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Ares Real Estate, a subsidiary of Ares Management , announced the acquisition of a hotel portfolio from Landsec in the UK. The portfolio includes 18 hotels with 3,028 rooms, concentrated in London and other major UK cities, purchased for £400 million. Ares plans to enhance the value of the properties through asset management initiatives, including refurbishment and energy efficiency improvements.
Positive
Ares Real Estate acquired a diverse hotel portfolio in key UK locations, including Central London, Edinburgh, Manchester, and Birmingham, providing geographic diversity and potential for revenue growth.
The surrender of AccorInvest leases allows Ares to consolidate ownership and operations, offering opportunities for value enhancement through strategic asset management initiatives.
The strong performance recovery of the hotels post-Covid presents a promising outlook for future revenue growth and profitability.
Negative
The acquisition of the hotel portfolio comes with the challenge of implementing various asset management initiatives, including refurbishment and repositioning, which may involve significant costs and risks.
Although the properties are well-located and have strong potential, uncertainties in the hospitality industry post-pandemic could impact the financial performance and return on investment of the portfolio.
The acquisition of a hotel portfolio by Ares Real Estate represents a strategic move to capitalize on the post-COVID recovery within the hospitality sector, particularly within the robust London market. By consolidating the ownership and operating structures of these properties, Ares is poised to implement asset management initiatives, such as refurbishing and repositioning specific hotels. This has potential for generating increased revenue, given the already strong recovery since the pandemic. The focus on energy efficiency and carbon footprint reduction aligns with broader ESG trends, which may enhance the appeal of these properties to a more sustainability-conscious consumer base and possibly provide tax incentives or regulatory benefits. However, the success of these initiatives heavily depends on the company's execution capabilities and market dynamics. The hospitality industry is sensitive to economic downturns and travel trends, which could affect occupancy rates and overall returns. Rating: 1
Ares Real Estate's emphasis on energy efficiency and carbon footprint improvements in their newly acquired hotel portfolio is a strategic move that resonates with the current sustainable investing trends. Investors are increasingly looking for assets that meet higher ESG criteria and Ares’ initiative could potentially lead to increased asset value and attract a wider investor base, especially among those prioritizing sustainability. It is also indicative of a forward-thinking approach to asset management in real estate, as sustainability becomes a key factor in the longevity and competitiveness of properties. However, the actual impact of these initiatives will need to be monitored over time to assess their effectiveness in reducing costs and attracting a sustainability-focused clientele. Rating: 1
The hotel industry, particularly in high-demand areas such as London, has experienced a robust recovery post-COVID, making Ares Real Estate's acquisition a potentially lucrative investment. The hotels' strategic locations in major UK city centers, including London, Edinburgh, Manchester and Birmingham, are likely to benefit from consistent business and leisure travel. By taking operational control and planning to enhance the properties, Ares aims to increase the hotels' competitiveness and appeal. However, the hospitality sector can be highly competitive, with success often hinging on factors such as customer service quality and brand reputation. As Ares takes over operations, maintaining high service standards while executing refurbishment and repositioning will be critical to realize the full value-add potential of this acquisition. Rating: 1
Income-Generating Hotel Portfolio Concentrated in London and Other Major UK Cities
LONDON--(BUSINESS WIRE)--
Ares Management Corporation (“Ares”) (NYSE: ARES), a leading global alternative investment manager, announced today that funds managed by Ares Real Estate have acquired a hotel portfolio from Landsec alongside hotel operating partner EQ Group (“EQ”), a leading European hospitality investment and management platform.
Prior to the acquisition, the properties were fully let to AccorInvest under long-term leases. In parallel with the closing of the acquisition, Ares entered into an agreement with AccorInvest to surrender these leases and transfer operations of the relevant hotels to Ares. As a result of these transactions, Ares has acquired 18 hotels with 3,028 rooms (the “Portfolio”) at a headline purchase price of £400 million.
