Real estate group swoops for Hilton hotels in sign of recovery

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A chain of Hilton hotels in the UK has been sold in a multimillion-pound deal to real estate group Henderson Park in a sign of the recovery in the travel sector and market for city accommodation.

The Hilton portfolio of 12 hotels and more than 2,400 rooms includes properties in London, Edinburgh, Dublin, Bristol and Coventry. It was valued at £555m, according to people with knowledge of the terms.

The deal was financed with debt from the credit arm of the private equity group Apollo Global Management.

Henderson Park said it planned to invest another £40m in expanding the hotels and improving their facilities. It has planning permission to build another two floors on to the Edinburgh hotel, for example, adding 31 rooms.

“We see a massive recovery coming on this and so our bet on the Hilton portfolio is on phenomenal assets,” Nick Weber, founding partner of Henderson Park, said.

“You have Islington and Chelsea, you have Edinburgh . . . and we feel we are buying it at a very attractive price. It is not a distressed price. We believe we are playing into the recovery that we are seeing in our other assets,” he added.

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The Westin Paris at 3 rue de Castiglione Henderson Park’s previous hotel transactions include buying the 440-room Westin hotel in Paris © Alamy

Despite the near-total shutdown of travel during successive lockdowns, there have been far fewer insolvencies in the hotel sector than many analysts and investors expected at the beginning of the pandemic.

Owners, supported by lenient banks and government support schemes, have held on to properties in the hope of achieving better returns on their investment as travel recovers.

The Hilton properties were sold by a public company through a select process involving only three or four prospective buyers, those with knowledge of negotiations said.

The deal is in line with the value of Henderson Park’s previous hotel transactions, which include buying the 440-room Westin hotel in Paris and two of the UK’s largest hotels — the London and Birmingham Hilton Metropoles.

Hotels make up just over a fifth of Henderson Park’s portfolio, which also includes office blocks and industrial sites. It has invested $11bn in property assets since it was founded in 2016.

Occupancy at the 1,100-room London Metropole averaged 49 per cent in September and had been higher at weekends, Henderson Park’s Weber said. Bookings for meetings and events in 2022 were at the same level that they were for 2020 in September 2019, he added.

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Average UK hotel occupancy hit a low of 21.9 per cent in April 2020, according to the industry data provider STR, but recovered to 71 per cent in August boosted by domestic holiday demand.

Hotels in central London that rely on international visitors have lagged, with occupancy averaging 56 per cent in August due to the UK’s tight travel restrictions, which have only begun to ease in the past month.

Joe Green, co-head of hotel brokerage at the real estate firm CBRE, said the lack of financial distress in the sector, coupled with confidence in the recovery of hotels, meant that property prices had remained high.

“A lot of money has been raised by investors for hospitality deals and when there is a lot of money raised and not a lot of supply that is good for pricing.”

Despite warnings that video conferencing would hit the sector, Green added: “There is an expectation among investors that travel will revert to close to what it was previously and that people will need to travel for work.”

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