Mixed-use is the Key to Funding Hotel Development in Africa
Based on JLL’s research into global property transactions.
JOHANNESBURG, September 16, 2019 – A new report from JLL, the world’s largest professional services firm specialising in real estate, has revealed that people seeking to finance a new hotel project in Africa will be much more successful if their hotel is part of a mixed-use development.
JLL’s research into global property transactions reveals that in the first half of 2019, there was a 42% increase in the value of mixed-use property transactions, whereas there was a decline in other sectors, with Office down 4%, Industrial down 6%, Retail down 20%, Hotel down 18% and alternatives down 40%.
Xander Nijnens, Executive Vice-President, JLL Sub-Saharan Africa, explains that the trend is driven by lenders’ approach to risk. He said: “Diversifying risk by including alternative types of property, commercial, retail, hotel and branded residences, in one development, provides comfort to financiers due to the diverse and more consistent income streams generated. Branded residences are also increasing in prevalence because they provide up-front cash inflows and a more predictable source of revenue than one gets from a hotel alone.”
In Africa, the leading funders of hospitality construction projects are government-backed Development Finance Institutions (DFIs) like International Finance Corporation (IFC), Overseas Private Investment Corporation (OPIC), the CDC Group, Proparco and the German Investment Corporation (DEG). They are motivated by economic development, skills development and job creation and have a lower requirement for the predictable, consistent loan repayments required by a commercial bank. DFIs are also able to stomach more risk.
A driving factor for this trend is that hotels rent their rooms in euros and US dollars rather than in local currency which, from a financing perspective, reduces the risk to the lender and lowers the interest rate paid by the borrower.
Lending rates in Select African Markets
The research comes a week ahead of the Africa Hotel Investment Forum (AHIF), Africa’s highest profile gathering of the hospitality and tourism industry, which takes place in Addis Ababa on September 23-25.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management.
Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities.
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About JLL MEA
Across the Middle East and Africa (MEA) JLL is a leading player in the real estate and hospitality services markets. The firm has worked in 35 countries across the region and employs over 800 internationally qualified professionals across its offices in Dubai, Abu Dhabi, Riyadh, Jeddah, Al Khobar, Cairo, Casablanca and Johannesburg
About the Africa Hotel Investment Forum (AHIF)
AHIF is the premier hotel investment conference in Africa, attracting many prominent international hotel owners, investors, financiers, management companies and their advisers. It is organised by Bench Events (www.BenchEvents.com), who have a long track record of delivering multiple premium hotel investment conferences and forums across Europe, the Middle East, Africa, Asia and Latin America. Bench Events’ mission is enabling prosperity by facilitating growth, networking and thought leadership in the hospitality industry worldwide.
Sponsors of AHIF are: Platinum Sponsors: Accor, Hilton, Marriott International and Radisson Hotel Group; Gold Sponsors: Aleph Hospitality, Ascentis, Calibra Hospitality Consultants, CityBlue Hotels, Citymax Hotels, Derba Midroc Cement, Drawlink, Drees & Sommer, Ethiopian Ministry of Culture & Tourism, Ethiopian Skylight Hotel, febc, Haile Hotels & Resorts, Hotel Partners Africa, Insignia, IHG, JLL, Louvre Hotels Group, Munich RE, PrideInn Hotels, STR, Stuart and Partners and TIME Hotels; Exhibitors: Best Western Hotels & Resorts and E Hospitality Consultants.