Principal Hotels Completes £290 Million Sale Leaseback of Six UK Hotels

The Times - December 24, 2006

Alternative Asset Investment Management (AAIM) is understood to have struck a deal with Permira, the private-equity firm, to buy six four-star hotels in the Principal chain for £290m. The hotels have been acquired as part of a 25-year sale-and-leaseback deal with Permira, which snapped up the chain in September from Royal Bank of Scotland. The portfolio comprises the Russell in London, the George in Edinburgh, the Royal York in York, the Met in Leeds, the Palace in Manchester, and Selsdon Park in Croydon.

Principal, which competes in the upper mid-market of the hotel sector, has a total of 1,310 bedrooms and a strong focus on conferences, with 80 meeting rooms that can accommodate more than 7,000 delegates. The hotel purchase is being carried out using the Symmetry fund joint venture that AAIM set up with Bank of Scotland in October to spend £2 billion on European property. In October AAIM teamed up with Robert Tchenguiz, the property tycoon, to buy Menzies, the regional hotel chain, for £190m.

The hotel spending spree forms part of a plan by AAIM to act as a consolidator in Britain’s provincial four-star market. The transaction with Permira is just one of a flurry of pre-Christmas deals for AAIM. It has also refinanced its investment in the British headquarters of the electronics firm JVC at Staples Corner, north London, with HSH Nordbank, the German bank.

The refinancing has created a bonanza for its investors, earning them three times their original money in three years while retaining their original investment in the building. Since AAIM was launched in January 2003, it claims to have generated an average return of more than 80%, amid soaring commercial- property values that have squeezed rental yields to record lows. Sphere: Related Content