Middle East buyers targeted in London Grosvenor House sale
‘Strong interest’ expected from Arab investors as landmark 5-star hotel goes on market for more than $715 million
Arab investors are being targeted in the sale of the Grosvenor House hotel in London, with “strong interest” expected from Middle Eastern buyers willing to shell out more than $715 million for the landmark 5-star property.
The hotel, on Park Lane in the UK capital, formally went on the market this week after its troubled owner, part of the Indian conglomerate Sahara, was placed into administration.
Expensive ‘supercars’ flown in from the Arabian Gulf are a regular sight outside the 494-room luxury hotel, which is operated by Marriott International.
And a Middle Eastern name could also feature above the hotel doors, should negotiations with regional buyers prove successful.
Property consultancy Jones Lang LaSalle (JLL), which is advising on the sale, told MEConstructionNews.com that Middle Eastern investors would be courted as part of the sale process.
“We clearly will be approaching investors from the Middle East,” said Mark Wynne-Smith, global chief executive of JLL’s hotels and hospitality group.
“If you look at who owns real estate along Park Lane, a very high proportion is owned by Middle East investors. So we’d certainly be anticipating that a high-profile block like this [would be of interest].”
Qatari investors have been particularly active in buying up luxury European hotels. Constellation Hotels, part of the Qatar Holding investment vehicle, bought InterContinental London Park Lane – a stone’s throw from Grosvenor House – for £400 million ($608m) in 2013. And the government-owned Katara Hospitality bought a 50 percent stake in The Savoy in December.
Mr Wynne Smith declined to comment on the asking price of Grosvenor House, but said “the market has strengthened significantly” since Sahara bought the hotel for £470 million ($715 million) in 2010.
Buyers in Asia and the U.S., as well as those in the Middle East, are also being courted, he added. “Those are the main sources of outbound capital in European hotels at the moment,” said Mr Wynne Smith.
Sahara is said to have been looking to sell the hotel for some time, but its hand was forced after a loan on the hotel, arranged by the Bank of China, was declared in default.
The group has been trying to raise $1.6 billion in bail money for its boss, the eccentric tycoon Subrata Roy, who is currently in a New Delhi jail after failing to return money to investors who had been sold outlawed bonds.
With the hotel now formally on the market, Rashid Aboobacker, a senior consultant with TRI Hospitality Consulting in the Middle East, said he expects “strong interest” from Arab investors.
“There has been a growing demand from Middle Eastern investors to buy trophy real estate assets including hotels in key European and U.S. cities,” he said. “The Grosvenor House hotel in London is a landmark property with lot of history and brand equity.”
Relatively low asking prices may also be a spur for Middle Eastern investors to look at such properties, Aboobacker added.
“Although these properties do not come cheap, the valuations are sometimes quite attractive due to the challenging economic situations faced by some of the owners in Europe and the U.S.,” he told MEConstructionNews.com.
John Podaras, a UAE-based partner at hospitality consultancy Hotel Development Resources, said the hotel was likely to be of particular appeal to Middle Eastern investors looking for a “trophy” investment.
“This type of asset typically attracts attention from the private sector as well as sovereign wealth funds,” he said.
“Whereas Middle Eastern appetites remain strong, investors from the Far East and funds from North America have been focusing their attention on the European market, a trend that is likely to continue through 2015.”
