GLOBAL REPORT—Lone Star Funds’ agreement to acquire Jurys Inn Hotel Group for £680 million ($1 billion) shows the United Kingdom and European acquisition markets still have legs.
Gavin Brent, director of hotels and leisure for property consultancy GVA, said private equity is still in search of property ownership stories that dovetail into increased value and a successful exit.
“This deal shows that there still are stories out there that allow opportunities to create brands, add value, invest in management and reach successful exits that typically sit within their five-year or so investment hold,” Brent said.
Avestus Capital Partners, when it operated under the name of Quinlan Private, bought the Jurys Inn portfolio in 2007 for £792.6 million ($1.2 billion), roughly the same value as the proposed transaction with Lone Star.
Jurys Inn, owned by a consortium that includes Avestus Capital Partners; Mount Kellett Capital Management; Oman Investment Fund; Ulster Bank;
and Westmont Hospitality Group has 31 properties, all but one in the United Kingdom and Ireland.
According to a news release, the deal is due to close in the first quarter of 2015, and the existing management team, led by CEO John Brennan, will continue to lead Jurys Inn.
Private equity still hungry
Jonathan Langston, senior director at business consultancy CBRE, said the Jurys Inn deal yet again shows the strong appetite for portfolios.
“We’re still trading upside at historic percentage levels in growth terms, and oil prices are falling. The last time we saw them do so it sparked a terrific travel and tourism boom. It is clear that there are still legs in the market,” Langston said, adding that other boons to the hotel sector are coming from the return of the corporate market and low interest rates.
“From a market perspective, there remain good fundamentals, although it is too early to predict if trading volumes will grow to even larger heights,” he added.
Other recent transactions of large Irish and British hotel deals instigated by U.S. private equity concerns include: KSL Capital Partners’ acquisition of De Vere Village for $756 million and Interstate Hotels & Resorts buy of a 32-property portfolio from Chardon Management Limited.
Meanwhile, the deals might keep on coming. KSL is reported to be interested in selling the Malmaison and Hotel du Vin chains. Additionally, fellow U.S. private equity firm Patron Capital, along with the Royal Bank of Scotland, is reported to be doing likewise with Jupiter Hotels.
Deals outlook
Jurys Inns received injections of capital from those companies that formed part of the aforementioned consortium. In the Jurys Inn’s release, Hassan Al Nabhani, CEO of the Oman Investment Fund alluded to that, saying the “capital restructuring undertaken in May 2013, with the co-operation of the lenders and our partners, revived (Jurys Inn), paving a new path of growth and progress.”
Jurys Inn and Lone Star Funds declined to comment on the matter while compliance continues.
Brent said market conditions for such deals, and further acquisitions, are good, with interest rates in developed countries not likely to be raised before 2016 and regional U.K. markets continuing to improve.
“My prognosis is that the regions within the next 12 months will start seeing more rate growth (in percentage terms) than London. This is what happened in the recession before this one, but still my clients are asking, ‘Where are the deals?’” Brent said.
Brent also had praise for the banks.
“The banks have not been overloading the market with stress. They’ve been holding onto assets, which is positive to see,” Brent added.