MONTREAL ? Canada?s biggest pension fund, the Caisse du d?p?t et placement du Qu?bec, is shopping two iconic hotel properties in North America and several others in Europe as it speeds up the divestiture of its lodging real estate amid more favourable market conditions.
The Caisse?s Ivanhoe Cambridge real estate subsidiary has just put Ottawa?s Fairmont Chateau Laurier and D.C?s Fairmont Washington on the market. It also started a sales process for a package of 18 other hotels in Europe, notably in Germany.
The properties are part of roughly 60 hotels Ivanhoe held in its stable in 2011 before deciding to get out of the accommodations business to focus on other asset classes. Since that time, Ivanhoe has sold about half of the hotels in that portfolio. Other properties that remain under its control include the Fairmont Royal York in Toronto and the Fairmont Hotel Vancouver.
?So far, what we have sold we sold to our satisfaction,? Sylvain Fortier, Ivanhoe?s executive vice-president for residential and hotel investments, said in an interview Wednesday. ?Now we feel like the demand is better than a year and two year?s ago. And so we would like to accelerate the disposition program.?
The 415-room Fairmont Washington should attract bids in the range of US$185-million while the 429-room Ch?teau Laurier, located right next to parliament, should fetch US$125-million, said Hoboken, N.J.-based Real Estate Alert, which reported the activity earlier Wednesday. The properties are being pitched to investors looking for steady income, the trade industry website said.
When Ivanhoe decided to check out of the hotel business two years ago, it said the industry?s high capital costs and risk didn?t justify the returns. It has since shifted more of its money instead to shopping centres, office building and multi-residential units.
But the sales process hasn?t been a steady one. In some cases, Ivanhoe decided some of its properties could benefit from additional investment and upgrades before coming to market. In other cases, the company was waiting for more favourable timing that would see less competition from other hotel portfolios being sold.
Sales of lodging properties in Canada grew for three years to the end of 2012, nearly tripling in total dollar terms since the full effects of the last downturn, Colliers International said in its latest annual report on the sector. Investment will remain strong this year as more liquidity in the debt markets stokes deal flow and fundamentals strengthen further, the commercial real estate services organization said.
?We believe we are in a period of sustainable growth that should carry the market through the next five years,? Colliers said.
The two Fairmont properties just put up for sale are generating ?a wide range of interest? from various groups, Mr. Fortier said. He said lenders are also getting back in the game more forcefully after taming down their involvement in previous years.
Ivanhoe sold four properties in Paris earlier this year to Morgan Stanley?s real estate unit. The New York-based investment firm is trying to revive its real-estate program with a fund as large as US$3-billion after suffering huge losses during the financial crisis, the Wall Street Journal reported May 28.
Ivanhoe considered selling its entire portfolio of Fairmont hotels as a package several years ago but concluded it would be difficult given the valuation and lack of lenders willing to backstop such a purchase. It sold the Fairmont Waterfront Vancouver and Fairmont Winnipeg in 2011 and the sale of Fairmont Empress in Victoria is in due diligence now.
The only three hotel properties Ivanhoe is definitely not discarding are Quebec?s Quebec City?s Ch?teau Frontenac, Montreal?s Reine Elizabeth and Montreal?s W, in which it holds a 51% interest.
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