Trinity lands first deal in Europe with more on the way

A joint partnership among Trinity Investments, funds managed by Oaktree Capital Management, and funds managed by UBS Asset Management’s Real Estate & Private Markets Multi-Managers business has acquired the 138-key Park Hyatt Zurich from an affiliate of Hyatt Hotels Corp. The hotel will remain branded as Park Hyatt Zurich under a long-term management agreement with Hyatt, which continues to make progress on its asset light model plan.

While deal price details were not disclosed, a December report from Bloomberg said negotiations on the sale were underway and that the asset could fetch a price of around $467 million.

Park Hyatt Zurich occupies a prime island plot in the heart of Zurich’s central business district and features the largest room inventory amongst luxury hotels located in the Zurich CBD. In addition to the hotel, the acquisition includes the property’s nearly 4,000 square meters of office space.

I’ve felt that sentiment change tremendously in the U.S. so far this year, and I’m feeling that changing in Europe, as well. And that’s not just with seeing more activity on the acquisition side, but you’re seeing more lenders showing up.

Sean Hehir

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Trinity Investments President and CEO Sean Hehir told Hotel Investment Today on Thursday that this marks the third asset they’ve acquired from Hyatt, “and as opposed to other groups who are looking to unencumber the assets, we are happy to – with the right brands -- enter into long-term contracts, which we did here.”

Hehir added that it has now done $2.6 billion worth of acquisition with Oaktree (seven hotels, 4,640 rooms) since 2017, and then bringing in UBS on this deal is like what they did when acquiring the 1,000-key Diplomat Beach Resort in February 2023. “Bringing those two groups as our partners on this asset is just a testament to the relationships and partnerships that we have, and it’s a continuation Trinity’s business,” Hehir said.

For Hyatt, the deal takes them closer to their $2 billion planned disposition program by year-end 2024. "We still think there are several Hyatt assets that would be appealing to buyers in today's environment, despite high interest rates and challenging underwriting," wrote Truist Securities analyst C. Patrick Scholes. "Beyond Zürich there are two other owned assets in EAME, the Park Hyatt Paris-Vendôme and Andaz London Liverpool Street. There are also several U.S. assets including resorts and major market full-service urban (in nicely recovering markets) that could potentially be appealing to buyers."

More to come for Trinity in Europe, U.S.

Hehir expects more deals in Europe to come after Managing Partner Ryan Donn opened the European office in London last summer. The plan is to replicate what Trinity is doing in the U.S., which includes handling everything from acquisitions to asset management and project management that their large joint-venture partners rely on.

More full-service upscale and upper upscale deals in Europe are coming soon, according to Hehir, and they like markets like Ireland, the U.K., Portugal, Spain, Greece, Switzerland and some of the Nordic countries. Whereas North American deals could be for 400-plus room properties, Europe will likely lend itself to 100 rooms and somewhat larger.

Hehir also alluded to another deal in the U.S. that could close within a week. In fact, Hehir said he has become equally bullish about trading prospects in both the U.S. and Europe.

“We’ve told our investors that if we’re value-add investors, we have to be able to find a way to invest across all points of the market cycle,” Hehir continued. “Of course, globally, there’s been a slowdown in transaction activity just with the uncertainty with interest rates, etc. But I’ve felt that sentiment change tremendously in the U.S. so far this year, and I’m feeling that changing in Europe, as well. And that’s not just with seeing more activity on the acquisition side, but you’re seeing more lenders showing up.”

While there might be increasing comfort with rates and the prospect for better rates ahead, Hehir said hospitality assets in the right markets are tremendous investments today. “We’re not buying 2 and 3 cap warehouses; we’re buying 6 and 7 cap rate hotel assets,” he said. “So, even if your initial financing is 7% to 8%, and it’s a value-add deal, you’re working your way into positive leverage pretty quickly.”

While bullish, Hehir added that owners don’t want to be in every market within the U.S. and Europe. “We've really stayed disciplined in the U.S. being in the “smile” states of Florida, Texas, Arizona, California and Hawaii, and in the markets I mentioned in Europe,” he said. “You’ll see us being disciplined in those markets and those types of assets again.”