White
Patron Capital is growing its portfolio and profits by riding to the rescue of distressed hotel companies and properties that need cash and discipline to realize their full upside .
By Oriana Lerner , contributing editor
This could be another power-play year for London-based Patron Capital in terms of its hotel platforms . Market conditions are ideal for this private equity firm with an appetite and aptitude for transforming distressed assets into star performers .
“ Banks in many countries have a lot of hotel product within their control ,” says Josh Wyatt , Patron ’ s director of hospitality and leisure . “ Rather than sell it outright for a significant discount , they have a fiduciary responsibility to maximize value . So they ’ re going to be looking for partners to help them rationalize their hotel portfolios . Recapitalization plays and workouts will be the themes for 2012 through 2014 .”
That is why Wyatt is “ mid- to long-term bullish ” on hotels and other leisure classes and why most industry knight
watchers predict Patron will make headlines for the foreseeable future .
Though Patron ’ s strategy is strictly opportunistic , Wyatt and Patron ’ s founder Keith Breslauer see three major veins of upside in the hospitality industry : the hostel market , regional and family hotels , and luxury hotels / trophy assets . The firm ’ s current hotel platforms give it a solid staging area from which to make incursions into these arenas , while its preference for situations in which it can acquire a controlling stake or structure substantial control over the investment limit competition .
Hostel approach Patron ’ s get-involved strategy is taking it into sectors many other firms wouldn ’ t touch — specifically , hostels . In 2007 , most private equity players wouldn ’ t have taken a serious look at Generator Group with its two hostels , one in Berlin and one in London , and the related intellectual property . Patron ’ s view was different .
“ We saw the opportunity to be the first institutional investor to bring highend interior design ; interesting F & B ; comfortable , custom beds ; and unique
The lobby bar at The Generator in Dublin
physical assets together to create a new sector that serves an exciting demographic of 18- to 28-year-old consumers who are technologically sophisticated ,” Wyatt says . “ What ( Ian ) Schrager , ( Barry ) Sternlicht and ( Andre ) Balazs did for boutique hotels , we feel we are doing for the hostel space .”
Wyatt likens the hostel market of 2012 to the boutique market of the 1980s : “ incredible market potential , few sophisticated players and the ability to purchase unique , interesting assets at attractive prices , reposition them , add value and exit once the market develops further . This market will have one of the most dynamic growth stories for the next five to 10 years ,” he predicts .
The flexibility of the concept and attractive price of development and conversion have already grown Generator to a portfolio of eight design-led hostels with 5,200 beds in six European countries , and growing the concept will be a primary focus for Patron .
Unique opportunities Patron also believes the regional hotel market will present attractive valuation
14 HOTELS March 2012 www . hotelsmag . com