Scala's acquisition of a long leasehold in Hilton London Heathrow Terminal 5 shows investors still selectively looking at hospitality

JLL has advised Shiva Hotels on the sale of the Hilton London Heathrow Terminal 5 to investment group Scala Capital Partners.

Rekha Toora, SVP, EMEA Hotels Capital Markets at JLL, said, ‘Despite changing global headwinds, investor appetite for strategic acquisitions in the UK remains strong and the sale of Hilton Heathrow Terminal 5 is a great example of this. The purpose-built hotel offers multiple levers of value to the incoming buyer in a sub-market which has now achieved a full recovery of 2019 year to date RevPAR.’

Significance
Parties to the transaction did not disclose the value of the deal.

However, they noted it is a ground rented transaction. In the last 12 months, the 5-year UK funding rates have increased from 1% to 4%, which has had a dramatic impact on fundability of transactions. Although the hotel has a ground rent associated with it which generally has a reduced appetite for funding from lenders, the sale demonstrates that not all investors are impacted by the financial market volatility in the same way. Experts say ultimately this transaction is about the 'fundamentals' of the transaction.

The hotel sector has shown a sharp recovery across all segments. In 2021, the industry was not expecting a recovery until 2024, but this year many hoteliers are set to hit 2019 performance this year; this is one of the considerations for the continued interest in the hotel sector, especially in London.

The asset is located at the UK’s largest international airport which handled 91 mln passengers in 2019.

In a statement, JLL explained the long leasehold asset is situated on a large 12.5-acre site and is a franchise of Hilton’s core brand.

The hotel features 350 well-appointed bedrooms, a broad range of amenities including a fitness centre, spa, and multiple food and beverage outlets including award winning restaurant Mr Todiwala’s Kitchen along with 460 car parking spaces with electric vehicle charging points.

Morris Katri, CEO of Scala, said, ‘We are excited to embark on this strategic acquisition which following a focussed asset management programme will strengthen its position in serving the airport and the local market.’

Established in 2001 by Rishi Sachdev, Shiva Hotels is a privately owned hotel group. Sachdev said: ‘This sale supports our strategy to focus our attention on the Central London luxury hotel sector over the coming years.’

 

 

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