Starwood Capital has snapped up another UK hotel chain to add to its collection. The latest purchase is Four Pillars, which has the potential to be added into the company’s other recent UK hotel sector purchase, in due course.
With Four Pillars, Starwood gains a 683 room portfolio of five owned and leased hotels, and one managed hotel. A mix of styles, the three and four star properties are all based in the Oxfordshire and Gloucestershire area, west of London.
The largest of the portfolio is a modern 328 room venue at Cotswold Water Park, with facilities for larger conferences and events in a rural setting. The property includes 63 self catering apartments, which are promoted for short breaks. Also in Gloucestershire is Tortworth Court, a Victorian mansion with 190 rooms.
In Oxford, Four Pillars has the 174 room Oxford Spires, and smaller 84 room Oxford Thames, which has recently undergone a GBP2m extension and refit. Outside Oxford, the company has an 87 room contemporary hotel in Witney, and manages a three star, 66 room hotel in Abingdon.
"Four Pillars offers high-quality, full-service, four-star hotels in superb locations," said Kevin Colket, Senior Vice President at Starwood Capital Group. "We look forward to building on the company's operational excellence and its longstanding client focus."
Four Pillars has been through several changes of ownership in recent years. In 2007, it was bought by RREEF, a Deutsche Bank investment vehicle, in a deal reckoned to be worth GBP121m. The deal – when management had only initially sought a sale and manageback of their properties – was indicative of the heated investment market of the time. For RREEF, this was a new step into the UK hospitality sector.
At the time, Four Pillars had five hotels and there was talk of expanding, with RREEF’s Alistair Dixon stating: "Through our partnership with the Four Pillars management team, we have created a solid platform for future investment and intend to build a substantial portfolio over the coming years."
But the planned growth was not to come, as the market peaked. With conditions becoming tougher, RREEF’s banking backers placed the Four Pillars parent company into administration in 2009. Consultants PwC reviewed alternative funding options, but faced with only low offers, the banks opted to stay on board and take an equity interest. In summer 2013, investment consultancy Canaccord Genuity was reportedly appointed to review the options once more for the Four Pillars business.
The deal is the second purchase in the UK hotel market for Starwood, which in early 2013 bought the Principal Hayley group. That deal gave it a 23 strong portfolio of mainly large, city centre hotels, across the country – and one in France – with many of them local historic landmarks that are strong on conference facilities.
At the time, Starwood Capital chief executive Barry Sternlicht called the move “an exciting investment in the European hotels and conferences sector that provides us with a great platform to expand further in Europe.”
Comparing the geographical spread of the two brands, the Four Pillars venues provide an ideal fit into the Principal Hayley portfolio. The latter is strong in the north of the UK, has a good presence in London but currently offers clients just two hotels west of London. A rebrand could well be on the way.
HA Perspective: [by Katherine Doggrell] There have been several times in recent history where the words: “no-one will ever conference again” have been uttered. After 9/11, shares in teleconferencing companies soared on the belief that business people were too shaken to travel and, post-2007, corporates were seen as being profligate if they hit the road. Mini bars across the developed world grew dusty and filled with cobwebs.
So when Starwood Capital acquired Principal Hayley, questions were asked. Desmond Taljaard, then-head of asset management, Europe, Starwood Capital Europe Advisors, described the portfolio as “agglomeration rather than conglomeration. They’re not necessarily cohesive units, but we can make something out of it. If you’ve got a Lego starter pack it is easier to build a house than someone who hasn’t”.
It was also felt that the portfolio generated good solid cashflow and there was a lot of scope for Starwood Capital to pluck those low-hanging fruit. This is echoed in the Four Pillars portfolio, which should also benefit from the recent improvements in trading in the provinces.
With the likes of Marriott International revamping its meetings offering and launching an online booking and inspiration website, it looks as though it’s time to start thinking about the best way to build a bridge that can take the weight of an egg using only straws.