Hotel Investor & Operator
September 2016
A specialist in hotel investment and hotel management
Algonquin’s perimeter : 40 hotels (c. 7,200 rooms), including 17 directly-operated hotels (c. 1,750 rooms).
“Hotel investor & Operator” since 1998, Algonquin is a private equity investment player which is directly involved with day-to-day hotel management
This specific hotel know-how covers both day-to-day operational matters (such as the set-up of sales and marketing policies, the management of costs, human resources, health & safety regulations, etc.) as well as all real estate matters (in house project management expertise, commercial layout optimization, etc.)
This is the reason why institutional investors, private equity firms and family offices have sought to benefit from Algonquin’s know how as specialised hotel investor and asset manager through the creation of dedicated hotel ventures, in which Algonquin is always an investor, with equity stakes typically ranging from 2% to 50% depending on the size of the assets or portfolios involved Number of hotels
12 2
1
1
3
2002
2003
2004
2005
4
2006
2007
16
2008
20
2009
24
2010
29
33
34
2011
2012
2013
37
2014
41
40
2015
2016 YTD
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A portfolio of 40 hotels representing 7,200 rooms (Total AUM: €1.5bn) Room Split Leased to Intl. Chains 13%
Directly operated by Algonquin 41%
UK Managed by Intl. Chains 46%
Liverpool London
Germany 7%
GERMANY Reims
Warsaw
Krakow
BELGIUM
Belgium 9% UK 3%
Italy 14%
POLAND
Düsseldorf
Antwerp Brussels
Nuremberg
Paris Offices
FRANCE
Poland 8%
Lyon France 59%
Valence The Alps Toulouse French Riviera
3-star 10%
Colombes 5-star 22%
Milan
Venice
ITALY Rome
Saint-Denis
La Défense Boulogne Paris Bercy Disneyland Paris
4-star 68%
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17 hotels (3,900 rooms) operated under management contracts Algonquin is an historical partner for international hotel operators
Algonquin acts as an active owner and asset manager by supervising the operating performances of the operators London
Antwerpen
Warsaw Düsseldorf Kraków
Brussels
Algonquin interacts most notably on revenue management and cost control optimization as well as in active real estate asset management (Capex)
Nuremberg Offices
Operator's Brand
Paris
Milan
Venice
Cap d’Ail Rome
Colombes La Défense
Boulogne
SaintDenis
Paris Bercy
Name
Rooms
Location
Country
Venice
Italy
Westin Venice
4*
185
Westin Milan
5*
227
Milan
Italy
Sheraton Kraków
5*
232
Kraków
Poland
Sheraton Warsaw
5*
350
Warsaw
Poland
Sheraton Rome
4*
640
Rome
Italy
Hyatt Regency Düsseldorf
5*
303
Düsseldorf
Germany
Sofitel la Défense
5*
151
La Défense
France
Meridien Nuremberg
5*
192
Nuremberg
Germany
Mariott Cap d'Ail Marriott Renaissance Brussels Marriott Executive Apts Brussels
4* 4* 4*
186 262 56
Cap d'Ail Brussels Brussels
France Belgium Belgium
Pullman Paris Bercy
4*
396
Paris
France
Radisson Boulogne
4*
170
Radisson Blue Antwerp Courtyard Colombes Courtyard Paris Saint Denis
4* 4* 4*
247 150 150
Boulogne Billancourt Antwerp Colombes Saint-Denis
Park Inn Antwerp
4*
59
Antwerp
France Belgium France France Belgium
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6 hotels (1,500 rooms) operated under lease or management lease agreements
Liverpool London Brussels
Algonquin has invested in assets leased to large hotel operators, mainly through variable lease contracts where value creation is possible through an active asset management policy between Algonquin and the lessee
Paris Offices
Lyon
Nice
Lessee's Brand
Name
Class Rooms
