• RBS signs deal for Whitbread Marriotts

Royal Bank of Scotland is set to finally unload the 47 Marriotts, all in the UK, it bought last April from the joint venture between Whitbread and Marriott.
   The details of this latest £1.06bn deal reflect just how ambitious investors are becoming as hotels enter the mainstream of property asset classes.
   The consortium of investors, led by Israel's Delek but with Ireland's Quinlan Private as the largest single investor group, has signed a deal that is set to complete by the end of March.
   Funding is split £856.1m debt, £202.1m equity, giving a LTV of 81%. According to a statement by Electra Real Estate, an Israel-based property group that is to hold 9.9% of the equity, the 8,456 rooms in the chain are expected to generate an average net income, less expenses, of £78m over the next 10 years.
   This yield, of just below 7.4%, does not take into account the increase in capital value of the holding. In an unusual arrangement, RBS, the debt provider, has negotiated a deal whereby it will receive 20% of any profits of the future sale. The profits will not take into account any current receipts or an amount that reflects an increase in value of 2.5% per annum until the sale.
   RBS paid £951m for 46 of the hotels and about £30m to buy the remaining one property separately. An additional line of credit of up to £62.2m is being provided by RBS to fund further investments on the hotels. This, again according to Electra's statement, was \sufficient to finance all the investments that will be necessary in the coming years\.
   The biggest single investor is Quinlan Private with a holding of 45% to 50%. Delek Real Estate, a subsidiary of Israeli conglomerate Delek, is taking 17%, Israeli bank FIBI 5% and another Israel-based investor Dorea 3%.
   Igal Ahouvi's Blenheim Property Group also has a substantial interest. Delek and Electra are co-investors with Ahouvi in the 16 UK Hiltons bought for close to £400m just over a year ago.
   As with the Hiltons, the investors in the current deal are happy to take on management contracts. Marriott has been signed-up for 30 years with an option to extend for a further 10.
   Delek now owns interests in 63 UK hotels. These, together with its interests in 131 car parks and 10 office buildings, are to form part of an offering on London's Alternative Investment Market. Delek Belron, the international wing of Delek Real Estate, is expected to offer shares representing about 20% of the company.
   Delek Belron has also formed an Eu100m fund with Israel's Fattal Hotels chain to buy European hotels. The fund aims to invest up to Eu500m in 20 hotels over the next couple of years. Central and Eastern Europe is the focus.

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