• City Inn finds favour while Macdonald deal stalls

City Inn, the chain set-up by former Macdonald Hotels founders David Orr and Donald MacDonald, are looking at £330m expansion, according to press reports.

The move shows that there is a flood of money available for proven hotel concepts and proven executive teams.

The article in the London Times newspaper quoted David Orr, City Inn’s chief executive and son of Sandy, as saying he wants to be in all the major European cities.

He is to make his first foray outside of the UK with a flagship 550-room project in Amsterdam. Already in development is a 284-room hotel in Manchester and a 333-room property in Leeds has secured planning permission.

A 600-room hotel near the Tower of London, the second property in the UK capital, is also in the pipeline. And a move into the US was also mooted.

Bank of Scotland owns 50% of City Inn and provides debt via its joint venture funding model. There are currently four hotels in the chain – in London, Bristol, Glasgow and Birmingham.

The appeal of backing a start-up was the track record of Sandy Orr and Donald MacDonald (not the chairman of Macdonald, Donald “little d” Macdonald), in Macdonald Hotels and with other hotel ventures including six Novotels, and the Travel Inn and Sheraton in Edinburgh.

What there seems less money for are sale and leaseback arrangements struck on inappropriate terms. It is an encouraging sign for the wider hotel financing community that the £200m sale and leaseback by Macdonald of 20-plus of its properties is taking so long, hopefully giving Macdonald time to think about a more suitable structure rather than simply pushing for the highest price, an approach taken since February when the deal was first mooted.

Back then, results emerged of Macdonald’s financial performance in the 18 months to September 24, 2004 showing a pre-tax loss of £30m on sales of £168.5m.

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