HOTEL REAL ESTATE INVESTMENT
Ana Balat Capital Management provides advisory and corporate finance services to listed and non-listed regional promoters and owners of hotel real estate corporations in its target markets. Transactions are negotiated in an effective manner.
The hotel real estate investment potential continues to thrive despite economic headwinds, with global hotel transaction volumes reaching a new high of USD 42 billion in the first 6 months of 2015, an increase of 15 per cent compared to 2014. The number of tourists and air passengers traveling to the Eurasian and African regions increases year on year, fuelled by the expansion of airlines. Part of the continued growth may be explained by market uncertainty, driving investors to “safe assets“ both in developed and emerging markets. Growth drivers in the Eurasian and African regions include favorable domestic demographics, rapid urbanisation, a growing middle class, and improving fiscal management. New and highly populous markets have emerged for real estate investors, with hotels scheduled for construction from Lagos to Tehran. The mid-scale hotel construction pipeline for Dubai reached 217 per cent in 2015, compared to 2014, evidence of a strong continuing upward trend. The overall Middle Eastern-African hotel pipeline reflected 191,047 rooms across 763 hotels under contract in 2015, an increase of 42 per cent in the number of hotel rooms under construction compared to 2014. Tourist numbers have been projected to increase with 5.7 per cent per annum in Africa compared to 3.2 per cent globally until 2030, with hotel demand in the region to increase at a rate of 5 per cent per annum in 2016 and 2017 (variations apply across the region). Local and regional mid-market investors dominate current hotel real estate ownership and investments, and may navigate their markets better than global entrants, as they are better placed to identify and capitalise on the opportunities offered in these diverse markets. Investors from the Middle East and mainland China are leading the trend with the high-end, larger scale projects.
Ana Balat Limited seeks to fund regional hotel development promoters and owners, and, to a lesser extent, real estate acquisitions. This is reflective of the emerging nature of the hotel real estate market throughout the Eurasian and African regions. Targeted IRRs are in the range of 16 to 25 per cent, and capitalisation rates in the range of 8 to 12 per cent. As most of our target markets are development driven, there exist to date low open market transaction volumes, and only a limited number of investment grade assets. Ana Balat Limited forecasts liquidity to improve in the medium term as new projects will enter the market, with existing investors exiting their investments and increasing liquidity in these markets.