Industry Update
Press Release28 January 2020

Principal Real Estate Europe Acquires The Ona Hotel Terra In Barcelona For Their Hotel Real Estate Fund Ii

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Principal Real Estate Europe

On behalf of the Principal Hotel Real Estate Fund II ( "Hotelfund II" ) PRINCIPAL REAL ESTATE EUROPE " PRINCIPAL", confirms the closing of the acquisition of the Ona Hotel Terra in Barcelona for € 40.50 million from a local real estate developer. The 3* hotel has 152 rooms, a restaurant, a bar, 2 meeting rooms as well as a rooftop terrace with swimming pool offering exceptional views over Plaza de España and Palace of Montjuic. As part of the transaction a long-term lease was entered into with Ona Hotels, a family owned Spanish hotel group based in Barcelona which operates 40 hotels in 4 countries (Spain, Andorra, Morocco and Tunisia) with ca. 5,500 rooms.

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This acquisition reflects the value-add strategy of Hotelfund II to focus on strategically located, high quality 3-5* hotels in major cities across Europe with significant potential to increase value. Accordingly this hotel, was secured for the Hotelfund II by PRINCIPAL in a forward purchase contract whilst still under construction as it is one of the last hotels to receive a building permit before the hotel development moratorium in Barcelona and is ideally located in the centre of Barcelona next to the convention centre "La Fira" in a pedestrianised street just behind Plaza de España. PRINCIPAL therefore acquired the hotel once construction completed and the brand new hotel opened on the 17th of January 2020. Going forward Principal expects good performance and value enhancement of this asset as it benefits from the strong general hotel market development in Barcelona throughout 2019 and beyond, the normal ramp up in trading of a newly opened hotel, dynamic lease structure and high-quality characteristics of this hotel real estate asset; all in line with Hotelfund II's investment strategy.

After the successful sale of the hotel portfolio in the Principal Hotel Immobilien Spezialfonds (" Hotelfund I") as reported this is a significant step by PRINCIPAL on the acquisition front. Indeed this is the second hotel PRINCIPAL has acquired on behalf of Hotelfund II and follows the signing of significant additional equity of over €100 million bringing the total subscribed equity of Hotelfund II to €245 million. All investors in Hotelfund II which were invested in Hotelfund I subscribed this additional equity after the disposals of Hotelfund I which significantly exceeded target returns of this first Principal's hotel real estate fund launched in 2012.

Jochen Schaefer-Suren, CEO of Principal's Hotel and Leisure division, commented: " The Ona Hotel Terra in Barcelona is an exciting investment for our Hotelfund II as it is a very attractive value-add opportunity in particular as the hotel development moratorium in Barcelona should constrain supply and provide a unique opportunity to benefit from future demand growth to all existing hotels including our new hotel in Barcelona. It is a perfect illustration of the type of value add hotel investments Principal is looking for after the successful sale of the hotel portfolio in Hotelfund I, led all but of one of our investors in Principal hotel fund II to give us this further vote of confidence with over €100 million additional equity. This allows us to look for further hotel investment for Hotelfund II of over €400 Mio in 2020 and beyond"

Principal Hotel Real Estate Fund II

The Principal Hotel Fund II is structured as a Luxemburg SCS and provides investors with the opportunity to participate in value-add opportunities at a point in the cycle where many hotels with long-term fixed rent leases are fully valued yet rental growth is an essential driver to protect capital values. To achieve such rental growth the fund's strategy focuses in select hotel markets on value creative asset management initiatives at the individual hotel asset, which can be achieved in any general market context. However this requires a very experienced specialist hotel real estate fund management team like Principal's hotel team to design and implement such an asset specific value-add strategy.

Principal Real Estate Europe

Principal Real Estate Europe is part of Principal Financial Group's dedicated real estate business, Principal Real Estate Investors, which manages or sub-advises $85.7 billion in real estate assets globally (as of September 30, 2019). The group's real estate capabilities cover all four quadrants encompassing public and private, equity and debt investment solutions. In Europe, Principal Real Estate Europe operates from offices in London, Frankfurt, Amsterdam, Paris, Lisbon, Luxembourg, Madrid and Milan, employing more than 100 staff who manage real estate across all asset classes in nine different countries.

Principal Global Investors

Principal Global Investors® leads global asset management at Principal®. As a multi-boutique firm, we bring a focused perspective and offer expertise across a host of asset classes. At our core, we are driven by our purpose to help investors and businesses achieve their financial goals. Our global investment professionals deliver investment solutions for public and private pension funds, foundations and endowments, central banks, insurance companies, sub-advisory arrangements, sovereign wealth funds and individual portfolios.

Principal Global Investors manages approximately $459.3 billion in assets on behalf of over 800 institutional clients located in over 80 countries as well as retirement plans and individual clients, reflecting our worldwide market reach and experience and our commitment to high-quality research and service (as of September 30, 2019).To find out more, visit us at principalglobal.com.

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