Hotel Analyst
Economic remission rather than
recovery The move to restructure the UK’s ailing hotels has sped up, with a slew of former Von Essen hotels being sold, debt restructuring plans at Jurys Inn and a potential resolution to the ownership battles at Maybourne Hotel Group.
The increase in activity, as banks
lose patience and take action, looks likely to grow as concerns build about the economic health of the Eurozone and its impact on trading and financing in the UK. The division of the Von Essen
estate continues apace. Buyers have included The Eden Hotel Collection, Longleat and Bath Priory, the company owned by Andrew Brownsword, which picked up a package of four hotels. So far no sale prices have
been confirmed. The estate was reported to have been suffering from a lack of investment, which is likely to have meant tough negotiations from buyers, with jewel in the crown Cliveden thought to be one of the more dilapidated. The Times also reports that
Andrew Davis, founder of Von Essen Hotels, owns a so-called ‘ransom strip’ of land at Ston Easton Park, his favourite of the portfolio, which could delay its sale.
The land means that Davis could
control access to the site. However, the newspaper understands that Lloyds Banking Group
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and Barclays are investigating whether, by splitting off the land into his private ownership, Davis may have abused his position as a director of the company. Meanwhile, Jurys Inn is
reported to have written down the value of its assets by nearly £440m last year, as its lenders are thought to have called in PricewaterhouseCoopers to find ways to restructure debt at the three-star hotel chain, with a debt- for-equity swap thought to be the most likely conclusion. Jurys Inn was bought in 2007
for E1.2bn by a consortium led by Derek Quinlan, while an Omani investment fund bought a 50% stake a year later. The group’s assets are valued at about £340m, while it owes £616m to lenders led by Royal Bank of Scotland Group. Trading at the group is thought to be good, with sales of £138m in the year to December 2010, up 5.9% on the prior year. Maybourne Hotel Group, which
shares a Quinlan connection with Jurys Inn, continues to boost lawyers’ fees, with the Barclay brothers reported to be attempting to buy the debt associated with the 36% stake of the Maybourne Hotel Group owned by Paddy McKillen.
HA Perspective: The companies involved in the UK’s most high-profile hotel property restructurings are as different as they are similar. A group of faded country houses, a chain of three star hotels and some of London’s most famous hotels. What unites them is debt and the need to deal with it. Right now, however, the economy appears to be in remission from recession rather than recovery as the autumn forecast from the European Commission showed. Growth for
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the whole of 2012 is forecast to be just 0.5% as an average across the EU, and just 1.5% in 2013. The OECD forecast at the end of October just 0.3% growth for the Eurozone in 2012. Only those patients refusing
treatment for their debt disease from their bank doctors – or who the banks refuse to treat – are dying. The problem for patients is that the current sovereign debt crisis is causing banks to continue to deleverage rather than expand their balance sheets as would normally happen a couple of years after a recession. Treatment is increasingly likely to be withdrawn. A report from Nomura suggests
that the deleveraging is going to be large, particularly in the Eurozone. Nomura said the maths equates to Eurozone banks selling assets worth E1,000bn. Nomura added that these assets are unlikely to be in domestic markets but among the E6,000bn outside the Eurozone. The US has the biggest chunk,
at E1,800bn; the UK is next with E1,600bn; and then Eastern Europe at E1,000bn. In amongst these enormous numbers are some significant hotel loans. The NAMA travails have been well flagged but expect more from the Germans, the French et al. Nurse!
Interstate continues
global growth Interstate Hotels & Resorts has entered into a long-term management agreement for the 136-room Four Points by Sheraton Kecskemét, located in central Hungary.
The deal marks Interstate’s first Eastern European hotel and is the group’s tenth country outside the US, as the company continues to expand rapidly outside its home territory. In addition to managing the
hotel upon completion, Interstate will provide pre-opening and technical services to assist in construction planning, design and FF&E. Leslie Ng, Interstate’s chief
investment officer, said: “We continue to execute on our growth strategy outside of North America. By partnering local, in-country experts with top-quality international brands, we see significant management opportunities for Interstate in the region.” Earlier in November the group announced that its strategy had seen it reach six hotels opened or signed in India as part of JHM Interstate Hotels India, a 50/50 joint venture management company between Interstate and JHM Hotels. Prior to that, in September, the company entered into a joint venture with TVHG Budget Group Beheer BV, through its subsidiary TVHG Budget Group Netherlands, to invest in a portfolio of nine hotels located across the Netherlands. Thomas Hewitt, Interstate’s
chairman and CEO, said: “This contract, our 28th in Europe, demonstrates that our business model translates well in any part of the world. We have the size, scale and management depth to support this rapid, global expansion.” Interstate and its affiliates manage and/or have ownership interests in nearly 400 hotels with more than 69,000 rooms in 40 states, the District of Columbia, China, Russia, India, Mexico, Belgium, Canada, Ireland, England and the Netherlands.
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