London-based property firm buys Le Méridien Etoile for €365 million

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London-based property firm buys Le Méridien Etoile for €365 million

Henderson Park, a London-based property firm, said Wednesday it bought the largest hotel in Paris, signaling strong demand for hotels across Europe.

Henderson Park said it bought Le Méridien Etoile from U.S. group Mount Kellett Capital Management and U.K.-based Cedar Capital. Henderson Park paid €365 million ($392 million) for the hotel, a person familiar with the matter said.

Le Méridien Etoile, less than a mile from the Arc de Triomphe and with 1,025 rooms, is the largest hotel in Paris. The recently-refurbished hotel is near the Paris Convention Centre and operated by Starwood Hotels.

The deal is one of the biggest hotel deals this year in Europe, where hotels were the only real-estate sector in which investment volumes increased during the third quarter, according to Real Capital Analytics. The €4.3 billion invested between July and September was up 20% compared with the period in 2015.

Overall, commercial real-estate deal volumes were down 38% in the third quarter from last year, Real Capital data show. The drop was concentrated in the region’s biggest markets: the U.K., France and Germany. While Britain’s decision to leave the European Union played a role, caution after a multiyear property boom also had an impact.

Soaring values in some markets have pushed down returns. In a hunt for yield, investors have increasingly shifted away from traditional property assets like offices and shopping centers into other areas like hotels, warehouses, student housing and even garden centers.

Buying hotels is in part a bet on tourism and business travel. In Paris, tourism suffered in the first half of this year, partly due to the terror attacks in late 2015.

“The Paris hotel market has gone through a tumultuous time,” said Nick Weber, founding partner of Henderson Park. “Le Méridien Etoile is poised to take advantage of a recovering hotel market.”

Le Méridien Etoile was the first transaction for recently-launched Henderson Park, which raised $500 million from U.S. private-equity firm Stone Point Capital, Kuwait’s sovereign-wealth fund and Wafra Investment Advisory Group, which is part-owned by the Kuwaiti government.

“Paris is one of the most visited cities in the world. That’s not going to change,” Mr. Weber said.

Henderson Park invests in Europe across all real-estate sectors, with a focus on major cities.