Covivio says exchange of business assets will accelerate the
value-creating asset management of its hotel portfolio through repositioning
and management optimization.
PARIS – Covivio, a Paris-based diversified European real estate
operator, has entered into exclusive negotiations with AccorInvest to
consolidate their jointly held hotel properties and business assets. Covivo
stated that a deal is set to be completed during the second half of 2024.
Covivio Hotels owns 54 hotels that are let to AccorInvest
under long-term variable rent leases based on revenues. AccorInvest owns the
business assets for these hotels and has signed long-term management contracts
with the Accor Group.
The consolidation operation would take the form of an
exchange of business assets, currently held by AccorInvest, for hotel premises
owned by Covivio Hotels. Following this transaction, Covivio Hotels would own
24 hotel operating properties and AccorInvest would own 10. The agreed value of
the properties transferred to AccorInvest represents around €210 million, while
that of the business assets acquired by Covivio Hotels is around €260 million.
Based on 2022 figures, the assets transferred to AccorInvest represent annual
rental income of €9 million, while the business assets acquired by Covivio
generate EBITDA of €25 million.
Covivio Hotels is also joint shareholder and asset manager
for a further 60 hotels let to AccorInvest and held via two joint ventures,
established in 2010 and 2014 respectively: one is 80% held by Crédit Agricole
Assurances and 20% by Covivio Hotels, while the other is held by la Caisse des
Dépôts, Société Générale Assurances and Covivio Hotels. An exclusive agreement
has also been signed with a view to consolidate the property and business
assets of 25 of these hotels: 19 hotels for the joint ventures and six for
AccorInvest.
The deal would therefore enable Covivio Hotels, led by CEO Tugudual Millet, and its partners to acquire business assets in major tourist areas with considerable potential for value creation through repositioning and management optimization.
These consolidation transactions for Covivio Hotels and the
joint ventures represent a total of €390 million in hotel properties transferred,
identical to the value of the business assets acquired, thus making the
transaction cash neutral. Upon completion, Covivio Hotels and its partners will
have consolidated ownership of 43 hotels and AccorInvest 16 hotels.
Through this transaction, Covivio Hotels said it intends to
increase its capacity to directly influence portfolio performance by
repositioning some hotels it has held for almost 20 years to leverage their
considerable growth potential.
The deal would therefore enable Covivio Hotels, led by CEO
Tugudual Millet, and its partners to acquire business assets in major tourist
areas with considerable potential for value creation through repositioning and
management optimization. Some of these hotels would remain under the Accor
brand (under management or franchise agreements), while others may be
rebranded.
This accretive strategic move would mark a new step in
Covivio’s development in the hotel sector towards a more diversified model
(leased assets, operating properties).
On a pro forma basis following this transaction, Covivio
Hotels’ revenue structure would comprise 54% fixed revenues and 46% variable
revenues (mainly EBITDA from operating properties, whereas the proportion of
variable rents would drop to 7% from the current 20%).