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Mixed-Use is the Key to Funding Hotel Development in Africa

A new report from JLL, one of the 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 this year, there was a 42 percent increase in the value of mixed-use property transactions, whereas there was a decline in other sectors, with office down four percent, industrial down six percent, retail down 20 percent, hotel down 18 percent and alternatives down 40 percent.

Xander Nijnens, executive vice-president, Sub-Saharan Africa, JLL, explains that the trend is driven by lender’s 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.”

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.

The research comes a week ahead of the Africa Hotel Investment Forum, Africa’s highest profile gathering of the hospitality and tourism industry, which took place in Addis Ababa on September 23-25.