Following its acquisition of two prime portfolios in Germany and Spain, Foncière des Régions, through its dedicated hotel subsidiary Foncière des Murs, has signed an agreement to buy an iconic portfolio of 14 four and five-star hotels from Starwood Capital for £858M (€976M). The properties are all located in the largest cities of the United Kingdom. Separately, Foncière des Régions has agreed to sign long-term FRI* leases for 13 of the properties with InterContinental Hotels Group (IHG), who will rebrand and operate the hotels as part of its luxury and upscale brands portfolio following closing. For Foncière des Régions, a leading European real estate operator, this landmark transaction represents its first entry into the British market.
Foncière des Régions will now have a presence in the United Kingdom, the top hotel real estate investment market and fourth most popular travel destination in Europe (38 million tourists in 2017, an increase of 4%).
This portfolio is entirely made up of high-end hotel real estate (four and five-star hotels) and comprises a total of 2,638 rooms in prime locations at the heart of major British cities: nine are located in England (Birmingham, Leeds, Liverpool, London, Manchester, Oxford, Wotton and York), four are in Scotland (Edinburgh, Glasgow), and one is in Wales (Cardiff).
These property assets are of very high quality. Having recently benefited from various programmes of work (£182M was invested between 2014 and 2018), they offer strong potential for growth and good levels of profitability (EBITDAR margin above 30% of the turnover).
This transaction marks a major step in Foncière des Régions’ hotel business development strategy, strengthening its move towards more upmarket real estate and the geographical diversification of its portfolio in this sector.
IHG, one of the world’s leading hotel companies will, after closing, rebrand and operate the hotels as part of its luxury and upscale portfolio under long-term, fixed-term FRI* leases with variable rents (including a guaranteed minimum). Foncière des Régions and its partner will thus support the upscaling of this portfolio, with a target yield of 6% at cruise speed.
To finance this transaction, Foncière des Murs, a subsidiary of Foncière des Régions, has in particular planned an increase of its share capital in the amount of c. €300 million, to be subscribed by all its major shareholders**. The detailed terms and conditions of this share capital increase shall be detailed at a further stage, in particular in the prospectus submitted to the AMF’s approval.
“Foncière des Régions is continuing its strategy to move upmarket in the hotel real estate industry. This acquisition is an opportunity to duplicate the development strategy already rolled out in France, Germany and Spain, where Foncière des Régions is the preferred partner of active operators on these markets. This transaction will help Foncière des Régions cement its leading position on the hotel real estate investment market in Europe”, explainsDominique OZANNE, Deputy CEO of Foncière des Régions.
“A resolutely European player that combines working, traveling, and living on a daily basis, Foncière des Régions is launching itself on a new market, while consolidating its strategy: to select the best markets, surround ourselves with the best partners, and use all of our skills and expertise to create value for all of our stakeholders”, says Christophe KULLMANN, CEO of Foncière des Régions.
* triple net
** i.e. Foncière des Régions, Cardif Assurance Vie, Generali Vie, Crédit Agricole Assurances, Sogecap, Assurances du Crédit Mutuel Vie SA and Caisse des Dépôts.
Source : Company