Sale of seven hotels in continental Europe for €634million (£440m)
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Sale of seven hotels in continental Europe for €634million (£440m)
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Category: Europe -
This is a press release selected by our editorial committee and published online for free on 2006-07-13
InterContinental Hotels Group PLC ("IHG") today announces it has agreed to sell a portfolio of seven InterContinental branded hotels (2,537 rooms) located in Continental Europe to the Morgan Stanley Real Estate Funds ("MSREF"). IHG previously announced in January 2006 that these hotels had been put on the market.
IHG has retained 30 year management contracts on the hotels, with two 10 year renewals at IHG’s discretion giving a total potential contract length of 50 years. These long term contracts ensure the representation of the InterContinental brand in these important locations. IHG and MSREF have separately reached preliminary agreement on converting further hotels comprising up to 1,000 rooms to IHG’s brands, and are exploring other opportunities where IHG's brand family complements MSREF’s asset portfolio.
The portfolio has been sold for €634m (£440m1) in cash before transaction costs, approximately €80m above net book value of approximately €550m, with no material tax charge arising. In addition, MSREF has agreed to make capital investments in the portfolio for approximately €60m, including implementing new brand initiatives and adding further facilities to these prestigious hotels.
The transaction is expected to complete in the third quarter of 2006, subject to the satisfaction of certain conditions including EU merger clearance. Proceeds received from the disposal will be used for investment, returns to shareholders, and managing IHG’s level of debt.
In 2005, these seven hotels generated revenues of €185m, EBITDA of €42m and EBIT of €23m before management fees. Normalised management fees from the management contracts are expected to be approximately €10m per annum going forward.
On completion of this transaction, IHG will have sold 175 hotels with a net asset value of more than £2.8bn since separation from Six Continents in April 2003. IHG has retained over 90% of sold properties under its brand flags, as part of its strategy to grow its managed and franchised business and reduce asset ownership. Aggregate proceeds received to date have been above net asset value. IHG has announced the return of £2.75bn to shareholders, of which £2.6bn has already been completed.
Andrew Cosslett, Chief Executive of IHG, commented:
This deal is a significant step for IHG as we near the conclusion of our asset disposal programme. MSREF is a highly respected real estate investor and will be a strong business partner. We look forward to working with them and developing our relationship. Looking ahead, IHG is fully focused on its growth target of adding 50,000 to 60,000 rooms to our portfolio on a net and organic basis by the end of 2008."
Struan Robertson, Managing Director, Head of Morgan Stanley Real Estate Europe & Middle East, commented:
“With this transaction MSREF is extending its hotel investment business into Europe. We are pleased to be working with InterContinental Hotels Group, and the prestigious InterContinental brand, and look forward to expanding our involvement with them around the world. At the same time we are establishing a specialised hotel asset management platform to ensure the highest quality interaction with our hotel operating partners across the region.”
1 Exchange rate as of 10 July 2006
For further information, please contact
Investor Relations (Paul Edgecliffe-Johnson): +44 (0) 1753 410 176
Media Enquiries (Leslie McGibbon): +44 (0) 1753 410 425
+44 (0) 7808 094 471
Transaction details:
1. The purchasing entity is a company ultimately controlled by MSREF.
2. The net book value of the assets sold was approximately €550m.
3. No material tax charge arises as a result of the transaction. A deferred tax provision of approximately €120m in relation to the assets will be released on completion.
Disposals announced today:
2005
€m
Revenue 185
EBITDA* 42
EBIT* 23
*Before management fees
Hotel Rooms
InterContinental Amstel Amsterdam 79
InterContinental Budapest 398
InterContinental Carlton Cannes 338
InterContinental De La Ville Rome 192
InterContinental Frankfurt 770
InterContinental Madrid 307
InterContinental Vienna 453
Total 2,537
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