Barclay brothers near Ritz sale

Ritz London Royal Suite
Ritz London

The Barclay brothers were expected to sell the Ritz Hotel in London to a consortium of Saudi Arabian families.

The sale was forecast to be the first in a series in London, as the capital continued to attract overseas buyers, despite falling yields.

The Barclay brothers were thought to be looking for raise around £750m from the sale of the hotel, which they paid £75m for in 1995 and have since spent around £40m refurbishing.

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London hotel investments were forecast to reach a record high of £1.5bn this year, according to Savills.

Colin Hall, head of London hotels - agency, told us: “Demand is strong, we’re still seeing a lot of interest from the Far East but in the last six months we have also started to see a lot of interest from Turkish investors, possibly as a result of uncertainty at home. London is a relatively easy market to buy into if you can find anything to buy and it has a reputation as a safe haven.

“Demand is literally right across the board, but the biggest demand is the middle slice, from £30m to £150m. There are a lot of buyers in that space, largely from overseas rather than local. With yields at 4% local buyers are saying that it doesn’t make sense, but if you’re borrowing in Singapore at 1%, then it makes more sense. The greatest demand remains for unbranded; a lot of people want to put their flag in London.

“There may be a slight bit of uncertainty ahead of 31st December and the Brexit deal-or-no-deal, but the biggest issue, maybe more than last year, is on the supply side. I’m expecting to see even more demand this year, but owners will be sitting on their assets for the next two to three years - the hotels that I am talking to are quite bullish about performance. I think we will see revpar grow this year and the increases in costs have largely been absorbed and accounted for.”

The latest data for London, December 2019 year-to-date from STR reported that revpar was up 3.7%, ADR up 3.6% and occupancy up 0.1 percentage points, to 83.5%. STR’s preliminary data for hotels in London for the month of December indicated lower occupancy - down one percentage point, but higher rates, up 2.6%. Revpar rose by 1.5%.

The Barclay’s deal was not the only one being signed in London. The end of last year saw the family office of former Qatari Prime Minister Sheikh Hamad bin Jassim Al Thani agree to sell the Sanderson London and the St Martins Lane Hotel for £255m, to Israeli-backed Vivion Investments.

At the same time, Vivion agreed to sell the 316-room Holiday Inn Bloomsbury in London for £90m, representing, it said, a 28% premium to its current value and 36% above acquisition cost. The hotel was bought by The Imperial London Assets, the Walduck family's investment group.

Following completion of these transactions, Vivion’s portfolio in Greater London will comprise 16 hotels.


Insight: Ah, who will buy my wonderful gold-bedecked hotel? As ever, quite a few people, in particular those looking for a trophy to wave around and, as Hall pointed out, those seeking a sanctuary for their money to ride out any storms. And access to cheap money in a number of global locations is making it all come true, even for those not sitting on pots of family cash.

But sadly for everyone’s hopes and dreams, even with appetite ranging from budget to Ritzy, there isn’t enough for everyone to have their own bit. So where to put that money before it burns a hole? Expect to see more enthusiasm on the fringes; in hostels, in student accommodation, in co living. Wherever you can put a head, you can glean cash from under the pillow and often at better than 4%.

If you really must stick with hotels, the picture outside remained one where a greater appetite for risk was required. Christie & Co said last week that it anticipated an increase in distress positions for under-invested and/or poorly managed assets, something which rising costs in recent years have not helped. While London’s market is bolstered by political volatility elsewhere, the regions are hoping that this year will be smoother politically for the UK and long-term visions can once again be set.

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