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Developers seek Europe’s iconic buildings
September 9 2013

Developers and hoteliers actively are seeking prestigious trophy assets to develop and add to their collections.

Highlights
  • Europe’s iconic buildings are increasingly sought as luxury properties.
  • Developer Prime Investors Capital received planning permission on 20 August to renovate the Admiralty Arch into a luxury hotel.
  • Sovereign wealth funds and high net worth will seek further trophy assets.

GLOBAL REPORT—Europe’s former palaces and grand houses, its opulent memorials, its wings of museums and other iconic buildings are in hot demand as investors and developers seek to build a new breed of lavish hotels.

Among those recently snapped up have been sold by governments seeking new ways to reduce expenditure in this era of austerity. Others fell out of fashion decades ago but are savoring new life as cool retro-roosts aided by increased capital expenditure. Yet more await the more daring or deep-pocketed to be transformed into self-indulgent escapes.

Behind their grand façades, business plans are drafted, money is discussed, planning permission sought.

Developer Prime Investors Capital received planning permission on 20 August to renovate the Admiralty Arch into a luxury hotel. Thanks to the United Kingdom’s austerity policies, the building—unveiled in 1911 as a memorial to Queen Victoria and which once housed the U.K. navy’s top brass—was leased for 99 years to PIC. The property is located on The Mall, London’s most ceremonial avenue. Trafalgar Square sits to one side of it, and Buckingham Palace is on the other.

Plans are for 100 guestrooms and a ballroom, spa, pool and restaurant. The building’s freehold remains with the government due to its national importance.

“Together we will restore Admiralty Arch into a landmark attraction the whole country can be proud of,” PIC’s CEO Rafael Serrano said in a news release. Armani Hotels & Resorts has been mentioned as a possible flag.

Deep-pocketed development
PIC does have substantial reserves, Serrano hinted.

”Our deals primarily focus on prime London (developments), but we also consider prime Western European cities such as Barcelona, Madrid, Paris and Rome. Similarly, we are open to cities in Asia and the Americas, such as New York City. We consider a mix of projects, including hotels and offices, as long as they are prime, and as long as they provide us with an opportunity to enhance and create value. We are currently looking into several requests for specific transactions.”

Starwood Hotels & Resorts Worldwide has a $200-million war chest to develop iconic European buildings within its Luxury Collection brand. This is in addition to its recent re-openings in Spain that include the 2012 renovations of the Hotel Alfonso XIII in Seville and Hotel Maria Cristina in San Sebastian as well as the 2013 makeovers of Venice’s famed Gritti Palace and Paris’ equally sybaritic Prince de Galles, following a two-year renovation.

The brand has an energetic drive, with plans to have more than 90 hotels by the end of 2014 and more than 100 not too long thereafter. One of those to open next year will be the 112-room Hotel Bristol in Odessa, the first Luxury Collection property in Ukraine. Jointly owned by L.A.R.K. LLC (Vertex Hotel Group TM) and Bristol-Krasnaya LLC, it will occupy a  building built in 1898 on ritzy Pushkinskaya Street and will have Renaissance and Baroque elements.

In a press release, Paul James, global brand leader for the brand, said, “The Luxury Collection has an intimate understanding of today’s luxury travelers who, more and more, aim to stay with a brand that offers a consistent level of impeccable service, while celebrating each hotel’s heritage and unique character.” In the last five years, Starwood has doubled its global luxury room count.

Investor interest high
“Iconic buildings make for good trophy assets, and if we split those markets, for those who want to develop them, it’s a rarefied atmosphere, and thus there is a strong appetite to want to own them, while for clients, the cache for staying in one is equally high,” said Jonathan Langston, senior director for CBRE Hotels, Europe, Middle East & Africa, and who also heads up its professional services business lines.

“When such buildings enter the market, they generate much interest,” he added. “Some previously have been hotels and have now reverted to that use. Perfect examples in the U.K. are the great Victorian railway hotels, which, when travelers stopped requiring railway station hotels, declined and were converted to other uses. Now they have come back and are newly iconic—for instance, The Landmark London in front of Marylebone Station and the St. Pancras Renaissance London Hotel by St. Pancras Station.”

Demand is coming from high net worth and sovereign wealth funds, Langston said, adding, “This is especially true of London.

“Visitor numbers are up, the legacy of the Olympics continues and it really now is a world-class city. In the rest of Europe, Paris will see also more of this, as will gateway cities, although such developments will not be fully restricted to urban areas.”

Qatar’s Katara Hospitality, rebranded in 2012 from its guise as Qatar National Hotels, is the hotel and hospitality arm of Qatar’s sovereign wealth fund. It has a thick wallet. A subsidiary of Qatar Holding LLC, the company has stated it plans to own 30 hotels and resorts by 2016 and a further 30 in the following decade. According to Bloomberg News, the company in May said it was in talks to buy “iconic hotels in London and Rome.”

Katara bought Paris’ Le Royal Monceau Raffles Resort in 2012 and is opening some time in 2013 the Peninsula Paris, which will be the brand’s first European property. The Peninsula Paris will occupy a huge, stately, 1908 Beaux Arts building on Avenue Kléber in the city’s 16th arrondissement immediately adjacent to the Arc de Triomphe and the Champs-Élysées.

Later this year it will also re-open the Excelsior Hotel Gallia Milan, which is being renovated and, having opened in 1932, will be among Katara’s most modern properties. Among its iconic European holdings also is the Hotel Royal Savoy in Lausanne, Switzerland, which was built in 1906 in Grand Château style. It sits in the middle of a 50,000-square-foot park and will re-open in 2015 after a top-to-bottom revamp.

Another of Qatar Holding’s subsidiaries, Constellation Hotels, bought the InterContinental Park Lane, London, in March for a reported £400 million ($620 million), which included approximately £100 million ($155 million) to purchase the iconic hotel’s freehold from the Crown Estate—that is, from the U.K. government.

Hotel transaction activity in the U.K. during the first half of 2013 was nearly four times that of the last six months of 2012, according to an 27 August press release from Deloitte.

“The total deal volume for H1 2013 reached around £1.96 billion ($3.1 billion) compared to £500 million ($780 million) in H2 2012,” the press release said.

According to the press release, one of the major acquisitions boosting these numbers was the purchase by the sovereign wealth fund Abu Dhabi Investment Authority for approximately £640 million ($998 million) of 42 Marriott-operated properties.

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