Deals

Morgan Stanley to buy $750m worth of Hilton Hotels

The Wall Street bank’s real estate arm is reportedly buying 10 European hotels as it ramps up exposure to the global hospitality sector.

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Morgan Stanley Real Estate Fund (MSREF) is set to acquire 10 European hotels from Hilton Hotels Corporation for $750 million (€553 million).

The package includes two properties in France, one in Spain, three in Germany and others in Switzerland, Luxembourg, Brussels and the Canary Islands, according to a report in The Times newspaper today.

MSREF has been busy ramping up its exposure in the hospitality sector in recent weeks. Earlier this month, it completed a $6.6 billion deal to buy Orlando-based CNL Hotels & Resorts, handing it eight luxury resorts in the US, while it bought a package of properties in Asia for $2.4 billion from All Nippon Airways.

Its interest comes as rival The Blackstone Group sells some of its investments in the space. Blackstone, which has been an aggressive consolidator in the global hotel markets, sold its Extended Stay Hotels chain to The Lightstone Group for $8 billion recently.

According to The Times’s report, MSREF is expected to exchange contracts with Hilton tomorrow. Hilton has been entering into deals not only to sell and manage back properties but to sell businesses outright. In March, it sold the Scandic Hotels chain for more than $1.1 billion to EQT, making the Nordic buyout group owner of the largest chain in the region.

Hotel groups in Europe are following the trend of monetizing real estate assets in order to pump funds into the core business. Accor, the French hotel giant, is a long way into an asset sell-off program, most recently disposing of a group of German and Dutch properties to new London-based private equity real estate firm Moor Park Capital for €868 million.

Increased real estate activity in the European hotel sector is persuading LPs to directly commit large amounts of equity to the sector too. Last year for example, Dutch government pension fund ABP struck up a joint venture with Danish fund ATP, GIC Real Estate and US group Host Resorts to buy four and five star properties across the region.

Patrick Kanters, ABP Investments’ managing director of real estate Europe, Asia told PrivateEquityRealEstate.com’s sister publication Private Equity Real Estate this month: “Hotels are of course more volatile and correlated with the economic outlook but it is good timing in the current upturn. Also the market is opening up. Now we see operating companies splitting from their property assets.”