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U.S. Private Equity Swoops On London Hotel Opportunities

Previously the Kingsway Hall, The Middle Eight Hotel in Covent Garden.

U.S. funds and private equity operators have kick-started London’s hotel investment market following two major deals this year.

Following an £800M swoop by Starwood in January, funds managed by HIG Capital have taken a 50% stake in two luxury hotels in London in a deal with Shiva Hotels, almost two years after helping finance them, Bloomberg reported.

The Miami-based private equity firm has formed a joint venture with Shiva for the five-star Middle Eight near Covent Garden, which has about 180 rooms, and The Guardsman, located about 400 meters southwest of Buckingham Palace, which has over 50 rooms.

The deal includes partially paying down a senior loan from Bank Leumi that was secured against the properties.

HIG had previously financed a portfolio of three Shiva properties with a £76M junior loan in March 2022. It will now have control of the board of the joint venture.

A Shiva Hotels spokesman said in a statement that the companies had moved from a straight debt deal to a joint venture “and are fully aligned to maximise the value of the assets going forward,” which will be “mutually beneficial.” 

Shiva Hotels was founded by former Lehman Brothers derivatives trader Rishi Sachdev.

Previously, HIG announced that several of its affiliates had combined their southern European hotel assets to create Ella Hotels & Resorts.

“Ella is a luxury, lifestyle and hotel group operating a collection of sustainable eco-chic resorts across southern Europe,” the company said in a news release announcing the brand.

HIG's phased development and refurbishment plan for the portfolio of 13 Greek hotels, with a combined total of 4,500 rooms, will bring their value to over £850M, the company estimated. It also plans to expand the Ella brand into other "established Mediterranean holiday destinations", focusing on the Spanish, Portuguese, and Italian markets, with a target portfolio of circa 10,000 rooms, HIG added.

Meanwhile, in January private equity firm Starwood Capital completed one of the largest UK real estate deals in the past 18 months, buying a portfolio of 10 London hotels for £800M. 

Starwood bought the portfolio comprising 10 hotels with 2,053 rooms from Edwardian Group, the privately owned UK hotel owner and operator. The hotels operate under the four-star Radisson Blu Edwardian brand.

Eight of the hotels are in central London, one is in east London and another is in Heathrow. 

Large hotel transactions in London have been few and far between since interest rates shot up, with hotel volumes dropping £2B last year, down 37% from 2022, according to data from Knight Frank

The deal means that Starwood’s European hotel portfolio stretches to 47 hotels with 10,000 rooms. Starwood will look at opportunities to improve the London portfolio's value, including rebranding the hotels.

Related Topics: HIG Capital, Shiva Hotels