Investors to circle €60m Westin hotel

The five-star Westin Hotel and adjoining AIB bank branch on Dublin's Westmoreland Street and College Green will be of interest mainly to international investors rather than hoteliers when they are offered for sale from today at a guide price of €60 million. At this level the investment will show a return of more than 7.7 per cent.

Though the names of a number of leading hoteliers have been mentioned as likely buyers, the reality is that they are unlikely to pitch for the hotel because it is leased on a long-term basis for at least another 12 years.

Adrian Truick of agents Knight Frank is handling the sale for receiver Declan McDonald of PwC. The two properties were held as a investment by Treasury Holdings until it was wound up in 2011 with debts of €2.7 billion.

25-year lease
The Westin is one of the best-located hotels in Dublin, occupying a large proportion of a city block overlooking Trinity College. The former AIB premises was converted into a hotel and let on a turnkey basis to Westin Hotels Ireland in 2001 under a 25-year lease. The current rent of €4,187,700 is subject to review every fifth year with a guaranteed increase of 3 per cent compound at each review. The lease is guaranteed by Starwood Hotels & Resorts Worldwide.

AIB is paying a passing rent of €675,000 a year for the bank premises on the ground, basement, sub-basement and first floors levels at the corner of College Street and Westmoreland Street. The 35-year lease also runs from 2001 with rent reviews every fifth year on an upward-only basis. The lease, due to run for at least another 22 years, is guaranteed by AIB Group.

Investors looking at the Westin can be expected to study recent hotel sales in the city. Kennedy Wilson's purchase of IBRC and Bank of Ireland loans tied to the Shelbourne Hotel worked out at a valuation of almost €420,000 for each of the 265 bedrooms. More recently the sale of the Clarion Hotel in the IFSC for €33 million equated to €200,000 per key. Companies pitching for the Westin are likely to put a valuation of about €10 million on the bank investment and €50 million on the hotel. At that figure each of the 163 bedrooms would work out at just over €306,000.

The ground and first floors of the eight-storey Westin accommodate most of the public areas, including the reception, foyer, restaurant, lounge, meeting rooms and conference/ banking facilities. The hotel bar is located in the original bank vaults at basement level.

A number of original 18th century listed facades and other period features of the old bank building have been incorporated into the hotel, including the original banking hall, which has been converted into a striking function room with highly ornate ceilings and chandeliers.

Dublin’s hotel market continues to improve, with the uplift in room rates and occupancy levels driven by an improving backdrop and increasing tourist numbers. In 2013, occupancy levels grew by 5.5 per cent, with revenue per room increasing by 11.2 per cent. Even with average room rates improving, revenue per room is still 20 per cent below the 2006 peak and accommodation costs in Dublin continue to lag the average European level.

Adrian Truick says that with long-term secure income and guaranteed rental growth, the Westin investment would appeal to a range of local and international investors as well as the specialist European hotel investment funds.