Lone Star has agreed a deal to sell its remaining UK hotels for close to £600m, marking its successful exit from the sector.
It is disposing of 23 assets held from its Amaris Hospitality platform, which are leased to Mercure and Hilton, to European investment firm LRC Group.
The price being paid for the properties reflects a blended yield of around 7%.
The sale of these final assets, totalling around 4,000 bedrooms, means the private equity giant has sold around £2.2bn of hotels over a period of two years.
LRC Group is a privately held investment management firm. Its headquarters are in Cyprus, and it has offices in London, Berlin and Amsterdam. It currently has a portfolio of around £3.5bn of assets under management.
The investment firm typically pulls together clubs of private investors and has a large number of backers from Israel.
It was founded in 1995 by Yehuda Barashi who is still a principal at the group and oversees all business activities and investor relations.
It works across all asset classes but specialises in portfolio transactions from distressed situations. This will be its first investment into the UK hotel sector.
In the UK it is best known for its joint venture with Delancey to develop the 600,000 sq ft Royal Mint Court campus, EC3 near the Tower of London, which will be a £750m project. The campus is currently being eyed by the Chinese government for a new embassy.
LRC and Lone Star have previously worked together on off-market deals and brokered the transaction directly.
Lone Star first began investing in the UK hotel sector in 2014 by targeting distressed owners. The bulk of these transactions were brought together under the umbrella company Amaris Hospitality.
On completion of the sale to LRC, Lone Star will have made a considerable return on its investment. Since it began investing, other investors have become attracted to the steady income regional hotels generate and have been attracted to the prospect of generating efficiencies of scale through agglomeration.
Although Lone Star has now exited the UK hotel market, further private equity sales are still expected this year. Investors such as Cerberus Capital Management and Apollo Global Management are both major holders of provincial hotel assets which they also acquired in 2015.
Lone Star’s hotel entrance
■ June 2014 – As part of its purchase of the £5.2bn Rock and Salt non-performing loan portfolios from Irish Bank Resolution Corporation it took control of three hotel businesses. These were the 17-asset Puma Hotels, the 19-asset Curzon Hotels and the 32-asset Somerston Hotels. Some were branded Holiday Inn and Thistle whilst others were individually branded or unbranded.
■ January 2015 – Acquired 29-asset Jurys Inn business and three Hilton Worldwide-leased hotels for £680m from a consortium including Royal Bank of Scotland, Quinlan Private, Mount Kellett Capital and Oman Investment Fund.
■ February 2015 – Acquired 21 hotels operating under Accor’s Mercure and MGallery brands as part of its £1bn portfolio purchase of Project Laser from Moorfield
Lone Star’s hotel exits
■ April 2016 – The Atlas portfolio of 47 Holiday Inn Express hotels sold to London & Regional for £575m
■ May 2017 – Three MGallery by Sofitel hotels sold to a private investor for £90m and the Mercure Bristol Holland House to Aprirose for £45m
■ November 2017 – Jurys Inn made up of 36 hotels sold to Swedish Investor Pandox for £800m
■ January 2018 – 23 Mercure hotels sold to LRC Europe for £600m
To send feedback, e-mail amber.rolt@egi.co.uk or tweet @AmberRoltEG or @estatesgazette
