French firms AccorInvest and Covivio have announced an agreement to swap €393 million ($420 million) in economy and midscale hotels that will simplify each ownership of those assets for both companies.
As of today, publicly listed Covivio owns the real estate for 54 hotels that it has signed over to AccorInvest. AccorInvest is the ownership vehicle spun from global hotel brand Accor that owns 702 hotels and 109,684 rooms in 25 countries under long-term leases with rents paid based on a share of revenues.
Under the structure of the "framework agreement" announced today, Covivio will take back full control over 24 of those hotels valued at €266 million and AccorInvest will gain full ownership of 10 hotels valued at €208 million.
AccorInvest is transferring full control of 19 properties leased to it by a set of two joint ventures partially owned by Covivio in exchange for full ownership of a portfolio of six hotel properties, which brings the total asset values in the deal up to €393 Million.
One of the joint ventures is owned 20% by Covivio and 80% by Crédit Agricole Assurances, and the other is owned by Caisse des Dépôts et Consignations, Société Générale Assurances and Covivio. The joint ventures will continue to hold 41 properties leased to AccorInvest.
Each of the properties involved in this deal are currently operated under management and franchise agreements for Accor brands but some will be converted, according to a news release from Covivio.
In a corresponding news release, AccorInvest officials claim the deal will allow it to increase operating margins due to a €22 million ($24 million) decrease in leasehold charges.
The deal, which was begun last November, aligns ownership and operations formerly shared across each hotel into a platform where both are now within the same hotels and same ownership vehicles, or, as the release stated, “[increases] the proportion of fully owned assets in [their portfolios] over which the [groups control all value-creation levers.”
Tugdual Millet, CEO of hotels at Covivio, said he saw the agreement as another major step between the two French firms.
“The agreement will contribute to Covivio’s development in the hotel sector and gives us the opportunity to draw on the full range of our real estate and hotel expertise. By repositioning a large part of the portfolio, we intend to strengthen our ability to act directly on its performance, thereby leveraging significant growth potential,” he said in a statement.
Covivio officials noted that in 2023 the assets that will transfer to AccorInvest generated €11 million, while the hotel operations Covivio will acquire generated €31 million in earnings before interest, taxes, depreciation and amortization.
The deal is expected to close before the end of the year.
This deal marks the biggest move for AccorInvest since early 2018 when Accor sold 55% of the ownership platform to several sovereign funds, including Saudi Arabia’s Public Investment Fund and Singapore’s GIC. That sale resulted in a cash contribution of €4.4 billion.
AccorInvest was split off from Accor in late 2013 to create an ownership platform separate from the fee-based hotel brand company just months after current Accor chairman and CEO Sébastien Bazin joined the company.
AccorInvest added that it has been moving through its own transformation since 2021, with this latest deal another step that “aims to consolidate its portfolio around the most profitable assets … in order to enhance its quality and value.”
Covivio added at the end of 2023 it owned 313 hotels in 12 countries with a value of €6.4 billion.