• Brehon builds in Ireland

Private equity investor Brehon Capital Partners has snapped up its fifth Irish hotel. The latest was the Killashee House Hotel in County Kildare, bought for EUR13m in partnership with Midwest Holdings.

The hotel had been placed in administrative control in May, being a profitable business apart from its debt load. A well-known wedding venue, it hosted 160 such events in 2013. The property was purchased from NAMA, which took control of Faxhill Homes, the parent company that owned the asset, in June. 

The Killashee deal follows the acquisition of the Marker in Dublin docklands, the Powerscourt in Enniskerry, the Mount Juliet in Kilkenny and Mount Wolseley in Carlow. The company is also reportedly finalising a further deal to buy Ireland’s largest resort hotel, the Citywest, for around EUR30m.

Brehon was established in 2011 and has private equity backing; to date, it has built an asset base of around EUR400m. Recently, the company announced that Paul Connolly, founder of Connolly Capital and an adviser to Credit Suisse, has been appointed non-executive chairman. 

Brehon’s hotel buys appear to be opportunistic, rather than an attempt to build a chain. But speaking to the Irish Times, Brehon’s Kevin McGillycuddy commented: “All the hotels we’re involved in have unique attractions. We feel we can make incremental improvements to them.” This will include cash investments to improve the properties, probably adding up to between EUR30-40m across the five. “At senior management level, we have the ability to identify the synergies between the type of providers at the hotels to improve margins where we can.” The latest purchase, Killashee, appears to have cornered a substantial slice of the local weddings market, having hosted more than 160 functions in 2013.

The Powerscourt signed under Marriott’s flexible Autograph brand in January 2013, having dropped its previous Ritz-Carlton branding when Brehon bought the property for EUR200m; at the time, a renaming was being considered. The Marker runs with a listing under boutique umbrella brand Leading Hotels of the World. Interstate manages both the Powerscourt and Marker hotels.

The company has around EUR100m of further equity to invest over the next 12 to 18 months. “We’ll look at hotels when those opportunities come up,” said McGillycuddy. “The next opportunity could be in the office or residential sector. We are comfortable in the hotel space, but it’s important to state that it’s not our primary focus.”

Around EUR200m of deals were done in the Irish hotel market in 2013, and this year that volume is expected to be considerably ahead, as owners and NAMA release stock to eager buyers. In May, Ulster Bank revealed Project Nadal, a plan to dispose of up to 10 Irish hotels, including two Radisson Blus in Dublin and Athlone, with a summer marketing campaign scheduled in. As well as Brehon, buyers include Dalata, which recently purchased a stake in the Ballsbridge and Clyde Court hotels in Dublin, both ultimately still in the hands of Ulster Bank parent RBS.


HA Perspective [by Chris Bown]: Brehon says its involvement in hotels is opportunistic rather than strategic, and it will probably concentrate more on other property sectors. But for now, it is an active buyer in a market where plenty of opportunities are due on the block over coming months. For those with the cash and a positive attitude to some risk, the deals are there to be done.

It has said it may well stay as an investor over the medium term, and has ruled out floating a Reit structure. But if the capital markets start to get their appetite for hotel property back, then Brehon has suggested it could look at an institutional fund structure for the assets.

Brehon’s swift move to pick up a selection of largely independent hotels is in contrast to the progress of a similar initiative to link up Irish independents by Royal Bank of Scotland and asset manager Michels & Taylor. It was in September 2013 that the pair announced they were planning to draw together at least 25 hotels the bank had come to own, under a new brand. The big reveal has yet to be announced.

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