GLOBAL REPORT—Kew Green Hotels, which on Tuesday bought 19 Holiday Inn properties from consortium LRG Holdings Limited, has become InterContinental Hotels Group’s largest European partner with 38 properties.
Kew Green executives did not disclose the purchase price, although Christie Group, which brokered the sale, said in a news release the portfolio was acquired for “significantly above the £70-million ($115-million) guide price.”
Kew Green’s latest move followed July’s news that its asset-management wing, Kew Green Management, signed seven management agreements, which included standalone The Grand Brighton, two Holiday Inn properties and four Ramada hotels.
Paul Johnson, CEO of Kew Green, said at that time additions were “part of our continued strategy … with a target to reach a portfolio of in excess of 60 hotels.”
The 19-hotel portfolio—which raised Kew Green’s holdings to 53 properties—originally was part of a 73-property portfolio of United Kingdom Holiday Inn, Holiday Inn Express and Crowne Plaza hotels LRG Acquisitions Limited bought from IHG in 2005, according to Nick O’Keeffe, Kew Green’s director of business development, and other sources.
According to a news release, in that year IHG received “an initial £960 million ($1.59 billion) in cash … (and) entered into a management agreement with LRG on 63 of the hotels and operat(ing) the other 10 hotels under a temporary management agreement.”
LRG is a consortium that comprised or still does: Lehman Brothers, which collapsed in 2008; Realstar Group; and GIC Real Estate, the investment vehicle of the Singapore government, according to media sources.
Realstar Group did not return calls before press time.
Jesper Palmqvist, area director, Asia/Pacific, at STR Global, said the Singapore government still is involved in alternative real estate via its Temasek Holdings sovereign wealth fund vehicle, with most of its holdings being in Asia and through its ownership of real-estate, design and development subsidiary Surbana.
UK focus
The 19 Holiday Inns—which have an total of 2,394 keys—are in Ashford (Kent); Rochester (Kent); Birmingham; Chester (Cheshire); Runcorn (Cheshire); Warrington (Cheshire); Colchester (Essex); Nottingham; Taunton (Somerset); Haydock (Merseyside); Ipswich (Suffolk); Lancaster; Leeds (two properties); Norwich (Norfolk); Rugby (Northamptonshire); Stoke on Trent; Washington (Tyne and Wear); and York.
The properties will remain as Holiday Inns and undergo refurbishment, according to a Kew Green news release. In total, Kew Green now has approximately 6,700 keys all in the United Kingdom and under six brands—Holiday Inn, Holiday Inn Express, Crowne Plaza, Ramada, Ramada Encore and Courtyard by Marriott.
In 2014, Kew Green also bought five other Holiday Inn hotels, including one in May and four in January.
It also operates one more standalone management contract for The Richmond Hill Hotel in Surrey.
Organic growth
Kew Green intends to add organically to its portfolio, helped by a new capital injection.
O’Keeffe told HNN “fresh backing has enabled us to make these transactions. Our model is to own most of our assets, although we shall also still look at management.”
“Kew Green will focus on the U.K. and as long-term owner-operators. We have not looked overseas,” he added.
O’Keeffe said that the time was right for this deal as the hotel sector is in the midpoint of its cycle.
“Opportunities are limited, but the timing is good if you have the money and can move quickly. The situation with LRG was a good one, as they wanted the exit,” he said.
Jat Bains, a partner in hotel advisory company Macfarlanes, which has advised Kew Green on previous acquisitions, said that much activity in the European hotel sector recently has emerged from companies looking to combine management experience with acquisition of assets in slightly distressed situations where they could get a better deal.
Kew Green and Westmont Hospitality Group were among the most active players recently, he said.
“In the debate as to what is needed to be done at each newly franchised hotel, a single hotel will have no clout but to accept the chain’s minimum standards, but an owner with multiple properties will have greater say as the chain will want them to remain a licensee,” Bains said.
Palmqvist said Redefine BDL Hotels previously were IHG’s largest European partner.
“Kew Green now has a bigger seat at the IHG table, and IHG runs a very tight ship. It makes sense for asset managers to want to align themselves with IHG, and that is a challenge for other hotel-chain competitors such as (Wyndham Hotel Group), which is still small in Europe and therefore has a model that might not be so attractive to owner-operators,” he added.