German fund manager Union Investment Real Estate intends to strengthen its position in the European hotel investment market by entering into new strategic partnerships.

'The general environment and investment regime require increasing specialisation from institutional investors both on the transaction side and in terms of portfolio and contract management,' board member Frank Billand said in a statement.

'We are pressing ahead with expanding our in-house expertise in this area, with the aim of implementing individual contract structures for our investment products in future, such as franchise agreements or triangular arrangements whereby tenants enter into a management agreement with international operators.'

Union currently manages 24 hotel properties in the two- to five-star segment, representing around EUR 1.3 bn of assets, or 8% of Union's total portfolio.

The second cornerstone of the company's hotel strategy is to develop partnerships with leading, financially strong national and international hotel operators with a proven track record. Billand: 'Our hotels traditionally give our open-ended real estate funds a considerable performance boost. Even in times of economic difficulties, performance is not affected by lease losses.'

Union's hotel portfolio boasts a letting ratio of 100% and an average lease term of 14.6 years.

The company is looking to invest in hotel development projects or existing properties in CBD locations in Western Europe. Business, trade show and airport hotels with a minimum of 120 rooms will be the main investment focus. 'We are particularly interested in investing in locations with an international gateway function, like Amsterdam, London and Paris,' Billand added.