PPHE Hotel Group has agreed a joint venture with Israeli insurer Clal Insurance for two of its London assets, Park Plaza London Riverbank and the art’otel london hoxton development.
PPHE said that it will receive £114 mln (€133 mln) in cash as part of this transaction, enabling it to pursue new opportunities to accelerate growth.
Park Plaza London Riverbank is a 646-room hotel located on the Thames, part of London’s Southbank, overlooking the Houses of Parliament and Big Ben. The development of art’otel london hoxton is due to complete in the first quarter of 2024 and will comprise a 27-story building in the heart of Shoreditch overlooking the City of London, including 343 rooms and suites, approximately 5,000 m2 of lettable office space and several destination bars and restaurants.
The deal values Riverbank and the all in development cost budget of Hoxton at £542.3 mln.
Eli Papouchado, chairman and founder of PPHE Hotel Group, commented: ‘Clal’s investment reflects our mutual confidence in the strength of the London hospitality real estate market. The agreement values these two assets at the Group’s latest Net Asset Value and the proceeds will enable the Group to pursue new growth opportunities as the pandemic period subsides. The joint venture with Clal comes at a very exciting time as we look to rebuild our business, capitalising on the extensive investment programmes, which we completed just before the pandemic struck.’
Transaction details
On completion of the transaction, Clal will become a minority partner and owner of 49% of the shares in one special purpose company (JVCo) holding indirectly the real estate and operations of both Riverbank and Hoxton, the latter of which is scheduled to open in 2024. The Group remains the majority owner of the hotels by retaining a 51% holding in JVCo and, through its management company, has secured a 20-year hotel management agreement in respect of both hotels.
The total price paid by Clal in connection with the transaction amounts to £113.7 million in cash and a further cash injection of £12.1 mln to fund their portion of the remaining equity commitments of the art’otel london hoxton development project. This consideration, taking into account existing bank debt and remaining development costs, is based on a £263 mln property valuation for Park Plaza London Riverbank and an all in development budget cost of £279.3 mln for the art’otel london hoxton project.
The transaction is expected to complete on or before 30 June 2021.
