French REIT Foncière des Régions (FdR) has signed an agreement to buy a portfolio of 14 four and five-star UK hotels from Starwood Capital for £858 mln (€976 mln).
The acquisition, which marks the Paris-listed firm's debut deal in the UK, is through its dedicated hotel subsidiary, Foncière des Murs.
Situated in key UK locations, 13 of the hotels are being leased to InterContinental Hotels Group (IHG), which will rebrand and operate the hotels as part of its luxury and upscale brands portfolio following closing.
'Foncière des Régions is continuing its strategy to move upmarket in the hotel real estate industry,' said Dominique Ozanne, deputy CEO of Foncière des Régions.
'This acquisition is an opportunity to duplicate the development strategy already rolled out in France, Germany and Spain, where Foncière des Régions is the preferred partner of active operators on these markets. This transaction will help Foncière des Régions cement its leading position on the hotel real estate investment market in Europe.'
The deal follows the acquisition of two prime portfolios in Germany and Spain.
FdR said it considered the UK to be Europe's top hotel real estate investment market and fourth most popular travel destination, having registered 38 million tourists in 2017, an increase of 4%.
The four and five-star hotel properties in the portfolio comprise a total of 2,638 rooms in England, Scotland and Wales, namely in Birmingham, Leeds, Liverpool, London, Manchester, Oxford, Wotton and York, with four in Edinburgh and Glasgow, and one in Cardiff.
The properties have all benefitted from recent refurbishment programmes (around £182 mln was invested between 2014 and 2018) and FdR said that they offer strong potential for growth and good levels of profitability, citing an EBITDAR margin above 30% of the turnover.
The IHG leases are long-term, fixed-term FRI (full repair and insurance) leases with variable rents. FdR said it would work with IHG to upscale the portfolio, with a target yield of 6%.
To finance this transaction, FdR hotels subsidiary Foncière des Murs has planned an increase of its share capital to the tune of €300 mln, to be subscribed by all its major shareholders. The details of this share capital increase will be released at a further stage.