Qatari SWF bids €330m for Paris hotel Le Grand

Less than two months after acquiring a portfolio of five luxury Intercontinental hotels across Europe, Qatar’s sovereign wealth fund has made a binding €330 mln cash offer for the Intercontinental Le Grand in Paris.

If completed, the transaction would represent one of the largest single hotel deals in France.

The offer is being made through Constellation Hotels, a unit of the Qatar Holding investment vehicle which in turn forms part of the Qatar Investment Authority (QIA). The bid represents a 29% premium to the hotel’s book value at end-June of $342 mln (€255 mln).

Under the terms of the offer, IHG would retain a 30-year management contract on the hotel, with three 10-year extension rights at IHG’s discretion, providing an expected contract length of 60 years. Constellation has also made a commitment to invest an estimated €60 mln in future hotel renovations over time.

If successful, the deal will further expand the SWF’s portfolio of 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.

The hotel, which is located in the heart of Paris overlooking the Opera House, has 470 guest rooms, including 70 suites. It first opened in 1862 and has operated under the InterContinental brand since 1982. In 2013, the property generated revenues of $118 mln and earnings before interest and tax of $22 mln.

Commenting on the offer, Richard Solomons, CEO of IHG, described Le Grand as an ‘exceptional property’ and ‘iconic hotel’.

‘This announcement demonstrates the continued successful implementation of our asset-light strategy and the strength of our relationship with Constellation, following its recent purchase of InterContinental London Park Lane and its majority investment in InterContinental New York Barclay. This potential transaction is yet another example of the enduring appeal of InterContinental as one of the world’s leading luxury hotel brands,’ he said.

COMMENT
JLL’s Hotels & Hospitality Group acted as the advisor for InterContinental.

Mark Wynne-Smith, global CEO of JLL’s Hotels & Hospitality Group said: 'It is an exciting time to be a part of the hotel industry. In our Hotel Investment Outlook 2014 report, we predicted that 2014 will see EMEA transaction volumes grow by more than 20%. This activity is evident in Paris where we have already experienced huge success in 2014. This landmark deal is yet another demonstration of the cross-border expertise our global platform can provide. Our proven track record for completing flagship deals saw us ranked the number one hotels broker in the world by RCA for 2013 and deals like this help us to reach our aspirations of delivering truly global investment strategies that deliver maximum value for our clients.'

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.