• Aman breaks free from DLF

Indian luxury hotel chain Aman Resorts is back in the hands of its creator, Adrian Zecha, after being sold by DLF.

The sale, forced by indebted property conglomerate DLF's need to reduce borrowings, puts Aman in a position to move forward once more, after a period in the hands of an owner under financial pressures.

The deal was struck for USD358m, taking the Aman Resorts holding company Silverlink Resorts Ltd out of the DLF portfolio, though the company will retain the group's Lodhi hotel property in Delhi. Zecha was backed by an unnamed group of private investors, led by Peak Hotels & Resorts in the buyout, concluding a transaction that was first officially mooted in late 2012. Peak is backed by Omar Amanat, an investor with interests in entertainment and other business sectors.

In addition to finding the purchase price, the buying investors have also set aside a "substantial capital reserve account" which they have said will be used for immediate investment in the existing portfolio and in new properties.

For DLF, India's largest real estate company, the deal means an exit from the hotel sector. The company previously expanded into a variety of business sectors, including wind farms, insurance and export, but built up a USD4bn debt pile in the process. It is now refocusing on its original real estate business, and making progress in reducing its debts. Executive finance director Saurabh Chalwa said of the deal: "This is another milestone in DLF's strategy to focus on its core business of real estate and divest non-core businesses and assets."

The sale has been mooted for more than three years, and has attracted interest from a variety of potential bidders including Chinese travel conglomerate HNA, which eventually opted to take a stake in Spanish hotel group NH, after running the rule over Aman in 2012. Qatar's sovereign wealth fund, and French luxury group LVMH were also linked at various points with a potential purchase. Late in 2012, a deal with Zecha was announced, suggesting a price of USD300m, but the management buyout failed to complete as Zecha was unable to tie up financial backing.

The Indian stock market reacted positively, sending DLF shares up 4% on the news.

Zecha, an Indonesian hotelier, co-founded Regent International Hotels and then Aman Resorts, and commented: "I am delighted to partner with Peak as they share my vision for Aman's future growth and are committed to sustain our company's reputation for many decades to come."

DLF bought into Aman in late 2007, paying USD400m for the business and assuming USD150m of its debt. According to local analysis, with the Delhi property worth USD120m being retained outside the sale, the deal gives DLF a modest return for its involvement over six years.

At the time of the 2007 deal, Aman was, despite a strong reputation for having some of the best luxury hotel properties in the world, loss-making. The deal was struck at USD357,000 per room, a level at which some thought it was, nevertheless, something of a bargain. DLF was looking to expand its interests into hotels, having previously signed a deal with Hilton to grow its flags across the country, as well as building properties for other operators including Four Seasons.

The Hilton deal, which promised a pipeline of 75 hotels for the international brand, unravelled in 2011 when DLF bought out Hilton's 26% interest in the venture. 

Back in 2007, as today, Zecha hoped his new partners would help grow the business, which at that stage had 22 hotels. A new property in Lodhi, which DLF is to retain in the latest transaction, was the first addition, with three other openings in the intervening period taking the portfolio to 26 properties.

Aman Resorts was launched in 1988 with a hotel in Phuket, Thailand and today the chain has 26 resorts in 18 countries. Recent additions include Aman Venice and Vietnam.


HA Perspective [by Katherine Doggrell]: The most frequently-used word when talking about the Aman deal has so far proved to be “finally” and one can, one suspects accurately, imagine this said with a sigh of relief at DLF HQ. The company has been trying to exit the sector for some years, in the most trying of times, and can now concentrate on its less-complex property holdings, just as the market is showing signs of recovery.

When DLF acquired the group, for what was pegged – in 2007-land – as a bargain price, it was enraptured with the hotel sector, having also signed a deal with Hilton to roll out its brands in India.

But while DLF kicks itself, Aman can look forward to a brighter future, under founder Adrian Zecha. The group’s most recent opening was a resort in Greece, which it described as complementing Aman Sveti Stefan in Montenegro and Turkey’s Amanruya. The brand has previously said it was committed to worldwide expansion and was always “on the lookout for exceptional circumstances in which culture and history combine strongly in a unique natural environment”.

The partners of Aman Resorts Group have committed to what as has been described as a “substantial” capital reserve account to immediately make investments in existing and new properties. Nader Tavakoli, chairman of Aman Resorts Group, said that the group was committed to “ultimately, realising the significant growth potential of this best-in-class business as we continue to deliver superior, unforgettable experiences to guests worldwide”.

The luxury sector has proven its worth during the downturn, particularly at the very highest end, with demand from Russia and China’s newly-wealthy keeping the marble quarries of the world in business. This is unlikely to have been missed by Zecha’s backers.

Zecha previously left Aman because of a dispute between shareholders Clement Veturi and Colony Capital over the future development of the brand, which called for Amanresorts to act as management for a group of Colony-owned hotels. He returned in 2000, but one wonders now what the new owners have in mind once they have stabilised Aman and set it back on a growth track. And whether Zecha will refuse again to involve himself in management, should it come up.

Zecha will, in the short term, need the full commitment of his backers to ensure that Aman holds its position at the very highest end of luxury and that the enthusiasm for worldwide growth does not dull the product. Zecha was 80 years old last year. One doesn’t want to criticise his exercise regime, but investors hungry for expansion can be hard beasts to tame.

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