Location
Country
Radisson Nice
4*
331
Nice
France
Radisson Lyon
4*
245
Lyon
France
Club Med Tignes
4*
229
Tignes
France
Mercure Montmartre
4*
305
Paris
France
Mercure Montparnasse
4*
185
Paris
France
Novotel Liverpool
4*
209
Liverpool
UK
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17 directly-operated hotels (1,750 rooms)
Through Algonquin’s own brands or internationally renowned franchises
Algonquin’s in house team has been actively operating many hotels in Paris and France main regional cities (including ski resorts and Côte d’Azur) for the past 14 years Reims
Algonquin skills encompass marketing, sales, financial control, real estate project management, IT, web optimization and revenue management
Disneyland Paris
Franchisor/ Proprietary Brand
FRANCE Alpes
Valence
Toulouse
Rayol-Canadel
T E M M O S
Name Le Morgane Les Aiglons Le Golf Les Bruyères Mercure Les Bossons Mercure Reims Cathédrale Holiday Inn Reims Centre Holiday Inn Toulouse Aéroport Holiday Inn Coquelles Explorers Hôtel Disneyland Paris Hôtel le Bailli de Suffren Hôtel les Terrasses du Bailli La Résidence du Bailli Hôtel Kaya Hôtel Atrium Appart-Hôtel Hévéa Les Chalets de Rosaël
4* 4* 3* 4* 4* 4* 4* 4* 3* 3* 4* 3* / 4* 3* 3* 4*
Rooms
Location
Country
56 107 246 95 89 126 82 150 118 390 55 24 19 50 56 46 38
Chamonix Chamonix Les Arcs Les Menuires Chamonix Reims Reims Toulouse Coquelles Marne la Vallée Le Rayol-Canadel Le Rayol-Canadel Le Rayol-Canadel Les 3 Vallées Valence Valence Val Thorens
France France France France France France France France France France France France France France France France France
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Algonquin, hotel investor since 1998 75 hotels acquired over the past 17 years and 35 exits Track record last 10 years: Number of hotels owned in said year
12 9 hotels / 1,236 rooms
2008
Portfolio of 3 hotels 16 3 hotels / 675 rooms
2010
2011
20
Courtyard Saint Denis 150 rooms
24
Explorers Disneyland Paris 390 rooms
2013
34
Mercure Brigstow Bristol 116 rooms
2016 YTD
Exit in 2015 from a portfolio of 7 Parisian boutique hotels Equity IRR: 12% over 8 years
2 Boutique hotels in Paris 2 hotels / 61 rooms + 5 other Parisian hotels (164 rooms)
Sale in 2013 of the Aigle des Neiges Equity IRR: 45%
Radisson Boulogne 170 rooms
Sale in 2015 of the Courtyard SaintDenis – Equity IRR: 22.5% Sale in 2015 of the Novotel Edinburgh Equity IRR: 25%
Novotel Edinburgh Park 150 rooms
Sale in 2014 of the Holiday Inn Reims, Equity IRR : 41%, and of the Ibis Styles of Reims - Equity IRR: 62%
Mercure, ibis and Holiday Inn Reims 3 hotels / 274 rooms
29
33
2015
Sale between 2013 and 2015 of 7 non strategic assets
Portfolio of 3 mountain hotels 3 hotels / 450 rooms (“fonds de commerce” only)
2012
2014
Sold assets
Portfolio of 9 hotels
2007
2009
Assets still held by Algonquin
37
Holiday Inn Toulouse 119 rooms
Sofitel La Défense 150 rooms
Ibis York 91 rooms
Portfolio of 8 hotels 8 hotels & residences / 351 rooms
41
The European Hotel Portfolio 8 hotels / 2,308 rooms
40
Hyatt Regency Düsseldorf 303 rooms
Mercure Les Bossons Chamonix 89 rooms
Courtyard Colombes 150 rooms
Novotel Liverpool 209 rooms Radisson Blu/ Park Inn Antwerp 306 rooms
Sheraton Krakow (Poland) 232 rooms
Sale in 2014 of the Holiday Inn of Toulouse - Equity IRR: 52% Sale in 2015 of the Mercure Les Bossons Sale in 2015 of the Mercure Brigstow Equity IRR: 48% Sale in 2016 of the Ibis York Equity IRR: 33.4% Sale in 2015 of Hotel Kaya, Bailli de Suffren Resort, Chalets de Rosaël, Apparthotel Hévéa, and Atrium Hotel. Equity multiple: 2,5 times.
