Foncière des Régions moves into UK with £858m buy
 
Foncière des Régions moves into UK with £858m buy
03 MAY 2018 9:54 AM

French REIT Foncière des Régions agreed to purchase a 14-hotel U.K. portfolio from Starwood Capital Group, which IHG will manage and rebrand, bringing the Kimpton Hotels & Restaurants brand to the U.K.

LONDON—Three days after Europe saw AccorHotels buy Mövenpick Hotels & Resorts for 560 million Swiss francs ($565.3 million), the continent has seen another major acquisition, and one valued at twice that amount.

French real estate investment trust Foncière des Régions, through its dedicated hotel subsidiary Foncière des Murs, has agreed to purchase a 14-hotel portfolio from U.S. private equity company Starwood Capital Group. The hotels are part of Starwood Capital Group’s Principal Hotel Company, and the portfolio includes 10 hotels currently branded under the Principal brand, two currently branded under the De Vere brand and one unbranded. Two of the 14 are under development—The Grand Birmingham and a conversion of the former Martins Bank headquarters in Liverpool.  

The price tag for the upscale and luxury hotels, which collectively contain 2,638 rooms, is £858 million ($1.17 billion), according to Foncière des Régions, which in March confirmed it had exclusivity in regards to the transaction. The deal is expected to be completed by June.

In additional news on the acquisition, Foncière des Régions signed an agreement with InterContinental Hotels Group to rebrand and operate 13 of those hotels in the deal, some of which will become part of IHG’s Kimpton Hotels & Restaurants brand. 

While IHG was not available for comment at press time, the company issued a news release stating this deal would allow it to “launch its leading luxury boutique brand, Kimpton Hotels & Restaurants in the U.K., adding multiple hotels for the brand in prime locations in major city centers, including London, Manchester and Edinburgh.”

There is no indication of how many of the 14 hotels would be rebranded as Kimpton.

The news release from IHG also stated that the deal “will establish a presence for (IHG’s) new upscale brand, which will be launched later this year.” 

While IHG has not given additional details about that forthcoming brand, IHG CEO Keith Barr hinted to HNN in November that the company was exploring new brands.

Representatives from Foncière des Régions were not available for comment as of press time. 

Starwood hot for UK
SCG has been active in the U.K. of late.

In February the company bought seven U.K. Hilton hotels including approximately 1,300 rooms from U.S. real-estate investment trust Park Hotels & Resorts for £135 million ($188 million).

White-label hotel-management company Kew Green took over management of those properties, which will all undergo renovations, under franchise agreements with Hilton.

And in September, Starwood Capital pumped £100 million ($135.8 million) into the De Vere hotels portfolio and relaunched the brand.

That month it also invested $250 million in capital into London-based Yotel.

Starwood Capital Group, through its Principal Hotel Company, retains ownership of 10 additional De Vere properties.

Cody Bradshaw, SCG’s managing director and head of European hotels, remains bullish about the U.K. hotel industry.

“The top U.K. cities continue to benefit from major investments in infrastructure, regeneration schemes and new demand generators, which when coupled with record international tourism and high barriers to entry, continues to produce solid fundamentals and ample liquidity,” Bradshaw told Hotel News Now.

“Within these markets, we continue to pursue attractive hotel investment opportunities, particularly any situations where we can add value through repositionings and operating improvements,” Bradshaw added.

More brands
U.K. analysts see the deal as being indicative of further interest in the hotel sector.

“There remains so much interest. When a company like Principal goes on the market, it has ended up with one buyer, but there were probably 20 chains with an interest in the deal. That interest is not going away. These companies are not going to reduce their interest, and they will gravitate to other deals that better fit their investment profile,” said Russell Kett, chairman at hotel-industry consultancy HVS London.

“Despite continued uncertainty and Brexit, people still are going out buying hotels and hotel companies, which underlines the confidence in hotels and hotel chains,” Kett said.

Patrick Angwin, senior director at Horwath HTL, said IHG’s involvement in the deal is indicative of a clamor for adding higher-end segments to hotel-chain portfolios, an opinion shared by Kett.

“That was triggered by AccorHotels’ deal for FHRI Holdings, and more recently IHG bought Regent, although that is a localized brand and quite distinct, but it does bring up the element of big international brands trying to differentiate their brands. Trying to do that at that level is fairly difficult,” Angwin said.

Adding Kimpton to the U.K. will not come without teething problems, Angwin and Kett hinted.

“Ultimately, the benefit to a hotel operator of having a luxury brand is to drive rate, but when you get to the stage of these funky new products pushing the envelope, rate differentials can become so narrow. In some cases, budget brands are doing better in terms of (revenue per available room),” Angwin said.

Kett said he blamed the travelling public.

“They cannot cope with brands as they used to be. They now have to be lifestyle with all the extra bells and whistles. There are no plain vanilla brands anymore,” Kett said.

“The way they have to market themselves now is that we’re told millennials need to have experiences, but this is just in reaction to how life if going on. HVS has to do this, too,” Kett added.

Angwin said he thought there were too many brands.

“It is getting harder and harder to focus. The USP of luxury brands, if it is truly perceived, is slightly more distinct in people’s mind, but when you move away from the extremities, it is not so obvious to guests,” Angwin said.

“Only problem IHG has is that Kimpton is not known here. Ask the average (U.K. citizen) in the street, and unless they are well-travelled, they would not have heard of Kimpton. Then again, that is true of any new brand,” Angwin added.

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