Starman Hotels, a hotel investment joint venture between affiliates of Lehman Brothers and Starwood Capital Group, has assigned Molinaro Koger to sell the five star Le Méridien hotel on Piccadilly, in central London. The historic Grade II listed 267-room property will be sold subject to a management agreement with Starwood Hotels & Resorts and will continue to operate as a Le Méridien hotel.
‘Despite the financial uncertainty, there is a great deal of interest in this property, which is in a particularly coveted location,’ says Eric Kudlak, Managing Director Europe, Molinaro Koger.
‘While perceived as one of the world’s leading destinations, London presents investors with extremely high barriers to entry. Lack of potential development land limits the opportunity to enter the central London market and conversion opportunities are rare and usually demand major capital improvements.’
Recent operating statistics at Le Méridien indicate an occupancy level above 87 percent, with an ADR in excess of £213, resulting in a RevPAR of above £187. In 2007, the hotel had a strong year, generating £18 million in room revenues and more than £23.7 million in total revenues, with an NOI of £5.1 million.
While the property is positioned above its competitive set in room rate, there is potential to achieve a significant boost following a proposed room renovation. Other potential opportunities include a large and under-utilized meeting room overlooking Piccadilly on the first floor that could be converted to guest rooms, plans to construct an additional 15 premium rate guest rooms, also with views over Piccadilly, and an extensive vacant area in the subbasement that would be ideal for extra meeting space or a theatre.
The hotel is being sold with a leasehold. It has a restaurant and two bars, two lounges, a beauty salon, spa with indoor swimming pool, fitness center and a steam room. It also has more than 4,000 square feet of meeting space. Located in the heart of London’s West End, it is adjacent to the theatre district, Piccadilly and Oxford Street and is within easy-reach of the City.
According to Starman, the hotel’s competitive set includes the Sofitel St. James, Athenaeum Hotel, The Langham, The Sheraton Park Lane, the Cavendish and the Grosvenor House. The proposed investment will enable Le Méridien to increase rate and maintain occupancy, which currently runs at a 119 percent penetration level. Rate penetration hovers at 103 percent, which is expected to increase after the renovation.
In 2007 London attracted some 25.6 million overnight visitors, contributing £16.6 billion to estimated total tourism spend. The U.S. accounted for 13 percent of the market, Germany 8 percent, Australia and France each 7 percent.
About Molinaro Koger
Founded in 1959, Molinaro Koger (MK) is the world’s leading hotel-exclusive real estate brokerage, advisory and capital markets firm. MK provides clients with unparalleled service and commitment. During the past four decades the company has closed more than $15 billion in hotel property sales. Headquartered in Washington, DC, MK’s offices are located in Atlanta, Chicago, Cincinnati, Dallas, Los Angeles, New York, Phoenix, San Francisco, London, Mumbai, Beijing, and Shanghai.
MK structures the transactions of luxury hotels and resorts, in addition to urban and mid-scale properties throughout the Americas, Europe, India, China and the Middle East. The firm closes, on average, more than 75 hotel transactions each year. Each member of the MK team posses a unique perspective and invaluable insight. Together they have leading-edge expertise in every aspect of the hospitality business.
For further information about this transaction and current hotel property offerings, please contact MK at 703.760.9600 or visit www.mkhotels.com.