KSL Capital Partners is reported to have acquired the Village hotel chain from the De Vere Group, for around GBP480m.
The news came as KSL reaffirmed its commitment to its Hotel du Vin brand with the purchase of the Cannizaro House hotel in London for the conversion to the flag, with rumours persisting that it is also planning to buy the Great Scotland Yard site for Malmaison.
The deal with De Vere brings to an end a protracted sales process, which has seen a number of potential buyers step into the ring. KSL is thought to have outbid investors including Starwood Capital, KKR and Blackstone Group, beating the GBP450m the chain had been expected to sell for.
For De Vere, the deal is the latest move in what has been a significant cut in size since its peak, as it works to reduce its GBP1.1bn debt with Lloyds. The bank has controlled the group following a GBP650m debt for equity swap in 2010.
Earlier this year saw the GBP232m sale of its Venues business to Starwood Capital, and, with reports suggesting that the sale of six De Vere golf resorts, including Cameron House, to Bain Capital’s Sankaty Advisors for a rumoured GBP160m is due to be finalised, the sale of the 25-strong Village Urban Resorts brand means that the break-up is complete.
KSL itself has already been involved with the company, buying the Belfry, which is currently managed by De Vere. KSL is also thought to have bid on the group of six golf hotels, which it is likely to have folded into its international golf resort portfolio. The future for Village is unclear, although, with a series of refurbishments in 2012 as it was prettied up for sale, a major capital spend is unlikely to be the first point of business.
KSL made its presence felt in the UK last year with the GBP200m purchase of Malmaison and Hotel du Vin from MWB Group. The company said at the time that it would provide significant funds to help with refurbishments, and help support further expansion internationally. News from the brands has since been limited as the new owners took the helm, but recent months have seen Village CEO Gary Davis telling observers that the company was looking at adding two sites for each brand, with due diligence underway on five sites, including one in London.
Speculation suggests that one property is the site of the former headquarters of Scotland Yard, which is currently being converted into a luxury hotel by Galliard. Reports have suggested that KSL was to pay around GBP200m for the site, which is expected to be completed in 2016. As previously reported in Hotel Analyst, Galliard is thought to have held talks with representatives of sovereign wealth funds and ultra high-net-worth private investors from the Gulf states, including Qatar and Kuwait, but with KSL leading the running.
While the sale process at Scotland Yard continues, KSL has acquired the Cannizaro House hotel in London for a figure believed to be around GBP20m. The site will be the 16th for the Hotel du Vin brand and the first for the flag in London. It will reopen as part of Hotel du Vin in 2015, following a GBP1m refurbishment. The deal comes 20 years after the opening of the brand’s the first site, in Winchester.
Gary Davis, CEO of Hotel du Vin, said, “We are delighted to continue to grow our portfolio of hotels with the opening of our first hotel in the prestigious location of Wimbledon, London. Set within beautiful grounds the hotel is well connected to central London making it a great place for a leisure break, a business meeting or a wedding. We will invest a further GBP1m into the hotel over the coming months to bring our own style of chic accommodation and destination dining here and we look forward to becoming a vital and integral part of the local community.”
Cannizaro House, which dates back to 1819, has played host to Lord Tennyson, Oscar Wilde and the last Maharajah of the Punjab. KSL must hope that its auspicious past will herald in a more vibrant future for a brand which has so far failed to meet its early promise.
HA Perspective [by Chris Bown]: The Village chain was a worthwhile prize. Its hotels are in good condition, trading well, and come with the benefit of a modest development pipeline too. Health clubs and Starbucks cafes help bring in a constant stream of visitors; while the recent marketing of the brand has effectively already distanced it from the De Vere name.
One thing that is missing, however, is any immediate synergies, in terms of customer offer, with Malmaison or Hotel du Vin. The addition will nevertheless give KSL’s UK management platform more to handle; expect websites to start cross selling, in just the same way as Starwood Capital has done with its Principal Hayley, De Vere Venues and Four Pillars sites.
In common with the other brands, Village also lacks London presence, something the KSL management team will now undoubtedly be considering alongside their search for sites in the capital for Hotel du Vin and Malmaison.
Additional comment [by Andrew Sangster]: The sale of Village Urban Resorts marks the end of another extraordinary piece of heavy lifting by De Vere CEO Andrew Coppel. Having spent 10 years at the basket case that was Queens Moat Houses, most would have walked away from De Vere. But Coppel has squared up to the job and this time delivered the sell-off in four years.
The differences between De Vere and QMH are instructive as to the type of recession we have had this time around. While QMH’s problems had been initiated by the discovery of dodgy accounting, the net effect had been the same as at De Vere: over-leveraging.
But the banks this time appear to have given Coppel more latitude and he has delivered to them what looks to be a better result.
In both cases, Coppel took over from hubristic management and faced what many thought was an impossible task in trying to turn around the businesses. A tough operating discipline has, in both cases, seen the businesses survive, albeit after significant write-offs (about £1bn in the case of QMH and a £650m debt for equity swap at De Vere).
Only those privy to the accounts know the full extent of the pain but without Andrew “Lazarus” Coppel both businesses might well have been forced into a much more painful receivership process.
Coppel’s only problem now is that given the recovery there looks to be no obvious candidate for his healing magic. Or is there…..