back in July. This spoke of the likelihood of a recovery in business travel first and the growing strength of regional travel. 

But that recovery is set to take longer. According to a Horwath HTL report published in September last year, South Africa’s tourism industry will take until the end of 2022 and possibly early 2023 until it gets back on its feet. 

Given the scale of the market opportunity and the likely slow recovery, it is no surprise that AccorInvest has moved to sell-off its Africa portfolio as part of a general move to divesits non-European assetsThe urgent need for cash negates the damage of selling non-core assets at discounts. How much the price was impacted, however, is not publicly available information. Given the appetite of global investors currently, it could well be limited, even for the frontier markets in which AccorInvest’s African assets sat. 

There is a broader point with AccorInvest, however, and that is its role as an operator as well as investor and developer of real estate. For the institutional shareholders of AccorInvest, the exposure to operations and, in particular, employing thousands of people, is a complicating factor. 

This can work, of course, as companies such as Pandox show. But a French SIIC regime, which offers tax advantages, might be a more attractive option. The main challenge to any switch is probably the overseas investor base who are subject to a withholding tax. Perhaps, as the recovery boosts back the asset value, this is an option that will be tabled as an option for the overseas players to exit. 

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