Starwood Capital emerged top bidder for the De Vere Venues business, paying around GBP232m for the British conference centre business. The investor will now be working out how best to integrate its new acquisition with the Principal Hayley and Four Pillars hotel groups bought over the last year or so, to create a major player in the UK conference market.
The deal gives Starwood a conference venue business with 23 owned and leased venues, containing 2,433 bedrooms and 414,000 sq ft of meeting space. De Vere Venues, which claims to be “the UK’s number 1 for meetings, training, conferences and events”, also has a further nine properties where it operates space under franchise or management contracts.
The funds from the deal will substantially be returned to Lloyds bank, which controls the De Vere group following a GBP650m debt for equity swap in 2010. Royal Bank of Scotland and Barclays between them advanced GBP140m to Starwood in support of the purchase.
"We are very pleased to add De Vere Venues to our growing portfolio of attractive and well-placed assets in the United Kingdom," said Starwood Capital senior vice president Kevin Colket. "The company serves a number of long-term, blue-chip corporate customers, and we look forward to building upon its reputation for operational excellence."
The De Vere Venues estate was built around properties designed for corporate training. Many are in rural locations, designed for corporates sending staff on short residential courses. Some of the venues were formerly established or owned by major companies as their own training centres, which De Vere has purchased in recent years. Now opened up for leisure business, the group also targets its facilities at the weddings market.
The conference venue business was last sold in 2005, when as Initial Style Conferences it was bought by investors led by Richard Balfour-Lynn for GBP325m. Balfour-Lynn then bought the De Vere hotels group, and linked the two together under a common brand.
Tony Dangerfield, De Vere Venues chief executive, expressed confidence in his new owners. “In Starwood Capital Group, we have found a leading, global investor that both understands our business and is excited about what we have achieved. Their track record in supporting already successful companies and brands such as ours achieve further growth is well known and we look forward to announcing further developments as the wider group strategy is confirmed.”
Starwood will now be looking at how best to unite the De Vere Venues portfolio with the 23 hotels of the Principal Hayley business, which it bought in February 2013, and the five venues in the Four Pillars group purchased in January 2014. As Starwood Capital notes, it has spent GBP700m in the UK hospitality sector in just over a year, so there will undoubtedly be serious investigation of marketing synergies. A rebrand will be inevitable, as Starwood only has temporary rights to use the De Vere name.
Though primarily hotels first, the Principal Hayley portfolio is heavily marketed to the conference and meeting market. The portfolio has a mix including city centre locations as well as out of town venues.
A break-up is also possible. Some in the conference sector suggest it is over-supplied, and look forward to Starwood consolidating, perhaps turning some of the portfolio into hotels under other international brand flags, or looking for alternative property plays. The Uplands venue in High Wycombe, for example, has the potential to be included as a housing development site in a local plan currently out for consultation.
For De Vere, the sale leaves the group with its hotels, golf and luxury lodges businesses, as well as the modern Urban Village brand. With substantial debt still remaining, further sales are in the pipeline – including the rumoured investment sale of the Grand hotel in Brighton imminent – that should return GBP50m. The six golf lodges are likely to be offered for sale in midyear, with the 25 strong Urban Village chain prepared for sale towards the end of 2014. It is estimated that, even after a successful sale of all parts of the De Vere group, Lloyds will still have to absorb a further GBP200m loss from its involvement with De Vere.
HA Perspective [by Katherine Doggrell]: The Principal Hayley deal was always a consolidation play for Starwood Capital, the building blocks for a future conference-driven business. But the investor will now find that it’s not as easy as slotting everything together and continuing on its way. To pursue the blocks theme, Lego doesn’t fit with Duplo and neither of them fit with that cheap version you can buy in plastic bags down the market.
The choice for the group is whether to standardise as one type, or look at the strengths of each site and decide whether to keep, sell, or develop as a stand-alone. The group will be allowed to use the De Vere name for up to a year, should it wish to.
And above all, it must hope to see a revival in the provincial hotel sector. While there is evidence of a recovery in the regions, it is yet to prove sustained and the conference market remains under stress. The larger venues, with more potential for profitability, are likely to be part of the new conference group, whereas the smaller will be cut. It is probable that some of the properties could be sold on for alternative use (as the excess of room stock in Ireland is seeing) or may be converted to one of the global brands. In the meantime, for De Vere, the sell-off continues.