Queensgate Investments has acquired Generator Hostels from Patron Capital and Invesco Real Estate for an enterprise value of €450 mln - believed to be the largest deal ever in the hostel sector.
Generator owns and operates 12 operational assets and two more are under development. The portfolio comprises 8,639 beds. Most of the properties are freehold.
The hostels are located in London, Paris, Copenhagen, Amsterdam, Dublin, Hamburg, Barcelona (pictured), Berlin Mitte, Stockholm, Venice, Berlin Prenzlauer Berg and Rome. Generator is also opening hostels in Madrid and Miami, Florida this year.
Earning current revenues of over €70 mln, Generator Hostels says it targets the fast-growing sector of millennial customers, 'focusing on the best capital city addresses, design-led interiors, a safe environment and, most of all, attractive shared social spaces'.
This is the second major hostel transaction this year. In January TPG Real Estate acquired A&O Hotels and Hostels for an undisclosed sum. Described as the largest privately owned hostel platform in Europe, A&O operates 31 properties and 20,000 beds, primarily located in Germany.
Expansion plans
Queensgate intends to hold Generator for the long term and to invest more than €300 mln to add more hostels. Queensgate CEO Jason Kow said: 'Generator Hostels represents high-quality freehold assets, robust revenues, an attractive lifestyle brand, and material scalability opportunities.'
Headquartered in London, Queensgate is a venture between the Kow Family, the LJ Partnership multi-family office business, also based in London, and the Peterson Group of Hong Kong.
Early bird
Patron Capital and its co-investment partner, Invesco Real Estate, said the sale was expected to complete in May. Patron was advised by Lazard and CMS; Queensgate was advised by Brown Rudnick. Invesco Real Estate was represented by Freshfields.
It will likely provide a big return for Patron, which used its Fund III to acquire the fledgling Generator business in 2007, claiming to have been the first major investor to identify the opportunity in the highly fragmented hostels market. The seven largest chains represent only 1% of the properties globally, according to CBRE research.
'Generator has performed strongly under Patron's ownership, during which time we have expanded the business significantly from just two hostels to 14, and have redefined the hostel concept into the design-led hospitality experience that today's guests want,' said Keith Breslauer, managing director of Patron.
