In December, New York City-based Fortress Investment Group bought a majority stake in Dublin-based hotel and aparthotel firm Prem Group for an undisclosed price through an off-market acquisition.

Prem Group executives also have invested into the deal.

The firm, which owns and/or manages hotels, has 38 assets and more than 3,000 rooms in Ireland, Belgium, The Netherlands and U.K., according to Prem Group’s CEO Jim Murphy, who spoke exclusively to Hotel News Now.

Murphy said the investment will pave the way for expansion in countries such as Germany, where the firm currently does not have any properties.

Prem Group's latest openings, both of which debuted in July 2020, are the 115-room Premier Suites Plus Amsterdam and the two-room The Townhouse, a Georgian townhouse adjacent to its 37-room Premier Suites Plus Dublin Leeson Street.

In Prem Group's pipeline are two Holiday Inn Express properties in Belgium, one in Antwerp with 102 rooms and one in Brussels with 137 rooms. Both properties are scheduled to open in spring 2023.

Murphy said Fortress’ new capital will see investment in freehold hotel and serviced-apartment properties in Ireland, United Kingdom and mainland Europe, with a focus on the expansion of its Premier Suites brand.

He added the deal had its origins with Prem Group’s 2019 sale of its in-house procurement division, Trinity Purchasing.

“We sold [Trinity] to Aramark in an off-market deal. We received an unsolicited offer from Aramark for that business, and we had felt we had gone as far as we could with it," Murphy said. “But that gave us some cash and a good balance sheet, so we began to look to how we could capitalize on that windfall. [Prem has] always been very entrepreneurial, a business that has grown but also one with an aging shareholder base."

Prem Group was formed in 1989 with the acquisition of a Dublin hotel it retains today. Murphy said the firm has seen some of those shareholders retire, which resulted in a new executive team with a slightly different vision.

“We started quietly talking to finance groups, mostly in London, and Fortress was one of them, but then the discussion had to be parked in March 2020,” he said, referring to the beginning of the COVID-19 pandemic.

“During discussion, we kept the operating teams focused," he said. "We kept the Fortress deal quiet, even to some management. We said discussions were happening, but in the meanwhile we have a business to run."

Happy to have adequate cash to survive the worst of the pandemic, Murphy said Prem Group has been quick to recover.

“We had a good summer in 2020, so we began again talking to a small, select group of private-equity groups in January [2021], including Fortress, and it was obvious Fortress would be a good fit," he said. “There was a letter of intent in June, and the deal culminated with the departure of all non-executive shareholders. All departed amicably, and our relationships with them remain very good."

This marked a departure in investment strategy for Prem Group, which was considering an initial public offering, as recently as 2015. At that point, the company expected to go public by 2019.

Currently 18 members of Prem Group's management team are among the firm’s new shareholders, Murphy said.

“It was important for me and them to get a good fit and to align strategies," he said. “It will be a very collaborative process going forward. Prem has strength as operators, with good geographical spread, and sits well with the strength Fortress has as a massive private-equity company with enormous capital and property expertise."

He said the company is growing, as indicated by recent leasehold deals on assets in The Netherlands and Belgium.

What will also change is Prem Group's speed to market, he said.

“Our strategy will be one of moving forward fast. It will be opportunity-driven," he said. "Fortress likes real estate, and its targets predominately are in the freehold space. That is not to say we will not do leases and hotel-management agreements.”

Serviced apartments will remain important, too, and are likely to account for 75% of Prem Group's pipeline, Murphy said.

Its serviced-apartment brand Premier Suites has 16 assets, and Murphy said private equity firms beyond Fortress Investment Group remain very interested in this accommodations niche.

“[Investors feel] there still is not a lot of [serviced apartment] product around, and [they] also like, as we do, limited-service hotels such as brands Holiday Inn Express and Hotel Indigo," Murphy said. “City-center properties are the goal, although one problem remains staffing, which in the current climate is very important."

He said 80% of Prem Group's employees had been temporary laid off, but much work had gone into rebuilding teams.

Inflation and rising energy costs remain a concern, which Murphy said is made easier by his firm’s excellent relationship with its formerly owned Trinity Purchasing.

Another hurdle is finding buildings that lend themselves to conversions to serviced apartments.

“What we’re looking at is 32 to 33-plus square meters [344 to 355 square feet] an apartment. The one in Antwerp is a conversion of a hotel [and] just happened to have large rooms, and we are able to put some suites on its roof," he said. "The one in Rotterdam, the footprint of the building is superb, while Amsterdam is a mixed-use building, brand new from the ground up, and we have 10 floors in that building."

The Amsterdam property is located to the south of the Dutch city in a very commercial area with a high number of international firms.

Murphy said Prem Group won the tender for the building before new laws were enacted that restrict new hotel development.

“I think we got in because they saw a need for serviced apartments, rather than regular tourism, which it believes it has too much of,” he said.

He added that at the start of the pandemic, Prem Group closed 20 of its 38 properties, but all its serviced-apartment assets stayed open.

“It is far outperforming the traditional hotel sector. Amsterdam was at 50% occupancy, now 75%. Rotterdam traded right through, and we’ve seen high occupancies in Dublin, too. Guests just felt safe and comfortable,” he said.

Serviced apartments have performed well in other economic cycles, too.

“They also traded well through the last recession. They are not recession-proof, but they perform well,” he said. “With conversions, there always is a time lag, so it would be nice to balance that with a hotel that comes online quickly."

With a lot of cash currently chasing deals, Murphy said another advantage is Prem’s geographic spread, with offices in Ghent, Belgium, that looks after Germany and Benelux countries, and offices in Dublin and Liverpool.

“We have people are on the ground sniffing out off-market opportunities, families looking to [sell]. Opportunities are popping up, and now with Fortress involved, often it gets the first call,” he said.

Dublin, the U.K., The Netherlands and Germany are prime searching grounds, he said.

“We’re probably done in Belgium, maybe one or two more [properties], and we have been looking at Germany, where we came very close to signing a Holiday Inn Express in Berlin. There was a planning issue, so we walked away,” Murphy said.

He added Vienna would also be poised for growth.

“Premier Suites can fit into any commercial city that has commercial business. They require few staff, and they do not need a huge infrastructure on the ground,” he said. “We’re very ambitious. We are all in a slightly different phase in our career, but we have worked before with very little resources. What we always have had is good management."

Much of Prem Group's focus during the pandemic has been on improving its in-house revenue-management division. Murphy said it has approximately 100 clients, including Prem Group.

“We’ve spent the last 18 months really improving the product, with software developers in Philippines and Ireland. It is our lifeblood," he said. "The digital marketing agency, all social media, webpages, also for third parties, all is in-house, and it allows a small company to scale very quickly. Fortress liked that, too."

While Murphy expects January and February of 2022 to be quiet, he is confident of events and conference business returning.

“Conventions have all been pushed out. Look at the Manchester Arena. Its schedule is huge, and I see very strong business,” he said.

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