Pandox acquires 37 hotel portfolio in the UK and Ireland with Fattal Hotels Group as operating partner.

The transaction is made with Fattal Hotels Group (“Leonardo”) as operating partner, whereby Pandox, following a reorganisation of the portfolio, will retain 2o investment properties and one operating property in the UK and Ireland, and Leonardo will acquire the operational platform with 36 hotel operations under the “Jurys Inn” brand.

The investment properties will be operated by Leonardo under long-term revenue-based lease agreements. The total acquisition price amounts to MGBP 800 on a debt free basis, corresponding to approximately MSEK 9,030 (*). The acquisition is fully financed by a new bank loan, existing credit facilities and a loan from Leonardo of MGBP 120 to be set-off after the reorganisation, after which Pandox’s share of the total acquisition price will amount to MGBP 680, corresponding to approximately MSEK 7,680. The hotel property portfolio is expected to contribute the equivalent of approximately MSEK 450 in net operating income and MSEK 200 in cash earnings 2018, provided the acquisition is completed before year-end 2017.

“The acquisition fulfils all Pandox’s strategic criteria regarding countries, cities and locations, as well as size, segment and profitability, contributing to a further diversification of our revenue base. The hotel properties are of high quality, belong to the profitable upper mid-market segment and will bring an immediate and substantial contribution to earnings. Through the acquisition, Pandox adds 20 new hotel cities to the portfolio and achieves a considerable market presence in the UK and the Republic of Ireland, which are large and dynamic hotel markets. The acquisition demonstrates Pandox’s ability to execute on its business strategy in international competition and grow with good profitability also in new markets.”, says Anders Nissen, CEO of Pandox.

“We are proud to continue consolidating and developing our collaboration with Pandox, our strong expansion partner. The mutual trust we have built up over the last few years forms the basis for our success. For us, the acquisition of Jurys Inn hotels represents a huge step forward in our growth. With this, we have the opportunity to further expand and strengthen our expertise and brand awareness in Europe. We look forward to this new challenge.”, says David Fattal, CEO of Fattal Hotels Group.

Drivers for the acquisition

1. The hotel properties fit well into Pandox’s acquisition strategy and contribute immediately and positively to Pandox’s earnings and cash flow.
2. The hotel property portfolio is consistently of high quality and comprises 21 full-service hotels in the upper-mid market segment with a total of 4,694 rooms and an average size of approximately 224 rooms. The hotels are recently renovated with very positive guest reviews.
3. Pandox will be established in 20 new hotel markets and gains a considerable market presence in the UK and Ireland
   (*) Based on GBP/SEK 11.29, which is used throughout this press release.
4. The hotels’ locations and market positions are consistently strong with exposure to major flows and geographic proximity to important communication hubs, businesses and leisure activities.
5. The hotel property portfolio, including the operating property, has a yield of approximately 5.8 percent and the acquisition price per room corresponds to approximately MSEK 1.6.
6. The demand is derived mainly from domestic business and leisure travellers (e.g. Birmingham, Manchester, Leeds and Sheffield) and is complemented in many markets by considerable international demand (e.g. London, Dublin, Manchester, Glasgow and Belfast). The hotel properties complement Pandox’s existing portfolio well in terms of demand and segmentation.
7. The 20 investment properties will be operated by Leonardo under 25-year revenue-based lease agreements with minimum guaranteed rent and shared investments, which is at the core of Pandox’s business model. The minimum guaranteed rent amounts to approximately 83 percent based on estimates for 2018.
   The operating property will be operated by Pandox under the brand Hilton Garden Inn. The hotel has 364 rooms and is located at London Heathrow Airport.
8. Pandox estimates that the portfolio offers good potential from recently completed renovations, which have not yet taken full effect, and an increased focus on revenue management.

Transaction structure, acquisition price and financing details can be viewed on the company's website.