GLOBAL UPDATE : INVESTMENT
opportunities , especially in the form of unique or interesting assets where it can create refurbishment value . That is where its deals for Jarvis Hotels Ltd . and seven irreplaceable hotels from the Von Essen portfolio come into play .
Like Generator , Jarvis gave Patron a way to play the hotel business and the real estate angle . “ Investing in an operating business allows for more control and more options , both of which are vital in difficult economic conditions ,” Wyatt says , crediting special situations partner Stephen Green for his contributions to the Jarvis transaction .
However , performance issues , a pension liability and what Wyatt terms a cost structure that was not appropriate for the size and scale of the business led to assets priced 20 % to 30 % below market cost , at around US $ 82,000 per key , for the company ’ s 24 regional and mid-tier hotels .
Patron responded by creating Jupiter Hotels as a 50-50 joint venture with West Register ( part of the Global Restructuring Group of the Royal Bank of Scotland ). The JV plans a US $ 63 million cash injection to update the hotels and provide a competitive lift . To get fresh thinking in operations , Patron put all of the hotels under Accor ’ s Mercure flag with its reservation system and compelling performance in the middle market . Wyatt predicts asset management will be “ very intense .”
Although Wyatt forecasts that luxury hotels and trophy assets will be two of the hottest hotel markets in Europe this year , the safe but low returns they generally deliver wouldn ’ t work for a private equity firm typically looking for IRR of 17 % to 22 %. Wyatt found a way to play that market when the troubled Von Essen portfolio came up for sale . Not only did the company go into administration with debts estimated at more than US $ 396 million , it also became the
“ If we close
1 % to 2 % of our pipeline deals , it will have been a successful year .”
– Josh Wyatt , director of hospitality and leisure , Patron Capital center of controversy when its administrator , Ernst & Young , submitted a report to City of London Police alleging falsified accounting .
Scandal or no , there was huge interest in the 27 assets for sale . Von Essen ’ s portfolio included some of the most venerable country house and “ classic ” hotels in the U . K . ( Cliveden , The Royal Crescent and Amberley Castle among them , as well as the Château des Bagnols in France ). “ We felt , on a standalone basis , that Patron would not be competitive if competing on an asset-by-asset basis ,” Wyatt says . “ However , Patron is known for backing local partners and partnering with them to implement a business plan .”
In the case of Von Essen , Patron teamed up with Nigel Chapman ( founder and CEO of Luxury Family Hotels as well as CEO of Halcyon Hotels and Resorts ). “ By partnering with what Patron sees as the absolute expert in relation to the Luxury Family Hotels area , we felt we could build a business plan together that would bring the assets back to their former glory ,” Wyatt says .
The key consideration of the transaction was ensuring that a comprehensive operational and physical overhaul could take place in a relatively short amount of time . Patron and Halcyon spent five months assembling the team and the plan that would enable them to hit the ground running as soon as the transaction was completed last November . “ Within the first six weeks of ownership , we are seeing improvement across the seven assets ,” Wyatt says .
Looking ahead , Wyatt estimates Europe ’ s hotel-related deal flow averages about 10 to 15 deals each week . He and his team examine each in detail . About 10 % meet the criteria for earning “ internal team time .” “ If we close 1 % to 2 % of our pipeline deals , it will have been a successful year ,” Wyatt says .
The new ZIEHER CATALOGUE 2012 ! www . zieher . com www . facebook . com / ZieherGermany
„ Fingerfood Tree “
INTERNORGA , Hamburg 09 . -14.03.2012 Halle B7 / Stand 309
„ Sphere “