IHG agrees to sell major Paris hotel to Qataris for €330m

InterContinental Hotels Group (IHG) said on Monday it has accepted a €330 mln cash offer from Qatar's Constellation for its InterContinental Paris – Le Grand luxury hotel asset.

As part of the offer first announced in August, Constellation - a unit of the Qatar Holding investment vehicle which in turn forms part of the Qatar Investment Authority (QIA) - has committed to invest a further €60 mln in the renovation of the asset, which is located in the heart of Paris overlooking the Opera House, and has 470 guest rooms.

Under the agreed terms, IHG will retain a 30-year management contract on the hotel, with three 10-year extension rights at IHG’s discretion, giving an expected contract length of 60 years. Management fees are expected to be approximately €4 mln ($5 mln) per annum.

The hotel first opened in 1862 and has operated under the InterContinental brand since 1982. In 2013, the hotel generated revenues of $118 mln and EBIT of $22 mln. The bid represents a 29% premium to the hotel’s book value at end-June of $342 mln (€255 mln).

The transaction is expected to complete by the end of the first quarter of 2015, subject to the satisfaction of certain standard conditions.

Earlier this year Qatar’s sovereign wealth fund also bought a portfolio of five luxury Intercontinental hotels across Europe. In June, Katara Hospitality, also part of QIA, announced it had acquired the Dutch company which owns the Intercontinental Amstel Amsterdam, Intercontinental Carlton Cannes, Intercontinental Madrid, Intercontinental Frankfurt and the leasehold interest on the Intercontinental De La Ville Rome. Last year, the Qataris bought IHG's London Park Lane InterContinental and a 80% stake in its Barclay hotel in New York.

TOP HOTEL INVESTOR
Qatar was the top investor by volume in the European hotels sector in 2013 as its SWF expanded its network of luxury hotels.

QIA was the largest single investor, accounting for almost €1.3 bn of the activity. All its deals were focused on the luxury hotels segment, a particular favourite among Middle Eastern investors.

Qatar's largest individual transaction was the acquisition of a portfolio of four French luxury hotels from Starwood Capital for €717 mln. Qatar Holdings carried out this transaction through its Constellation Hotels subsidiary in a joint venture with Egyptian real estate developer Talaat Moustafa Group.

IHG franchises, leases, manages or owns over 4,700 hotels and 693,000 guest rooms in nearly 100 countries, with almost 1,200 hotels in its development pipeline.

See pages 21 to 28 in the December edition of PropertyEU Magazine for more on hotel investment.