Sale in 2015 of the Marriott Renaissance Brussels and the Marriott Executive Apartment Brussels Sale in 2016 of the Pullman Paris Bercy
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Value creation within the investment period
• Dedicated teams with offices in 3 countries • Networks : brokers, operators, administrators, independent owners • Examples of directly sourced deals over the past years: Mercure Reims Cathédrale (Foncière des Murs / Accor), Holiday Inn Reims (Alliance Hospitality), Ibis Styles Reims (Alliance Hospitality), Mercure Chamonix Les Bossons (Foncière des Murs / Accor), Courtyard Colombes (Host Hotels & Resorts), Sofitel La Défense (Accor)
Sourcing / Analysis / Deal Flow
• Small circle of recurring partners
• Constitution of the required documentation for the exit • Creation of a favorable context to exit the deal in the best possible conditions.
• Depending on Risk Rewards, Algonquin retains a variable minority equity after taking the underwriting
Structuration of the equity & bank debt
Exit
• Upstream identification of potential buyers
• Establishment of a secure investment framework for the co-shareholders through the implementation of a balanced shareholder agreement: drag / tag / right of veto, etc. • Strong relationship with numerous banking partners
Active Management during the Holding period
• Supervision of due diligences and audits, negotiation of legal documentation with the vendors
•
Financial control : reporting, budget, management control, internal audit
•
Legal : Legal follow-up
•
Technical : investments follow-up, property management, project management in case of renovation, extension and conversion projects
•
Platform for day to day operational support : reservations, sales & marketing, IT, media management, etc.
•
Management of the relationship with third party operators if any Page 8 8 8
A solid set of lenders and investment partners
Institutional investors
Wide range of lenders implanted in several European countries to quickly secure the most suitable financing for our operations
Private Equity
A network of long term partners suited for any operation (size, location, management type…)
HNWI, Family Offices
Algonquin partners with a large set of recurring investors (HNWI, Family Offices, Private Equity, Institutional Investors…) which enables it to undertake any kind of operations (Management Contract, Lease, Management Lease, Directly-operated hotels) with different Risk / Reward profiles Page 9 9 9
A dedicated team of 30 professionals based in London, Paris and Brussels, well balanced between investment specialists and hotel industry professionals Shareholder structure Algonquin S.A. as of June 2016
12%
39%
Algonquin S.A.
Jean-Philippe Chomette
Jean-Philippe Chomette
Founder & CEO
BNP Paribas Développement Private Investors
45%
Management
84%(*)
4%
Algonquin Management Partners
Frédéric de Brem Group Managing Director
Financial Department
Vincent Chamley Chief Financial Officer
UK/Belgium /France
9 people
Acquisition Department
Stéphane Obadia MD - Head of Acquisition
6 people
Real Estate Department
Charlie Besnier Head of Real Estate
3 people
Hotel Operations
Maxime des Monstiers Chief Operating Officer
2 people 16 General Managers
Asset Management
Emmanuel Dissez Head of Asset Management
2 people
(*) The other 16% are owned by SpaceH, a company held by Algonquin Management Partners’ managers
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Business Case 1
Acquisition of the Sheraton Krakow (Poland) December 2013 Asset Description
Photos
• 5-star hotel opened in 2004. Outstanding location in Krakow’s prestigious District One (Stare Miasto), on the banks of the river Wisla and overlooking the historic Wawel Castle • 232 guest rooms, laid out over 7 floors • 1 restaurant, 2 bar, 1 roof-top terrace and 8 meeting rooms (around 500sqm) • gym, indoor pool, club floor with club lounge & souvenir shop • parking: 30 underground spaces and 35 surface spaces
