• Investors maintain luxury focus

The tradition of slipping news past unsuspecting hacks busy with the festivities of the season continued at the close of last year with the sale of both the Grosvenor House Hotel and Le Richemond Hotel in Geneva.

Unlike some such holiday stories, the news was good for the sector, as ongoing proof that the luxury market remains attractive to international buyers looking for a home for their money. Despite the lack of availability helping to maintain prices for trophy properties, the buyer of the Grosvenor House, Sahara India Pariwar, is reported to have felt that it got a good price with the £470m deal.

 

The deal, thought to be the largest ever single asset transaction in Europe, represented a yield of just over 5%, according to sources close to the situation. In keeping with the current climate of limited debt, it was thought to have been an all-cash deal.

The hotel has been on the market since 2007, with figures around the £700m level being sought for it. Two failed auctions later, the sale marks the end of an era for the hotel industry, with hotel's disposal the last in the group of Le Méridien properties included in RBS's £1.25bn 2001 sale-and-leaseback deal, which helped to popularise the structure in the sector and heralded the era of the bricks and brains split.

The hotel was re-let to Marriott International in 2003 when Le Meridien went into receivership and the company will continue to manage the site, reportedly jointly with new owner Sahara.

Sahara said that the deal was part of major expansion plans for the group, which also owns the Sahara Star hotel in Mumbai and the Aamby Valley township in western India. It plans to add restaurants, a business centre, a night club and other facilities to the Grosvenor House.

The deal came as Rocco Forte and Family Ltd  – a company jointly owned by Rocco Forte and family and the Bank of Scotland  – sold Le Richemond, in Geneva, to an investment-holding company represented by Cedar Capital Partners for around £100m.

The Rocco Forte Collection will continue to operate the hotel under a management contract until at least the summer of next year, with a potential longer-term management relationship being subject to discussion and agreement between the parties.

Le Richemond, a 109-room luxury hotel, was opened in 1875 by the Armleder family and purchased in 2004 by Rocco Forte and Family (Luxury Hotels) Ltd. The proceeds from the sale will be used to repay debt in the joint venture company.

Sir Rocco said: "We said a year ago that we intended to sell Le Richemond hotel but only to the right buyer and at the right price. We are very satisfied with this transaction and it gives us the opportunity to develop a longer-term management relationship with a well respected hotel investment firm."

The deal was part of ongoing efforts by the group to cut debt and it looks to drive its expansion through management contracts. It said that it expected to announce more additions to its portfolio this year.

 

HA Perspective: What seems to be two similar deals are in fact quite distinct. The Grosvenor is essentially a property deal with Sahara simply buying a rental stream thanks to Marriott's lease on the property while Cedar's client has bought a hotel business with the right to terminate management.

It is not at all clear how Sahara intends to implement its plans for the Grosvenor. It is to be hoped that the comments made to the press about "joint management" refer to Sahara's role as an asset manager of the property. If not, Sahara and Marriott look set for an unhappy partnership.

 

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