Sweden’s Pandox AB is acquiring a portfolio of 37 hotels in a £800 million (US$1.07 billion) deal from U.S.-based private equity firm Lone Star Funds.
Israel’s Fattal Hotels Group, which already has a relationship with Pandox, will be the operating partner. The plan is to reorganize the portfolio, with Pandox retaining 20 investment properties and one operating property, in the U.K. and Ireland, and Fattal acquiring the operational platform with 36 hotel operations under the Jurys Inn brand. The investment properties will be operated by Leonardo under long-term revenue-based lease agreements. The acquisition is expected to be completed before year-end 2017.
The acquisition is financed by a new bank loan, existing credit facilities and a loan from Fattal of £120 million (US$160.2 million). After the reorganization, Pandox’s share of the acquisition price will total £680 million (US$908.0 million).
“The acquisition fulfils all Pandox’s strategic criteria regarding countries, cities and locations, as well as size, segment and profitability, contributing to a further diversification of our revenue base,” said Pandox CEO Anders Nissen, according to a press release. “The hotel properties are of high quality, belong to the profitable upper mid-market segment and will bring an immediate and substantial contribution to earnings.”
“We are proud to continue consolidating and developing our collaboration with Pandox, our strong expansion partner. The mutual trust we have built up over the last few years forms the basis for our success. For us, the acquisition of Jurys Inn hotels represents a huge step forward in our growth. With this, we have the opportunity to further expand and strengthen our expertise and brand awareness in Europe. We look forward to this new challenge,” said Fattal CEO David Fattal, according to the release.
Pandox said the move complements the company’s acquisition strategy and will contribute immediately to earnings. The properties include full-service hotels totaling 4,694 rooms, giving Pandox entrée to 20 new markets, including in the U.K. and Ireland (in cities such as Birmingham, Manchester, Leeds, London, Dublin, Manchester, Glasgow and Belfast).
Before the transaction, Pandox’s hotel ownership stood at about 120 hotels (98 leased, 22 owner-operated) with more than 26,000 rooms in 10 countries and a value of approximately US$4 billion.
The 20 investment properties will be operated by Leonardo under 25-year revenue-based lease agreements with minimum guaranteed rent and shared investments, which is at the core of Pandox’s business model. The minimum guaranteed rent amounts to approximately 83 percent based on estimates for 2018.
The 364-room operating property will be operated by Pandox under the Hilton Garden Inn brand; it’s near London’s Heathrow Airport.
In December 2015, Pandox made one of its first forays into Germany with a €400 million (US$432 million) purchase from Leopard Group and Fattal Hotels. As part of the deal, Fattal has 25-year lease agreements to continue operating the properties under its Leonardo brand. In an interview earlier this year with HOTELS, Nissen said he expected to do more deals for Leonardo-branded hotels. “The company would like to expand their brand in Germany. We like their model,” he said at the time.
