APG investing in City ID

APG investing in City ID

Published on: 16 September 2020

“Eventually we will travel again”

 

With the investment in aparthotel chain City ID, APG is further expanding its investments in the hotel sector, even though this sector has been particularly struggling due to the corona crisis. Robert-Jan Foortse, head of European Property Investments: “We expect to reach a new segment in the market with what you might call an institutionalized Airbnb.”

 

Last week, APG announced it plans to build an aparthotel in the heart of London. Now APG announces it commits capital to the expansion of aparthotels of City ID. What is it about this hotel concept that makes it so interesting to APG?

“This is filling a gap in our portfolio and we also believe in the market. A substantial part of our portfolio in invested in residential for rent properties, or put differently accommodations for long-term occupation, whereas at the other end we own hotels for one- or two-night stays. Between those two, however, there is another big market. A market that is geared towards guests who are looking for accommodations for three to thirty nights, with a bit more space and more amenities, like for example the option to prepare a meal in the room.


A platform like Airbnb also owes its growth for a large part to this target group. We believe though that are people who are reluctant to book their stay in an Airbnb. What kind of place are you getting, how clean and safe is it, who can I call on if something is not right? These guests don’t like these uncertainties. We hope to be able to serve that target group with what you might call an institutionalized Airbnb.”

The hotel portfolio looks like it is reasonably filled with CitizenM, The Student Hotel, Archer Hotels, Azora, the previous investment in City ID and the investment in two hotel sites in London. Are hotels not taking up too much space in the portfolio?

“No, not at all. The allocation to hotels is limited to 7 percent of the European part of our real estate portfolio. For the total global portfolio, this is 4 percent. With these hotels, we are really expecting to reach a new segment in the market. At CitizenM, the focus is on guests who typically stay there for one or two nights. The Student Hotel was originally set up as student housing, supplemented with tourist and longer business stays. With City ID, we can serve the large group of people who want to stay longer, both for business and leisure purposes. But we are also seeing that these rooms are being used as temporary residences by people who are waiting for their new homes to be finished, or who are renovating their own homes.”


Nevertheless: the hotel sector is really suffering due to the corona crisis. Does it really make sense to keep investing in that sector?

“Just like with all our investments, we are looking at this for the long term. The world will never be exactly the way it was before COVID, but I do believe that the situation will normalize in a few years. Eventually people will travel again. We will travel differently than before COVID, but ultimately not any less. If I look at myself: before COVID, it was customary to fly to and from London in one day for a few meetings with our investment partners in London. Meetings that we now use Teams for. In the future, I will be flying to London less often, but I will probably stay a little longer, so that I can meet with all our partners when I am there. Maintaining a good relationship with our managers and partners is crucial for us, and physical meetings are a key component to achieve that. The City ID hotels will meet the obvious needs for these trips.
Finally, the hotels we purchase with this committed capital first need to be (re-) developed. They won’t be opening for about 18 to 36 months.”


APG is collaborating with another party again for this investment: the Australian pension fund Aware Super. Why is APG opting for that structure?

“We like working with partners to be able to further diversify our portfolio. In this case, we are collaborating with Aware Super, a big institutional real estate investor from Australia, which we have met through previous investments. Aware Super is in the process of diversifying their portfolio from a purely Australian one to a globally diversified portfolio like ours. In addition to the attractive proposition of the City ID aparthotels, Aware Super was also attracted by our involvement with City ID, and our track record with citizenM and The Student Hotel.”


Sustainability is an important pillar in APG’s investment policy. Is that also the case now?

“Absolutely. Our ambition is to own the future CITY ID hotel properties. That will provide us with maximum control over the sustainability. We are putting the bar very high for that. There are more options with newly constructed buildings than with existing ones, of course, but in terms of sustainability, we are striving towards what is maximally feasible. Aware Super shares this vision.”

 

Is it clear yet, where City ID will be expanding?

“The first cities we are looking at are Amsterdam, Dublin and London. Other options are being investigated. At City ID, they are creating a ranking of the 50 most attractive cities. These are the places that are attractive to the target group of business travelers but are also attractive as a leisure destination. For example, Berlin, Stockholm, Barcelona, Milan, Vienna and Brussels.”

 

You can find the press release here.