The transactions market continued to show strength heading towards winter, with the possible sale of Tifco Hotel Group and the disposal of two Ibis Hotels by Nine Group.
The comments came as delegates at BLP’s Annual Hotel Conference heard that the current appetite from buyers was for single assets.
In Ireland, Goldman Sachs is thought to be in talks with a private equity group to sell the 26-strong Tifco Hotel Group, which includes hotels under a number of brands, including Hilton, as well as operating the Travelodge franchise in Ireland. The portfolio has been valued at just under EUR20m and sources close to Hotel Analyst suggest that, given the strong trading fundamentals in Ireland, competition for the portfolio has been enthusiastic.
The rumours came as Nine Group announced the sale of two Ibis hotels, in Birmingham City Centre and Ibis Coventry South, to the Luxmi Group, based in Calcutta. Henry Jackson, partner, Hotels & Leisure at Knight Frank said: “We facilitated the sale of these assets for Nine Group of Hotels in an off market deal. With sterling at a record low and hotel trading performance remaining strong, the regional hotel market is attracting considerable interest from overseas purchasers. The sale of these two assets for Nine Group of Hotels has seen Luxmi Group complete its first hotel acquisition in the UK with plans to acquire further real estate assets.”
The hotels will be run by Luxmi’s youngest director Neelabha Chatterjee who said: “These are the exact hotels one would want as a first investment. Birmingham and Coventry are growing at a steady pace and have a lot to offer. The aim is to keep providing the best possible service in the area.
BLP’s annual hotel conference saw attention move towards single asset transactions, while noting that there were still some portfolio deals yet to play out, most notably Project Dragonglass, CBRE Hotels’ marketing of a portfolio of six Hilton hotels, one of which is in London. It is thought that the broker has signed over 70 NDAs from potential buyers all over the world, with the first round of bidding due at the end of this month.
Appetite seems to be for single asset transactions, said Karen Friebe, partner, hotels & leisure, BLP, leading a debate between the owners and franchisors as two which model was most appealing to the large number of investors looking to come into the UK, taking advantage of the weak pound.
Paul Harries, the former finance director of Generator, which was sold earlier this year, told attendees that those companies which were asset rich, with a brand, found it harder to sell the idea of value potential to a potential buyer, who was likely to be focused on the value of the assets.
In contrast, Sabina Wyss di Corrado, director of acquisitions & development, PPHE Hotel Group, said that being asset-light made it harder to “feed the beast” of expansion, commenting: “Owners find the operator more credible if they contribute cash, not guarantees”.
In terms of development, David Bailey, senior director, CBRE Hotels, said: The UK remains in high demand. Development activity remains high, there are concerns, particularly in London, about the volume of supply coming into the market – we have a great knack in the hotel market to pile kit into markets which are doing well.”
Comments which were underlined by the news from Bournemouth that Malmaison had signed to open a 100-room hotel in the city, due in around two years’ time. The hotel, which is part of a mixed-used scheme which will also feature residential units, is being developed by Fresh Lime Developments.
Michael Bibring, founding director, FLD, said: “We have always wanted to bring an iconic hotel to this important site and they really don’t come much more aspirational than Malmaison with its style panache and unique creativity.”
Guus Bakker, CEO, Malmaison Hotel du Vin, added: “Bournemouth is a fantastic destination. The vibrancy of the town means that it is also a perfect location for the Malmaison brand. We look forward to working closely with all local stakeholders to bring this exciting opportunity to life.”
HA Perspective [by Katherine Doggrell]: The theme of this year’s conference season has very much been ‘are we at the top yet?’ and how soon are we going to come screaming down the other side. For the UK, which was sick of Europe not making it feel special enough, the market is now a special case, being fed by the weak pound.
But, as PwC pointed out at the start of the season, the upside from that will start to wear off in performance and this will surely trickle down into the transactions market. CBRE’s efforts with Project Dragonglass – one can only imagine a future career in naming hurricanes – have seen it market the hotels as a portfolio and as single assets. Not all, it seems, are in a hurry to grab too much of a chunk in the UK hotel market.
Speaking at the Hotel Distribution Event, hosted by Hotel Analyst in London, Steffen Doyle, managing director, co-head of European real estate investment banking, Credit Suisse, told attendees: “Debt is available and backed with capital – there’s USD400bn of private equity capital that needs to be deployed”. The signs seen so far by Hotel Analyst suggest that private equity is looking to mainland Europe, rather than the UK.
Perhaps looking for greater commitment from the operators in unusual times, Hilton’s Graham Dodd told the assembled that the company had seen owners look to shift franchised contracts to managed. All hail the superior management skills of Hilton, we don’t doubt, but also a sign that tricky times often call for some hand holding, as caution grows across the board.