Hotel investors seek Brexit bargains

(Travelodge London Kings Cross Royal Scot)

The U.K.’s hotel transactions market has continued post-Brexit vote, with the sale of the Travelodge London Kings Cross Royal Scot for £70.3 million. The hotel was bought by Hong Kong-listed Magnificent Real Estate, which said that the hotel had been valued at the same price before and after the EU referendum.

The 408-room Travelodge London Kings Cross Royal Scot was sold by Henderson Global Investors. Magnificent said that the deal represented “an undervalued opportunity to acquire a substantial sized freehold hotel…in one of the most popular tourism cities.” The company said that the site’s net income was £3.14 million per year. “The management is confident the total floor area and number of rooms can be further increased by extensions and redevelopment.”

It said: “The management does not think England leaving the EU may have any negative impact on its prosperous tourism industry, instead its cheaper currency may attract even more visitors. The hotel property was valued after the EU departure decision to be the same as the purchase price.”

“We are probably the first company to buy a property in London amid the Brexit overhang," William Cheng Kai-man, chairman, Magnificent, told the local press. "I was educated in England and I appreciate the last 500 years of British success in every way. To be governed now under Brussels is just killing the British style, class...which the world adored for centuries. I am confident that Britain can do things their way and be as successful as they were in the last two centuries.”

Kewk Leng Beng, Millennium & Copthorne chairman, also expressed an interest in Brexit bargains. “My exposure there is very limited," he told The Straits Times. "We have good cash flow in terms of pound sterling so it doesn’t matter. When people panic and start to sell hotels, I will come into the picture. In fact, I am looking.

“Overall I’m confident that the U.K. will be good in the medium term. Temporarily, it will face a lot of issues negotiating with EU. More importantly, the political leadership must be forthcoming. I'm confident that if there are fire sales, I will buy in the U.K., whether real estate or hotels. I'm looking in Europe as well. Some people could panic and maybe I will come into the picture. My balance sheet is not very leveraged and I've got firepower.”

“We are seeing a large amount of interest since Brexit from Asian investors focused on prime hotel and residential assets in central London," Will Hawkley, U.K. head of leisure, KPMG UK, told HOTEL MANAGEMENT. "They have been poised to take advantage of what they see to be a window of opportunity caused by the weakness of the pound. Assets have suddenly become cheaper for them, especially compared to pricing and levels of competition in their home markets.  

“The interest isn't necessarily new, i.e. deal processes have been ongoing in the run up to the referendum, but whereas other competitors are pausing to consider options these investors, often new entrants, are forging ahead with the strategic plans that they have been developing in recent years, because recent activity was dampened by the scale of competition, they are now seeking to take advantage of the shift in the competitive landscape and the weaker pound.”