• Malmaison linked to London site

Malmaison has been linked to the site of the former headquarters of Scotland Yard, which is currently being converted into a luxury hotel by Galliard. KSL Capital Partners, which acquired Malmaison and Hotel du Vin last year, is known to be looking at sites around the UK as it revives the brands.

Reports have suggested that KSL was to pay around GBP200m for the site, which is expected to be completed in 2016. The company declined to comment, although it is known that the group is conducting due diligence on a number of sites in the UK for both the Malmaison and Hotel du Vin brands, including in the capital.

The Daily Telegraph reported that Galliard had held talks with representatives of sovereign wealth funds and ultra high-net-worth private investors from the Gulf states, including Qatar and Kuwait, but that KSL was leading the running.

Galliard acquired the site in December last year, with CEO Stephen Conway commenting at the time: “Our vision is to create one of London’s most outstanding five-star hotels. It really is a ‘blue-chip’ building with grand architecture, a fascinating history and large dramatic interiors.” The 26-month construction programme is expected to cost over GBP50m, with Galliard working alongside the Crown Estate on the project.

KSL bought Malmaison and Hotel du Vin in March last year, acquiring it from the administrators from previous owner MWB Group for a figure thought to be around GBP200m. KSL said it would support the development strategy initiated by CEO Gary Davis, which has taken the group to 28 hotels, the latest a Hotel Du Vin in St Andrews.

KSL’s plans for Malmaison included an extensive renovation programme and expansion within the UK, European and international markets. Richard Weissmann, KSL partner, said at the time of the deal: “With an exceedingly loyal following, we believe each brand has tremendous potential for further growth and expansion.”

As previously reported in Hotel Analyst, the sale of the two hotel chains was driven by a spat between shareholders of the portfolio’s parent company, MWB Group. A dispute between the group company and subsidiary MWB Business Exchange, which provides serviced offices, could not be resolved by management, forcing the administration.

Earlier, in 2011, Malmaison had completed the sale and leaseback of five hotels, helping to cut debt to GBP180m. Principal lender Royal Bank of Scotland also agreed to extend its GBP282.5m debt facility forward until the end of 2014.

Malmaison and Hotel du Vin have endured a rocky history, with the failed Vector Reit in 2007, followed by a lengthy attempt at a sale meaning that the development of the two chains stayed around the 20-site mark for some time.

During that time the company had looked at cities such as Paris, Rome, Barcelona and Amsterdam for Malmaison, none of which came to fruition. The failure of the group to gain a foothold in Europe was thought to be one of the reasons behind the exit of long-term CEO Robert Cook, although this was later denied.

One possible move for Malmaison and Hotel du Vin came in 2008, when it was rumoured that Marriott International was considering a deal to buy the pair, with a view to expanding them in Europe. It is thought that the then CEO Bill Marriott pulled out at the last minute, with the US group preferring to create its own brands in the boutique and lifestyle spaces.

This has proven to be the case. Two years later Marriott International went on to partner with AC Hotels to create ‘AC by Marriott’, which has since launched in the US. The company then went on to launch Edition in 2011 alongside Ian Schrager and in the past month has opened the first hotel under its affordable lifestyle brand, Moxy, in Milan.

The group has committed itself, announcing in June that it was setting aside a large portion of its upcoming expansion to the luxury and lifestyle categories. “The luxury and lifestyle category is stronger than ever and we see demand continuing to rise worldwide,” said Marriott president and CEO Arne Sorenson.  “Next generation travellers are poised to comprise more than 60% of our business over the next four years, and already represent a broad spectrum of diverse cultures and lifestyles that view travel as an important way to enrich their lives.”

Marriott International’s decision not to acquire Malmaison and Hotel du Vin proved not to be a loss, but their time in the wilderness has meant there is catching up to do.

 

HA Perspective [by Chris Bown]: London’s hotel market has seen a number of moves in recent weeks, as the brands jostle for position in a market that seems to keep delivering demand, almost whatever the supply. Singapore’s UOL has bought into a development, to launch its Pan Pacific brand, while Chinese owner Reignwood has signed Four Seasons to manage its new hotel. But, while those two are out of the market, Malmaison will have plenty of competition for the Scotland Yard hotel – and Galliard will be looking for top money from the buyer. Elsewhere in the capital, there are still plenty of hotels in the development pipeline, should KSL wish to add flagship properties to either of its brands.

However, both Malmaison and Hotel du Vin trade on their quirky premises – old hospitals, asylums, breweries and warehouses. Such premises can be hard to find, and complex to convert.  Malmaison’s Oxford hotel is a former prison, so the brand fit for the nation’s most famous former police station will not be lost on its American owners.

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