Strategic Hotels & Resorts announced earlier this week that it had closed the sale of the 237-room Marriott Grosvenor Square to Hong Kong-based private equity firm Joint Treasure at a price that translated to approximately £528,000 per key.
George Nicholas, executive vice president in JLL’s Hotels & Hospitality group, negotiated the sale and told BigHospitality the price demonstrated investors' appetite for hotels in London, particularly in the Mayfair area.
“Over the last 10 years Mayfair hotel room yields (ReVPAR) has grown at a compound annual average growth rate (CAGR) of seven percent," he explained.
“That includes the period of turn and vastly outstrips growth seen in the retail price index (RPI), consumer price index (CPI) and amongst hotels in other cities.
“It is for that reason that hotels in this part of London remain so attractive to investors.”
Foreign interest
Nicholas said the Marriott Grosvenor Square attracted over a dozen offers from investors, who are still seeking to place capital into London hotel real estate.
He noted that there was particular demand for London properties from Asian and Middle Eastern investors, who are attracted by the stability and growth of the London hotel market, as well as the relatively favourable tax conditions in the UK.
However, Nicholas said it was unlikely that more significant London hotels would come onto the market this year.
“There will be more investors circling these types of investments but I don’t think there is going to be a lot of sales,” he said.
“London hotel owners are not quick to put their properties on the market, as capital values continue to appreciate and the operating performance continues to appreciate, there is no good reason to sell unless it is part of a wider business strategy.”
Strategic Hotels & Resorts chairman and chief executive officer Raymond Gellein said the sale of the Marriott Grosvenor Square was part of its ‘previously committed’ strategy to exit the European market.
It also enabled Strategic to buy out the remaining 50 percent ownership interest in the 649-room Fairmont Scottsdale Princess resort - the group’s highest growth asset.
Heart of Mayfair
Located in the heart of Mayfair, the Marriott London Grovesnor Square hotel has extensive conference and private dining facilities, and is home to Gordon Ramsay’s Michelin starred restaurants Maze and Maze Grill.
The hotel was sold with a long-term management agreement with Marriott in place, although Nicholas said it was likely the new owners would ‘invest in a continued programme of investment and improvement which will yield them a positive result’.