Investment

Union Investment Focuses Growth Strategy on Select-Service Hotels

BERLIN — Union Investment, one of the largest institutional real estate investors in Germany, is looking to grow its portfolio of hotel investments significantly as the travel rebound ramps up.

Speaking with Hotel News Now during the recent International Hospitality Investment Forum, Andreas Löcher, head of department, investment management hospitality, said the Frankfurt-based firm — which has roughly €43 billion ($44.6 billion) in real estate assets around the globe and spent €6 billion on acquisitions in 2021 — is particularly interested in growing its portfolio of select-service assets.

The company’s executives also have a desire to grow the portfolio in the U.S., but currency issues make that difficult, he added.

“We would love to do something in the U.S., as we see the market as coming back relatively quickly out of the crisis now, as well as in the U.K.,” he said. “However, we of course in these contracts are somehow struggling with hedging costs. We need to currency hedge our investments, which at the moment is quite costly.”

He noted the company is drawn to select-service hotels with strong international brand partners because of the superior operating model.

“We would, as a general statement, concentrate on limited, budget hotel concepts, which we do regard as relatively superior to full-service hotels,” he said. “Of course, it depends on the story and submarket.”

Union currently has 85 properties globally with more than 20,000 rooms and an estimated valuation of €6.4 billion.

In 2021, Union expanded its presence in the U.S. by introducing the Motel One brand to the country with a property in downtown Manhattan and by purchasing a Curio Collection by Hilton property — The Porter in Portland, Oregon, which was then leased to Oxford Capital Group.

Löcher noted his company was the first institutional investment group to back Germany-based Motel One.

“We believe in the story” of that brand, he said. “Back nine or 10 years ago, we were the first big investor. So we grew a bit with them, and they grew a bit with us.”

According to the firm’s website, Union currently has eight owned hotels in the U.S.

Other than the U.S., Löcher said Union’s growth focus will be on Western Europe. He said conflict in the eastern portion of the continent reinforces that strategy, although the firm remains bullish in its investments in Poland.

“We still regard [Poland] as a great market with domestic demand, but for the time being, we’ll probably be more concentrated in other markets like France, where we still have some more room to grow, or in southern Europe, Scandinavia, the U.K. or Ireland,” he said.

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