Following the recent sale of 2.84 million square feet of logistics space to Blackstone in the Netherlands, private equity firm HIG Capital is considering further expansion strategies in Europe's hospitality, industrial and logistics sectors.
"In the Netherlands we are currently looking at hospitality transactions," Riccardo Dallolio, head of HIG Realty Partners in Europe, said in a statement. The firm's target is mid-class hotels in good locations, drawing on HIG's experience in London's Docklands.
HIG sold the 378-room DoubleTree by Hilton in London's Docklands area to Hong Kong's investment manager Junson Capital in September 2016. The investment price was not disclosed, but market watchers estimated that it could be around $102.8 million—double HIG's initial investment. HIG bought the Docklands hotel from Swedish group Pandox in 2014. The hotel was refurbished and rebranded as a Hilton DoubleTree.
Last March, HIG sold 26 light industrial assets in the Netherlands for a rumored $145.5 million to real estate funds managed by Blackstone. In 2014, HIG purchased a portfolio of offices around Amsterdam.
HIG shares the same interest in the Dutch hospitality sector that a number of other international hotel groups are showing. In April, London's property investment firm Avignon Capital purchased the NH Amsterdam Zuid hotel for $50.3 million. That same month, Austrian developer IES Immobilien and Vienna-based Invester United Benefits announced plans to invest a "three-digit million-euro amount" in the 1 million+ square-foot mixed-use development Overhoeks project in Amsterdam's northern waterfront area. Construction will begin in May with a hotel, congress center and residential area. Meanwhile, French insurer AXA and Danish pension fund ATP partnered to forward-fund the construction of the 650-room Nhow Amsterdam RAI. It is already considered to be the largest hotel in the Benelux region.
HIG in Europe
HIG has been known to make opportunistic, value-add investments in small to mid-size real estate assets across all property types in the U.S. and Europe. The company has "a specific focus on special situations and complex transactions in the small cap space." The average purchase price is about $22.4 million.
The group operates $21 billion of properties across a range of asset classes globally. HIG's European real estate business has completed about 35 direct-property, NPL and financing transactions since 2013.
The sale of the light industrial portfolio to Blackstone marked the completion of a strategy that began over three years ago. "We started an aggregation strategy in 2013 and acquired (the light industrial) assets, which we thought were undermanaged, during a phase in the Netherlands when yields were high and vacancy rates were also historically high," Dallolio said. The group carried out asset management before it sold the portfolio to Blackstone.
HIG also operates in the mezzanine lending space. In October 2016, the firm completed a structured debt investment to help York Ventures purchase Yorkshire House in north eastern England. York Ventures will convert the city center building into a 124-room Malmaison Hotel with 49 serviced suites. "We intend to do more mezzanine lending across Europe as we already have done in Spain and the U.K.," Dallolio said. "Ultimately our strategy is to take small, complex transactions, manage the assets and turn them into simpler, larger and more valuable assets and portfolios. Our pan-European presence gives us the ability to cherry-pick the best opportunities with potential for improvement, aggregation and successful sale."