Strengths & Opportunities, Weaknesses & Threats at acquisition STRENGTHS • Recently-built asset (2004) with no (or limited) capex requirements • A very distinctive and rare piece of freehold real estate, situated in one of central/eastern Europe’s most sought after hotel markets (between 1995 and 2012 the Polish economy has shown consistent GDP growth, with an average growth rate for that period of 4.4%) • Prime location within the city centre of Krakow at a walking distance from all major entertainment facilities and offering splendid views over the Wisla River and Wawel Castle • Balanced business mix thanks to both corporate and leisure tourism • Limited future supply • Very promising infrastructure developments in the city (airport connectivity and extension, 36,000 sqm convention centre)
WEAKNESSES • Exposure to Polish Zloty exchange rate (to which Algonquin feels reasonably secure) • Complex acquisition of a Swiss holding company
Sourcing
Co-investors
• Direct
Investment figures in €k Acquisition Cost 37 200 Stamp duty & Due Diligence Costs 425 Algonquin Acquisition Fees 375 Total Investment 38 000 of which Equity 13 000 of which Debt 25 000
Deal Motivations & Risk/Reward Profile • • • •
Asset quality & location First partnership with Starwood Hotels and Resorts Strong risk reward profile 5-year, pre-carried Equity IRR : 18,4% (base case) / 22,4% (best case)
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Business Case 2
Acquisition of the Courtyard Colombes (France) October 2013 Asset Description • • • • •
Photos
4-star hotel opened in 2006 Located on the Boulevard Charles de Gaulle in Colombes, Hauts de Seine 150 guest rooms 1 restaurant, 1 bar, 2 meeting rooms Underground parking (50 parking spaces)
Strengths & Opportunities, Weaknesses & Threats at acquisition STRENGTHS • Recent asset (2006) • Attractive location in a developing business park, close to La Défense financial centre, a major demand generator in the area • Strong basis of loyal & regular corporate clientele • Hotel operated by Marriott Hotels, with whom Algonquin already has a strong relationship (owner of the Marriott hotel in Cap d’Ail, South of France) • Algonquin already has a solid knowledge of the La Défense hotel market (owner of the Sofitel La Défense) WEAKNESSES • Algonquin’s scope of intervention is restricted by the existing management agreement with Marriott Hotels
Co-investors
Sourcing • Direct
Investment figures Acquisition Cost FF&E Reserve buy-out Stamp duty & Due Diligence Costs Algonquin Acquisition Fees Total Investment of which Equity of which Debt
in €k 19 000 400 1 310 190 20 900 6 800 14 100
Deal Motivations & Risk/Reward Profile • • • • • •
Asset quality & location Resilient cash flow and upside potential with regards to the expansion of the neighbouring business park Quality of Algonquin’s track-record with Marriott Hotels (Marriott Cap d’Ail Monaco / Courtyard Saint-Denis), allowing for more involvement into day-to-day hotel management Existing management agreement including an owner’s priority return Strong risk reward profile 5-year, pre-carried Equity IRR : c. 15% (base case)
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Business Case 3
Acquisition of a 306 rooms Rezidor portfolio in Antwerp (Belgium) June 2015 Asset Description
Photos
Two 3 and 4-star hotels located on one side of the historical Antwerp Central station and 500m away from the historical city center. Radisson Blu Park Inn • 4-star hotel built in 1997 • 3-star hotel opened in 2008 • 247 guest rooms over 6 floors • 59 guest rooms over 8 floors • 1 restaurant, 1 breakfast area, 1 bar, 18 • 1 F&B outlet (breakfast only) meeting rooms (1,900m²) • Fitness, pool and Aquatopia aquarium • Underground parking (107 parking spaces)
Strengths & Opportunities, Weaknesses & Threats at acquisition STRENGTHS • Recently built assets (1997 for the Radisson Blu, and 2008 for the Park Inn) • Prime location in one of the most dynamic employment area in Europe thanks to its worldclass sea port, petrochemical cluster and diamond industry • Promising infrastructure development such as the 25,000m² convention center next door due to open in 2016 • Dynamic city with both leisure and corporate demand, from both domestic and international sources • Limited branded supply, all the more with the recent closure of the 174 rooms of the Radisson Park Lane and no further hotel development projects in the city • Repositioning opportunity through an important capex program at the Radisson Blu WEAKNESSES • Though a number of projects will soon revitalize the Central Station environment, the area currently lacks coherence
