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Ares Acquires 21-Hotel Landsec Portfolio for £400 Million

United Kingdom Hotels Fully Let to AccorInvest
Landsec sold its entire U.K. hotel portfolio to Ares Management for £400 million. The portfolio includes the Novotel London Greenwich. (CoStar)
Landsec sold its entire U.K. hotel portfolio to Ares Management for £400 million. The portfolio includes the Novotel London Greenwich. (CoStar)
Hotel News Now
May 8, 2024 | 2:20 P.M.

Los Angeles-based investment firm Ares Management Corp., with funds from Ares Real Estate, has acquired the entire U.K. hotel portfolio and operating platform from London-based Landsec for a £400 million ($501 million).

The sale has been rumored for months, but Landsec confirmed the 21-hotel deal Wednesday via a statement released on the London Stock Exchange.

The release said Landsec has completed £617 million of deals across all real estate sectors since September 2023 and that the closing price is a slight reduction on the book value of £404 million of last September. Ares, which has almost $50 billion of assets under management, said £350 million has been paid to Landsec already, with the final £50 million — plus 6% interest — payable within 24 months.

Landsec said the net proceeds of the sale will initially be used to repay debt.

The Landsec release added that the company wished to sell the hotels to "release capital from sectors in which the company does not have scale and to focus its resources on areas where it has genuine competitive advantage."

It added that the portfolio “generated net income of £28.4 million ($35.6 million) over the company’s last reported financial year. The income is 100% turnover-linked with a lease contract expiring in 2091 and 12-yearly tenant-only break options,” which it said was “limiting Landsec’s ability to influence performance or add further value to the assets.”

Prior to Ares' acquisition, all 21 hotels in the portfolio were fully let via long-term leases to AccorInvest — a hotel investment, ownership and operations spinoff of French hotel company Accor. With the closing of the Ares-Landsec portfolio deal, AccorInvest agreed "to surrender these leases and transfer operations of the relevant hotels to Ares," according to an Ares news release.

The hotel portfolio is made up of economy and midscale properties, with the "majority of value in Central London and the remaining assets primarily located in major United Kingdom city centers, including Edinburgh, Manchester and Birmingham," Ares' news release said.

John Ruane, partner and co-head of Ares European Real Estate, said the “transaction highlights our ability to create solutions which unlock assets in today’s dislocated market.”

Ruane said Ares will target energy efficiency and carbon footprint enhancements across the portfolio.

Ares’ partner on the Landsec hotel portfolio acquisition is London-based hotel-operating partner EQ Group. EQ Group has a €1.7 billion ($1.8 billion) hotel-management portfolio with approximately 5,000 rooms, including such properties as the Hilton London Metropole, Hilton Birmingham Metropole, W Ibiza and Moxy Dublin Docklands.

EQ, which has interests across Europe, also owns 101-room The Store, Oxford, which opened on May 7 in the former Boswells department store in the university city.

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