• Ireland deals boom, market cautions

Apollo Global Management is thought to have acquired the Goldman Sachs-backed Tifco, for a figure we understand to be around EUR450m.

The agreement came as transactions in Ireland continued to build, with CBRE reporting that deals worth EUR263m had been signed in the first nine months of the year, up more than three times on the year, but Tetrarch pulled back from its IPO.

The total value of the Tifco sale was not public, but filings for several Tifco-associated companies suggested Apollo borrowed EUR204m “for the purposes of refinancing the acquisition including the repayment of total funding debt”.

Tifco was the second-largest hotel operator in Ireland, behind Dalata, with 24 hotels, of which 18 were owned, many operating under Crowne Plaza and Travelodge flags, and the remainder under management contracts. The group also has two development sites in Dublin.

Tifco took over the company which operated Travelodge’s master franchise in Ireland in 2016, including a number of assets. Of the Travelodge properties in the portfolio, seven will be sold as freehold properties, with Tifco’s leasehold interest in the other five also part of the transaction.

The new owner of the hotel portfolio will also have the right to pre-fund a 392-room hotel at Townsend Street, in Dublin. Another site at Portobello has planning permission for 150 rooms.

Pre-tax profits at Tifco for the year to 31 December 2017 rose by more than 20% to EUR7.6m, with turnover rising by 7.5% to EUR37.2m, with revpar growing by 10.2%. Of that turnover, EUR35.8m came from hotel operations and EUR1.4m from management contracts. The group’s land and buildings were given a net book valued of EUR89.8m. The properties were last valued in 2016.

The company said that it “continued to actively pursue management contracts during the year” and added that it considered the year-end position of the company to be “satisfactory” with no need to significant changes in activity during the coming year.

Goldman Sachs’ involvement in Tifco dated from 2014, buying its debt from IBRC. Tifco’s minority shareholders include DID Electrical founder Gerry Houlihan and Aidan Crowe.

Tifco has continued to do deals as the sales process continues, signing a franchise agreement with Hard Rock to open a 120-room hotel in early 2020, operating the site itself. Todd Hricko, head of global hotel development for Hard Rock International, said: “Ireland has always been a place close to our hearts, and it only seems right to open a Hard Rock Hotel in Dublin, given the city’s musical roots. This is an exciting opportunity to extend our presence in Europe and elevate the one-of-a-kind offering at Hard Rock Hotels to the next level.”

Enda O’Meara, CEO, Tifco, added: “Dublin’s vibrant cultural scene makes it one of the hottest European cities to visit, attracting over 5.5 million overseas visitors annually. Hard Rock Hotel is an iconic, global brand that will be bringing something very different in its own distinctive style to this vibrant part of the capital city.”

The deal came as CBRE Ireland released figures for the volume and value of hotels traded in the Irish market in the first nine months of 2018, which showed that 12 transactions totalling almost EUR263m between them signed in the nine months to the end of September, with a hotel investment sale totalling EUR17.5m completed in recent weeks. This compared to 23 hotel transactions totalling approximately EUR87m completed in the first nine months of 2017.

The broker told us that they expected to see a good deal of transactions activity going into 2019, backed by strong performance, in particular in the Dublin market.

Despite the enthusiasm, Irish investor Tetrarch has called off a planned IPO, citing market turbulence. It will now revisit the plans, which could raise EUR400m, next year, reported The Sunday Times

The group had already spoken to potential UK and US investors, and appointed JP Morgan and UBS as underwriters. The company has hotel investments, and new hotel development projects in Dublin and across Ireland.

It was thought that it could raise between EUR200m and EUR300m, with capital to be used to fund expansion and offer a potential exit for investors.

HA Perspective [by Katherine Doggrell]: Ireland was, until greater concerns popped up across the Irish Sea, entrenched in some tricky debt and over-expansion issues, whereby it transpired that not even a golf-loving nation like Ireland could sustain a luxury golf resort every 100 yards or so. Action was taken with the creation of NAMA and the toxic issues at the centre of the market have now been cut out. And just in time, it seems, for the market to lose some of its exuberance and add a dose of sobriety.  JLL has forecast that, with Ireland’s legacy receiverships now coming to an end and fewer distressed hotels assets remaining, hotel investment volume was likely to reach EUR500m for 2018, representing 15% to 20% of the total long-term average commercial property market volumes in Ireland.

While this level of transactional activity is down on previous years, it reflected a return to the long-term average. Also, long-term average price per key for Irish hotels was still 28% below peak levels. Tetrarch is expected to be back next year, when it is hoped that nerves on both sides of the sea will have calmed.

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