Accor to sell off properties worth €3.2bn

The French hotel group’s announcement to sell off hundreds of hotels is likely to appeal to private equity firms and other real estate investors.

French hotel group Accor is set to check out of €3.2 billion ($4 billion) of hotel assets, it has announced.

The company behind the Sofitel and Etap budget hotels says it plans to sell 535 hotel properties by 2008 and further raised the prospect of selling another 550 between 2008 and 2009.

The move is part of a drive to hand funds back to shareholders and came as the company announced its first half results, with profits rising to €282 million versus €206 million the year before.

Accor also said it would sell €500 million of non-core assets between 2007 and 2008, including travel agency Go Voyages and Italian contract catering business Gemeaz Cusin.

The company is selling at a time of strong interest in European hotels from foreign buyers, many of them private equity and opportunity funds from the US.

In a recent study, property advisor Jones Lang LaSalle said private equity firms accounted for 41 percent of the €20.6 billion worth of European hotels bought and sold in 2005, compared to just one percent in 2000.

Last year, for example, Lehman Brothers, GIC—the investment arm of the Government of Singapore—and Realstar bought 73 UK hotels from InterContinental Hotels Group in a €1.4 billion deal.

Many hotel operators have been agreeing so-called “sale and manage back” contracts under which the bricks and mortar are sold off to property investors but the hotel company retains the operational contract to run the asset. These deals allow companies to plough extra capital into their core business and to improve the balance sheet.

Accor was one of the earliest examples of hoteliers unlocking value from their large property portfolios. It has been selling off property since as long ago as 1996.

Last year, American opportunity fund Colony Capital invested €1 billion (US$ 1.3 billion) in Accor in the form of bonds redeemable in shares and convertible bonds.