Distress Investors Start To Buy UK Hotels
Hotels are being targeted by private equity firms looking for bargains as a result of the coronavirus pandemic, and some significant portfolios are starting to trade.
U.S. hedge fund Marathon Asset Management has bought a portfolio of 17 hotels from private equity firm Cerberus for £180M, which is less per room than Cerberus paid for the portfolio, CoStar reported.
Of the portfolio, 15 assets are branded Holiday Inn and two are Crowne Plazas, and all are full-service hotels. There are 2,374 rooms in the portfolio in cities including Leeds, Leicester, Reading and Southampton.
The price paid is £75K per room, CoStar reported. When Cerberus bought the portfolio in 2015 from a joint venture between Lehman Brothers Real Estate, Canadian property company Realstar and Singaporean sovereign wealth fund GIC, the portfolio comprised 2,443 rooms across 18 hotels, for which Cerberus paid £225M.
Marathon has been a significant investor in regional UK hotels before. In 2019 it sold a portfolio of 17 IHG and Hilton-branded hotels to Thai investor DTGO for £465M. DTGO made a £17.5M payment in June last year to avoid breaching loan covenants on a £271M loan used to fund the purchase.
There is also £65M of mezzanine debt secured against the portfolio. All of the covenants on both the loans have been waived until the loans mature in December, in exchange for the top-up payment.
CBRE advised Marathon and Eastdil advised Cerberus.