LONDON—The former De Vere empire now has been fully broken up, with United States private equity company KSL Capital Partners buying the last part of the puzzle, De Vere Village, for £480 million ($756 million).
The (London) Times reported that KSL was the successful winner of a bidding contest that had also included Hong Kong’s Great Eagle Group, which owns the Langham group of hotels.
Most commentators said earlier in 2014 the initial bid for the portfolio would be £450 million ($712 million), the final sale price being a 6.7% improvement on that.
The De Vere Village portfolio contains 25 Village Urban Resort properties around the United Kingdom, and will soon include three hotels in Scotland, in Aberdeen (opens in December 2014), Edinburgh (January 2015) and Glasgow (June 2015).
In March of this year, fellow U.S. equity player Starwood Capital bought De Vere Venues from the De Vere Group for approximately £282 million ($449 million), while De Vere Golf now also is in U.S. hands, with The (London) Times reporting that it had been spun off to Sankaty Advisors, an affiliate of Bain Capital, for an estimated £160 million ($255 million).
If all those estimated sale prices are deemed to be accurate, the entire pie has been sold for approximately £922 million ($1.46 billion), approximately a 42% increase from the £650 million ($1.04 billion) debt-for-equity deal that saw it placed into the hands of U.K. bank Lloyds during the past recession.
KSL and De Vere Group did not return calls before press time.
A landmark deal
Interviewed by HNN last Monday, Nick van Marken, global head of Deloitte’s travel, hospitality and leisure department, uttered a prescient statement, both about the sale of De Vere Village and what a healthy price for it means for the current state of the U.K. and global hotel market.
“The sale of De Vere’s Village assets will be a landmark, a significant point in this cycle,” he said. “If you unravel the history, De Vere will have been successfully broken up and will be in the hands of a variety of new owners, a remarkable story in itself.”
Three days later, in an email to HNN, van Marken reiterated his above comment.
“This deal is the last piece of the puzzle. The rest has gone,” van Marken said.
Elizabeth Winkle, MD of HNN’s sister company STR Global, has equally shared a similar view about what this particular sale said about the hotel market.
“It is very positive in terms of investor expectations and confidence in future performance, and we are seeing more revenue growth opportunities,” she said.
Winkle added Europe had seen average daily rate increases during the past 13 months.
“Buoyed by strong occupancy levels, there is strong flow through to the bottom line, and also there is very limited new supply, all of which creates ideal industry fundamentals,” Winkle added.
The last of its breed
Mark Rajbenbach, partner, real estate, at business consultancy Paul Hastings—and who recently moderated a panel at the Hotel Investment Conference Europe in which panelists, including KSL, complained that very often deals did not come in front of them that provided sufficient value—said it was important to see the De Vere Village finally sell as it was a long and convoluted bid process that started in the summer.
“It is evidently also important in the context of the U.K. market as it shows strength not only in London and the top provincial markets but elsewhere, too. All the usual suspects are competing for all these portfolios, which shows a continued appetite for deals at those multiples,” Rajbenbach said.
Rajbenbach said that with most of the U.K. portfolios of De Vere’s size now gone, investors would start to look farther east.
“At the (conference I chaired) KSL said that all they had to show for the last year or so were second-place ribbons. Now they have a first,” Rajbenbach added.
In regards to the sale price for De Vere Village and other assets of De Vere Group, Rajbenbach said sellers increasingly were wise as to how extract the best terms that they could.
“I assume that at one level (Lloyds) would have prepared to sell everything in one lot, but it appears it has received better value by breaking it up into respective pieces,” Rajbenbach said.
The deal saw KSL finish up a busy week in the U.K. It also bought 46-room Cannizaro House in Wimbledon, southwest London, for a reputed £20 million ($32 million) from a £600 million ($954 million) treasure chest aimed at U.K. assets that after the De Vere Village buy has more than £450 million ($717 million) remaining.