• Hotel funds find favour

Hotel funds are all the rage. David Michels, the ex-CEO of Hilton Group, is reportedly looking at creating a £1bn fund.

And news has emerged of another fund, worth Eu500m, being set up earlier this year by Bank of Scotland and Capital Hotels Group.

The Michels project is still in the process of being created but he has been doing the rounds of City institutions with his former CFO Brian Wallace in tow along with an unnamed property industry big wig.

Somebody close to the putative fund was obviously keen to garner a bit of publicity as separate speculative reports appeared in both the Times and Financial Times on the same day. Michels is unlikely to see the role as full-time, however, as he has been busily collecting a portfolio of non-executive directorships. He now sits on the boards of retailers Marks & Spencer and Arcadia, property group British Land (which is shortly to become a REIT), airline easyJet, and most recently, at US company Strategic Hotel Capital.

Earlier this year, Michels criticised UK shareholders for being timid and allowing too many companies to be bought by foreigners, which suggests he is in no hurry to return to the public arena at the helm of another company.

Not surprisingly, his main cause for complaint was that he was unable to leverage up to buy Hilton Hotels Corporation while the US rival found it relatively easy to secure suitable funding to takeover the company he was running.

The prevailing culture in the UK for public companies was becoming anti-risk, he moaned. Equity investors, rather than debt providers, were singled out as the problem.

It is perhaps no surprise then to find it is Bank of Scotland that is supplying Eu412.5m to kick start Hibernia Hotels BV. The equity investment in the fund, the balance of the Eu500m, is being provided jointly by BoS and Capital Hotels.

The first acquisition by the fund was to buy the existing 11-strong estate of Capital Hotels across France, Germany and the Netherlands for Eu235m. It means there is around Eu270m of firepower still left to buy both leased and managed hotels across Europe. Properties in strong locations with international operators are being sought.

Capital has separately acquired a 15% stake in the luxury resort Soneva Gili in the Maldives, managed by the Six Senses group. Capital will continue to look for hotel and resort acquisitions in Asia outside the scope of the JV with BoS.

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