• JLL 10%
Main Investment figures Enterprise Value Extensive Refurb. Program Total Cost
Deal Motivations & Risk/Reward Profile • • • •
Co-investors
Sourcing
in €k ~50 000 ~7 000 ~57 000
Algonquin KKR
90% Financing Debt
Asset quality & location Capitalizing on long time relationship between Algonquin and Rezidor Risk Reward: high Value creation through: • Creation of a retail center from an outdated existing aquarium • Increase of the operational performance thanks to a comprehensive refurbishment program
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Business Case 4
Acquisition of the European Hotel Portfolio (Europe) October 2015 Asset Description
Photos
Portfolio of eight 4 to 5-star hotels located around Europe: • 5-star Westin Milan with 227 rooms • 4-star Pullman Paris Bercy with 396 • 5-star Meridien Nuremberg with 192 rooms rooms • 4-star Sheraton Rome with 640 rooms • 5-star Sheraton Warsaw with 350 • 4-star Marriott Renaissance Brussels rooms with 262 rooms • 5-star Westin Venice with 185 rooms • 4-star Marriott Executive Appts with 56 rooms
Strengths & Opportunities, Weaknesses & Threats at acquisition STRENGTHS • Mostly central locations in primary European cities • Large assets with strong bottom line • Good growth fundamentals as the portfolio is well positioned to capitalise on the anticipated European economic recovery • Value add opportunities through re-branding and re-positioning of some of the hotels.
Co-investors
Sourcing • Eastdil Secured
5%
Investment figures WEAKNESSES • Asset management intensive
Enterprise Value Extensive Refurb. Program Total Cost
in €k >400 000 ~50 000 >450 000
Algonquin 47.5%
Benson Elliot 47.5% Walton Street
Deal Motivations & Risk/Reward Profile • • • • •
Financing Debt
Quality assets in prime locations across several primary European cities, excellent exposure Complicated acquisition process and asset management, limiting the number of competing bidders Hotels managed by trusted operators of Starwood, Marriott, and Accor Performance still below the 2007 peak, seems to have already reached the trough Value creation through: • Intensive Asset Management • Capex programs
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Business Case 5
Acquisition of the Hyatt Regency Düsseldorf (Germany) July 2016 Asset Description • • • • • • •
Photos
New purpose built hotel opened in 2012 303 rooms: 242 standard (32sq. m.), 61 suite ( from 37 to 158 sq. m.) 2 restaurants (152 + 62 covers). 2 bars (144 + 44 covers), 1 private bar with 20 covers 10 meeting rooms covering 908 sq. m. for 780 delegates “Regency Club” on 18th floor with extra amenities for business guests 485sqm spa, includes 5 treatment rooms, sauna and gym 80 parking spaces
Strengths & Opportunities, Weaknesses & Threats at acquisition STRENGTHS • The Quality of the asset which is a an iconic building in Dusseldorf - Trophy Asset • Located in a Prime location for both leisure and business tourists • A Good hotel market well balanced between leisure and business demand. Market is becoming less reliant on the Messe with corporate demand increasing on the central location benefiting to the hotel. Ranked 3rd on TripAdvisor • Tax Benefits : Share deal featuring a low stamp duty, book value of the asset at €109m and a very low level of corporate tax over the investment
THREATS • European terrorist threat
Co-investors
Sourcing • Direct
2%
Main Investment figures Acquisition price Acquisition costs Acquisition fees Algonquin Total Investment Equity Obligations (Shareholders)
in €k 109.000 1.500 708 111.208 37.365 73.842
Algonquin
Aviva
98%
Deal Motivations & Risk/Reward Profile • Quality of the asset / location • Acquisition NOI Yield: 5.2%
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