Extendam launches the Convert Hotel FPCI fund dedicated to converting hotel assets

The purpose of the Convert Hotel FPCI (Fonds Professionnel de Capital Investissement) is to transform obsolete or underused hotel assets by making them more multipurpose in response to the actual needs of neighbourhoods, residents and guests. This can even mean converting hotels that are too small or insufficiently profitable into residential accommodation. The fund is eligible for capital gains tax relief under article 150-OB ter of the French tax code.

Modularity and multi-functionality to meet a wider variety of needs

The Convert Hotel FPCI aims to bring a more modular and multi-functional approach to the hotel industry. It will finance the conversion of hotels that have low occupancy rates or are not being fully utilised into apart-hotels, hostels, tourist or business residences, student, senior, or intergenerational residences, co-living spaces or more traditional residential properties.

Converting hotels into mixed-use real estate assets, sometimes with a range of facilities, allows the occupancy rate to be more evenly spread over the year, through complementary offers involving stays of different lengths. The idea is to offer a variety of services that appeal to both tourists and locals and create new revenue streams. Consequently, hotels become less dependent on the idea of accommodation alone and their useful square metres no longer lie idle during the day.

“Our investment experience in the European hotel market has shown us that mixed-used assets are the most resilient. This mix of uses and services must be closely analysed, with careful attention to the actual needs of the catchment area, or indeed the seasonal nature of the needs, with a view to achieving 100% occupancy compared to 68%, which is the current average* in France,” observes Agnieszka Miloud, Commercial Director, Extendam.

Convertibility

Hotels eligible for the Convert Hotel FPCI fund have good, city-centre locations and can be easily adapted to local town planning regulations that often provide for a wide range of usages, including accommodation.

These hotels already have fire safety and evacuation plans and are accessible for people with reduced mobility, making them easier to convert from an administrative and practical point of view. As a result, these hotels are also more suited to conversion than other types of real estate assets in terms of financing.

Target assets with high potential

In recent years, the hotel industry has been tending towards new, more versatile models, which can offer a wider variety of usages and meet a wider variety of client needs. For the hotels struggling to deliver a modern guest experience and finding the post-Covid recovery difficult, transformation is essential. Although they may not all be suitable for conversion, certain hotels with a high real estate value could get a new lease of life by overhauling their usable floor space.

Partners of choice and integrated ESG

To effectively conduct its hotel conversion transactions, Extendam has formed close ties with various real estate professionals, including project managers (nationwide real estate dealers), solicitors, and tax and real estate advisors.

In keeping with its active contribution to the hotel sector’s ecological transition, Extendam also pays special attention to how ESG criteria are integrated in the Convert Hotel FPCI fund strategy, focussing on responsible renovations that ensure improved energy efficiency and encourage recycling and bio-sourced materials.

Nexity, which is the leading property developer and real estate services platform in France, is also one of Extendam’s key partners for the launch of this fund.

“When you own a hotel, you have an asset that can be used for many purposes. Yes, a hotel comprises bedrooms, but it also has meeting rooms, a restaurant – or sometimes several restaurants – parking spaces, and so on. It also has Wi-Fi and a round-the-clock reception, which is often open 365 days of the year. By expanding the services of these unique real estate assets, the scope of possibilities will be even more significant in the years to come,” concludes Jean-Marc Palhon, Chairman, Extendam.

* Source: 2019 MKG report

DISCLAIMER
The CONVERT HOTEL FPCI (the “Fund” or the “FPCI”) is governed by Articles L. 214-159 et seq. of the French Monetary and Financial Code, is not subject to AMF approval and can therefore use specific investment regulations that approved funds cannot. Any person or entity wishing to invest in the Fund is obliged to verify in advance that he/she/it belongs to one of the investor categories referred to in Article 423-49 I. of the AMF General Regulation and Article L. 214-160 of the French Monetary and Financial Code.

This press release is for information purposes only and provides well-informed investors and/or their advisors with preliminary information about the FPCI. The Investment Firm accepts no liability with regard to the accuracy or exhaustiveness of the information contained in this press release.

This press release is not a recommendation to buy or sell or an incitement to invest in units of the Fund. By deciding to invest, potential Well-Informed Investors must rely on their own examination of the Fund’s characteristics as set out in the Fund rules (the “Rules”), including both the benefits and the risks (see appendix II of the Rules entitled “Fund Risk Profile”).

Any person or entity wishing to invest in the Fund needs to be fully aware that their capital is not guaranteed, may either not be refunded or be only partially refunded, and should not constitute their entire portfolio.

WELL-INFORMED INVESTORS
We draw your attention to the fact that pursuant to Article 423-49 I. of the AMF’s General Regulation, units in FPCIs can only be subscribed to or acquired by an investor falling within one of the following investor categories:
> The investors referred to in Article L. 214-160 paragraph I of the French Monetary and Financial Code;
> Investors whose initial subscription is €100,000 or more;
> Investors, natural persons and legal entities, whose initial subscription is €30,000 or more and who meet one of the following three criteria:
a) They provide technical or financial assistance to unlisted companies covered by the fund’s purpose to promote their creation or growth;
b) They provide assistance to the management company of the professional specialised fund in identifying potential investors or contribute to the company’s objectives in seeking, selecting, monitoring and disposing of investments;
c) They have acquired knowledge about private equity by being a direct equity investor in unlisted companies or by subscribing to a retail private equity investment fund that is not advertised or promoted, a professional private equity investment fund, a professional specialised fund or an unlisted venture capital firm;
All other investors, as soon as subscription and purchase is performed in their name and on their behalf by an investment service provider acting as part of an asset management investment service according to the conditions set in Article L. 533-13 of the Monetary and Financial Code and Article 314-60 of the General Regulation of the AMF.