Luxembourg Fund Partners, a London and Lux-based firm, has launched a hotel fund seeking €100 million of equity to buy assets in European cities.
The Landmark Hotel and Ground Rent Fund, which will be managed by Julien Renaux, Luc Leleux and Christophe Lentschat, who previously worked at Ernst & Young, Chase Manhattan bank and European Fund Administration respectively, aims to invest in a portfolio of hotel developments, hotel freeholds and other hotel real estate assets, it said.
The vehicle aims to buy freehold assets and development sites, which can then be leased to branded operators.
The firm said in its marketing literature for the fund that prime freehold hotel assets and ground rents had predominately produced “consistent positive growth” since the bottom of the economic correction. It added: “Branded hotel operators have continued to make profit in the mid tier sector and produce steady income streams.”
Luxembourg Fund Partners will primarily target London, where it said a “turning point” was reached in the fourth quarter of 2009 as occupancy levels started to stabilise.
It has bought three assets so far; a £10 million (€11.5 million; $15 million) site in London’s Docklands area with full planning permission for a hotel to be operated by IHG Holiday Inn, a £3.2 million site in Barking, east London, again with planning permission for a hotel to be operated by IHG Holiday Inn, and a site in Wembley in London for a Radisson Park Inn for £30 million. Development of that asset is underway.
Though the firm has begun looking at the UK, it also envisages buying assets in France and Germany and possibly elsewhere in Europe.
It said investors in the fund could take advantage of the increase in value of each project’s freehold. During the 18 month construction phase of each hotel, the freehold net asset values are projected to rise by at least 50 percent, it said. The fund envisages an income return of at least 9 percent. The aim is to deliver an overall targeted 15 – 18 percent internal rate of return.
Whilst the structure is open-ended, investors would be locked in for the first 24 months.