• PE’s UK exodus

Lone Star has sold its remaining hotels in Amaris Hospitality to LRC Group, which specialises in acquiring pan-European property portfolios, for close to GBP600m.

The deal came as Apollo Global Management was thought to be nearing a deal for its remaining hotels, as private equity groups continued their exodus from the UK.

LRC Group, which has its head office in Cyprus, was founded by Yehuda Barashi and has over EUR4bn in assets under management.

Chris Dimitriadis, director of operations and head of acquisitions UK, LRC, told Hotel Analyst: “While we cannot go into detail on the terms agreed in the transaction, we would like to comment that we are very pleased to have exchanged contracts on this exciting portfolio. This is a major milestone in LRC’s strategy to expand its presence in the UK and to increase its European hotel portfolio.

“We are especially pleased to continue our longstanding relationship with Hudson Advisors and LoneStar with this transaction and are grateful to all persons involved for the exceedingly efficient and professional manner in which the sale process was conducted.”

The group is currently working with Delancey on the redevelopment of the City of London’s historic Royal Mint Court site after LRC bought into the asset by buying the distressed loan in Barclay’s Equinox Eclipse 2006-1 CMBS two years ago.

LRC acquired the outstanding GBP96m senior loan at a 29% discount. The loan was secured on the 450,000 sq ft office complex’s leasehold; Delancey owned the freehold. LRC told us it had agreed a joint venture unlocking the value of the site and obtained planning consent for 800,000 sq ft of office development.

The company describes itself as specialising “in structuring and executing portfolio transactions from distressed situations and turning them around through strong in-house asset management with a solid, demonstrated track record”.

LRC Group has focused mainly on Germany, where it has offices in Berlin in addition to those in Larnaca, London and Amsterdam. The group’s assets are largely in the office sector, with tenants including HSBC, Google and Deutsche Bank.

The end of last year saw Pandox acquire 37 hotels from Lone Star for GBP800m, with 36 of them under the Jurys Inn brand.

Lone Star launched Amaris Hospitality in July 2015 and, at the time, the group had expected to float on the stock market, with Lone Star thought to believe it could have an end value of GBP2bn. Lone Star began acquiring the UK portfolio in early 2014, when it bought a package of debts from IBRC.

Lone Star bought the Jurys Inn hotel chain in a GBP680m deal in 2015 and had since invested GBP100m across the 89-strong portfolio, creating what it has described as “the UK’s best performing, most exciting hospitality investment and management company”. The company has been gradually rationalising its estate over the past two years, with deals adding up to GBP2,2bn, including the latest to LRC.

The company is now left with Shearings, which it took full control of in 2016.

At Apollo, 2014 saw the company establish its hotels platform in Europe after paying a rumoured EUR425m to take on 18 hotels under InterContinental Hotels Group from Ivanhoe Cambridge. The portfolio was a mixed bag of hotels running under Crowne Plaza, Holiday Inn and Holiday Inn Express franchise agreements. Its core is 11 German hotels, with two each in Holland and Spain, and single properties in Austria, Belgium and France. The following year it acquired 19 Holiday Inns and three Crowne Plazas from LRG Acquisition in the UK for GBP1bn.

Apollo has recently been moving away from the more established markets. Towards the end of last year Invesco Real Estate has acquired a portfolio of 13 hotels across Germany and The Netherlands for EUR530m from Apollo Global Management.

Apollo has instead turned its attention to assets in locations including Spain, where last year it was reported to have acquired 20 four- and five-star sites from CaixaBank, for EUR700m. The sale was part of Project Sun, which sees the bank planning to dispose of up to EUR1bn of hotel assets, with two portfolios of 144 hotels, totalling almost 11,000 rooms. Of the total, 112 properties are in loan default. Most of the hotels are four and five star, with 37 in Andalusia and 36 in the Canaries and Balearics.

HA Perspective [by Katherine Doggrell]: With private equity off to pastures new, is the grass greener or it merely that the job is done? Marc Finney, head of hotels & resorts consulting, Colliers International, told us: “What we’ve seen is that, although it was private equity money, these were basically distressed debt funds. They sorted out the assets and sold them on to long-term owners or funds  – so it’s good news in that the distressed debt has now been sorted out. The funds are now looking at other markets, at Greece and further east.

“Are they calling the top of the market? I don’t think so, I suspect in a couple of years –  things have been good for a while now. In the UK we’re still seeing strong operating profits and what we’re seeing from our asset management team is that the budgets for this year are all expecting growth.”

How long this can last depends on factors largely out of the sector’s control. The pace of transactions this year suggests that the uncertainty caused by Brexit has now passed, but that the current stock of investors is in it for the long haul suggests that everyone has accepted that the era of quick profit is over.

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