Echo Acquires Two Hotels in Budapest for €22 million

Main Photo: The Palazzo Zichy

Date: September 2019

Location: Budapest, Hungary

Names: Palazzo Zichy and The Parlament – both four-star

No. of Keys: 145 between the two hotels

Seller: TBA

Buyer: Echo Partners AG completed today the acquisition of two hotels through its Luxembourg hotel fund ECHO Fund SCS. Echo has acquired the four-star hotels Palazzo Zichy and Parlament which are both centrally located in Budapest and are top ranked by travellers.

The two acquisitions are entered shortly after the previously announced acquisition of the Radisson Blu Park Royal in Vienna on 19 July 2019 and is a further milestone for Echo in the establishment of a diversified Continental European hotel portfolio.

Echo Partners was able to further demonstrate its capability to quickly close transactions via off-market sourcing. The assets have a combined purchase price of €22m, an implied acquisition yield of 6.0% clearly exceeding Echo’s target hurdle of 5% and a remaining WAULT of 7 years.

The hotels’ combined 145 rooms achieved an occupancy rate exceeding 90% in recent years. The tenant contract is a triple net contract and thus guarantees maximum cash flow conversion for Echo and its investors. The acquisition was financed via a long-term loan at app. 50% loan-to-value and a fixed interest rate below 2% p.a.

Both hotels are excellently located in the inner city of Budapest in close vicinity to sights and public transport and are ranked among the top 10 Hotels in the Budapest according to Tripadvisor. Budapest is one of the fastest growing tourist destinations with an expected double-digit increase in room rates in line with historical growth rates above 10% p.a. in recent years.

Echo has furthermore identified significant value potential via proactive asset management, including further embedded upside from the current leases being clearly below market level.

Vitus Eckert, Founding Partner of Echo, states: “We are proud to announce the completion of the acquisition of two Budapest hotels shortly after the acquisition of the Radisson Blu Park Royal Palace Hotel in Vienna. The acquisitions exceed again our clearly defined acquisition criteria and are highly attractive for our investors. Furthermore, both hotels offer significant further upside potential in one of the a most rapidly growing European hotel market”.

Price: €22m

Price per Key: €151,724

THPT Comment: Three in rapid succession, two in Budapest after one in Vienna for Echo…well done.

First Seen: Investegate

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