London-based real estate investment firm Tristan Capital Partners announced last week its plans to expand its hotels investment strategy, with around €3 billion across both its core-plus and opportunistic fund series. The firm hired in specialist hotel expertise with the appointment of Luc Boschmans as Managing Director of hospitality investments across Europe, who will report to Ali Otmar, Deputy Head of Investments, along with Kristian Smyth, Executive Director in the Investments team. Luc was formerly at Archer Hotel Capital, where he spent a decade managing a pan-European luxury hotel portfolio. Kristian has 12 years’ experience in European real estate investment and was previously with CPPIB and Moor Park Capital Partners.
Ali Otmar said: “Over the past few years we have completed seven hotel investments, and we believe that the combination of Luc’s expertise, Kristian’s investment experience and our extensive network of joint venture partners gives us a competitive advantage as we ramp up our efforts in the sector. Our plan is to focus on the opportunities arising from the COVID crisis this year as we work to establish Tristan as a long-term player in hospitality.”
We talked with Luc Boschmans and Kristian Smyth about their plans.
Tristan’s announcement showed a focus on distressed hotel real estate. How does this fit with the company’s existing investment portfolio?
Kristian: Tristan Capital Partners has been investing in pan-European real estate across all major sectors across 19 countries for over 20 years and currently has around €11.6bn of assets under management.
We are experts in value-added real estate investing across two different fund series and our approach is to acquire assets that require specialist asset management to create value for our clients.
The hospitality sector is an area we like and have closed a number of deals in recent years. We developed the 25 Hours hotel in Munich, we are working on a luxury hotel project in Florence and have been working with a budget hotel in Amsterdam.
All of this means that we have in-house experience with hotel operators catering to different segments across both of our Funds on a pan-European basis. We want to build on this experience and pursue what we believe is a long-term strategic opportunity in this space.
Luc: The decision was actually taken before COVID-19 hit our economy and the hotel sector. The combination of Kristian and the team’s experience in real estate investment and my knowledge of the sector as well as the significant resource of Tristan’s investment platform gives us a real competitive advantage.
Luc, you joined the company recently to lead the hotel investment strategy: what will be your first actions?
Luc: Kristian and I will be working very closely with Tristan’s Investment Committee to shape our strategy. One of the first steps will be to engage the firm’s extensive network of 65 operating partners across Europe to identify opportunities so that we can build momentum rapidly.
Some in the industry have commented they haven’t seen as much distress as expected, particularly in Europe. Would you agree?
Luc: We think that the level of fiscal stimulus and extent of government support packages issued in response to the pandemic may have pushed the distressed opportunity out a bit further. However, acquiring distressed assets is only a part of our strategy, we want to establish Tristan as a long-term player in the industry.
Kristian: Tristan currently runs two equity strategies across a core-plus Fund and a value-add Fund Series. The funds target slightly different levels of risk and complexity in the underlying assets in which they invest, allowing Tristan to look at distressed and more capex intensive opportunities and those with more straightforward operational challenges.
What segments within hotel real estate are you particularly interested in?
Luc: The strategy is deal-led and we keep it as broad as possible. The experience in our team reaches from economy to luxury and from long-stay to resorts. Typically, we look at the dynamics of the location, the potential to improve the performance and the possible option for the exit strategy. We are targeting investments of around €40-50 million.
What markets are you looking at in priority?
Kristian: When it comes to distressed opportunities, we will be looking for opportunities arising from market dislocation, where you have hotels with strong fundamentals.
From a longer-term perspective, we will focus on liquid, supply constrained markets with positive occupational demand and on hotel categories that will be poised to recover fastest following the current crisis.
Tristan joins a number of investors who have declared their interest in distressed European hotel real estate, including ActivumSG this week. Questex’s recently published fourth quarterly Investment Sentiment Assessment, in partnership with ABP Invest, shows that opportunity for hotel investors has been slower to come through, but vaccine-driven hopes of a recovery in the market saw investors return to the core hotel product.