The Portfolio consists of midscale and economy properties with the majority of value in Central London and the remaining assets primarily located in major UK city centres, including Edinburgh, Manchester and Birmingham. The acquisition, which consolidates ownership of the Portfolio’s real estate and operations by the surrender of the AccorInvest leases, provides the opportunity to enhance value through implementing various asset management initiatives including the refurbishment and repositioning of certain assets. Alongside improving operational and financial performance of the hotels, Ares will target energy efficiency and carbon footprint enhancements across the Portfolio.
“This transaction highlights our ability to create solutions which unlock assets in today’s dislocated market,” said John Ruane, Partner and Co-Head of Ares European Real Estate. “The hotels are well located with an attractive weighting to the London market and have seen performance recover strongly since Covid. The rationalisation of the ownership and lease structure offer us exciting opportunities to add value over time.”
“We are delighted to partner with Ares to acquire this unique portfolio of hotels through a complex series of transactions,” said Namid Mangalji, Senior Managing Director & Co-Founder at EQ. “Together we can leverage our combined deep track record in deploying capex, operational turnaround, rebranding and repositioning.”
The Ares Real Estate team oversees $48.8 billion of assets under management and has more than 270 investment professionals across seventeen local offices in core markets in the U.S. and Europe as of March 31, 2024. The team leverages its scale and vertically integrated operating platform to execute comprehensive real estate equity and debt strategies that are flexible by geography, product type and sector. In Europe, Ares Real Estate has a tenured, local team of approximately 70 real estate investment professionals and a track record spanning approximately three decades of operations.
About Ares Management Corporation
Ares Management Corporation (NYSE: ARES) is a leading global alternative investment manager offering clients complementary primary and secondary investment solutions across the credit, real estate, private equity and infrastructure asset classes. We seek to provide flexible capital to support businesses and create value for our stakeholders and within our communities. By collaborating across our investment groups, we aim to generate consistent and attractive investment returns throughout market cycles. As of March 31, 2024, Ares Management Corporation's global platform had approximately $428 billion of assets under management with approximately 2,900 employees operating across North America, Europe, Asia Pacific and the Middle East. For more information, please visit www.aresmgmt.com.
About EQ Group
EQ Group is a leading pan-European hospitality investment and management platform that has invested in, managed or asset managed over €3.3 billion of hospitality real estate across 9,400 rooms. EQ partners with leading hotel real estate investors, investment banks, family offices and private equity funds and has an extensive track record of creating value by acquiring assets and executing complex business plans encompassing capex, rebranding and operational turnarounds. EQ’s portfolio spans a broad spectrum of hotels comprising internationally branded assets, independent luxury lifestyle hotels, resorts, meetings & events hotels and serviced apartments in key European gateway destinations. For more information, please visit www.eqgrp.com
Ares Real Estate acquired a hotel portfolio from Landsec, consisting of 18 hotels with 3,028 rooms primarily located in Central London and major UK city centers, for a purchase price of £400 million.
Who is the hotel operating partner of Ares Real Estate in this acquisition?
EQ Group is the hotel operating partner of Ares Real Estate in the acquisition of the hotel portfolio from Landsec.
What is the headline purchase price of the hotel portfolio acquired by Ares Real Estate?
The headline purchase price of the hotel portfolio acquired by Ares Real Estate is £400 million.
What are some of the asset management initiatives planned by Ares for the acquired hotels?
Ares plans to implement asset management initiatives such as refurbishment, repositioning, energy efficiency enhancements, and operational improvements across the hotel portfolio.
ares management, l.p. is a publicly traded, leading global alternative asset manager with approximately $106 billion of assets under management,* and more than 15 offices in the united states, europe, asia and australia.* since its inception in 1997, ares has adhered to a disciplined investment philosophy that focuses on delivering strong risk-adjusted investment returns throughout market cycles. ares believes each of its distinct but complementary investment groups in credit, private equity and real estate is a market leader based on assets under management and investment performance. ares was built upon the fundamental principle that each group benefits from being part of the greater whole. for more information, please visit www.aresmgmt.com. * as of december 31, 2017, aum amounts include funds managed by ivy hill asset management, l.p., a wholly owned portfolio company of ares capital corporation and a registered investment adviser.
