Big deals boost sales activity in hotel market

DTZ report says €126m of hotels were bought or sold in the first three months of the year

The latest review of the hotel market from DTZ says that €126 million worth of hotels were transacted in the first quarter of this year, up 37 per cent on the first quarter of last year. "Activity in the quarter was boosted by a handful of significant deals, notably the top five hotel transactions accounting for 80 per cent of the overall spend in the three-month period," says DTZ's chief economist Marian Finnegan.

The largest deal was JP McManus's purchase of the five-star Adare Manor Hotel and Golf Resort in Co Limerick for €31.5 million, significantly above the asking price of €25 million. This was followed by the three-star Temple Bar Hotel in Dublin 2. It made €27.5 million and was bought by a consortium of investors, including US hotel group Pyramid, Irish firm Windward Management and real estate private equity group Angelo, Gordon & Co. Also in Dublin, the three-star Ardmore Hotel in Dublin 11 sold for about €5 million with a plan to convert it into a nursing home. But, in a reversal of last year's Dublin-dominated market, just two hotels transacted in Dublin in the first three months of this year.

Among the notable sales outside the capital were Dalata Hotel Group's purchase of the four-star Clayton Hotel in Co Galway and the four-star Whites of Wexford for a combined value of more than €31 million. Dalata also snapped up the four-star Pillo Hotel and Spa in Co Galway for about €10.5 million.

Waterford Castle

Other deals concluded in the first quarter include the four-star Waterford Castle Hotel and Golf Resort for €6.3 million while iNua Hospitality acquired the five-star Muckross Park Hotel and Spa in Killarney, Co Kerry, for €6.25 million. Cork’s four-star Charleville Park Hotel and Leisure Club was sold to Pat McDonagh for €4 million. However, demand for Irish hotels was still strongest in Dublin, accounting for 26 per cent of hotel sales in the first quarter – the comparable figure for 2014 was 50 per cent. “Domestic buyers have become increasingly active,” says Ms Finnegan, “accounting for 72 per cent of the total spend in the quarter, while demand from international investors was strongest among US buyers.

“Transaction activity was dominated by smaller size deals, with 69 per cent of overall sales sub €10 million in value. Activity in the Irish hotel market is expected to strengthen, with approximately €80 million of hotel sale agreed at the end of the first quarter of 2015.”

Demand for hotels is being driven by the strong recovery in tourism. Central Statistics Office figures show a 14 per cent increase to 1.53 million visitors for the first quarter of 2015 in the number of overseas trips to Ireland. The number of trips taken by Irish residents within Ireland in 2014 reached 7.35 million, up 3.4 per cent on 2013.

Pipeline activity

The DTZ review suggests that the remainder of this year “will certainly be active”.

Top hotels "sale agreed" include the five-star InterContinental (formerly the Four Seasons Hotel) in Ballsbridge, a reported off-market transaction due to close shortly; the three-star Premier Inn at Dublin Airport which is sale agreed for over €10 million; the three-star Metro Hotel Dublin Airport for about €5.5 million; and the three-star Maldron Hotel Wexford, sale agreed for about €3.5 million.

Nama’s “Project Crystal”, comprising seven hotels throughout Ireland, is guiding €35 million and its assets are at “advanced stages of negotiations”, according to DTZ.

“It appears that the removal of the capital gains tax (CGT) exemption at the end of 2014 has not moderated demand and activity in the hotel sector in the opening months of 2015, with sales achieving a 40 per cent quarterly uplift and investor interest continuing to strengthen each quarter,” says Ms Finnegan. “Hotel portfolios combined with a significant number of individual hotels expected to come to the market should drive activity in the coming months.”